Section 56(2)(ix) of the Income-tax Act provides for taxability of any sum received as an advance in the course of negotiations for the transfer of a capital asset, and such sum was forfeited due to non-transfer of such capital asset. A new Clause 29A to Form 3CD has been inserted to report any advance received from the buyer but forfeited due to the non-materialisation of a deal to the sale of the capital asset.
The auditor is not required to report any such forfeited amount in respect of a personal capital asset or stock-in-trade. Any advances received and forfeited towards the sale of stock-in-trade would be taxable under section 28(i), and would not be required to be reported since the amount would be credited to the profit & loss account.
The requirement of reporting arises only on forfeiture of advance. If an advance has been received and has been outstanding for a considerable time, there is no requirement to report such amount unless and until it is forfeited by an act of the assessee.