2024 (3) TMI 724 - AT - Income Tax

Unpaid GST shown as liability, not P&L expense, and paid before return: s.43B disallowance deleted on appeal

Dispute concerned disallowance under s.43B for unpaid GST. The Tribunal held s.43B could not be invoked where the assessee had not debited the GST amount ... Disallowance u/s 43B - Disallowance towards the unpaid GST - HELD THAT:- The assessee did not debit the amount to the profit and loss account as an expenditure not the assessee claimed any deduction in respect of amount. In fact, the assessee has treated the same as current liabilities and provisions and also given the description under Schedule 7 regarding duties and taxes. Thus, the contention of the ld. A.R. that the provisions of section 43B is not applicable to the assessee as the assessee has paid the GST amount before filing of the return of income appears to be correct. The decision of Hon’ble Apex Court in case of Chowringhi Sales Bureau Pvt. Ltd. [1972 (10) TMI 4 - SUPREME COURT] will not be applicable as in the present case, assessee had given the details of the current liabilities and not estimated the same and was not debited the same as an expenditure in profit and loss account and not claimed any deduction to that effect. But since the assessee had paid the said amount prior to filing of the return of income, the decision of Hon’ble Delhi High Court will be applicable in case of assessee as the ratio laid down by the Noble & Hawitt (I)(P) Ltd. [2007 (9) TMI 238 - DELHI HIGH COURT] will be squarely applicable in the present case. Thus, the appeal of the assessee is allowed. Issues Involved:The appeal challenges the order of the National Faceless Appeal Centre for the assessment year 2020-21 regarding the disallowance made under \u/s 43B of the Income Tax Act, 1961.Assessment of Income and Disallowance \u/s 43B:The Assessing Officer assessed the income at a higher amount than declared by the assessee, making an addition under \u/s 43B for unpaid GST. The CIT(A) partially allowed the appeal, leading to the current dispute.Contentions of the Assessee:The assessee argued that under \u/s 43B, payments can be claimed as expenses in the year of payment, not when the liability was incurred. The assessee paid a significant amount of GST before the due date of filing the return of income, disputing the disallowance.Arguments of the Revenue:The Revenue contended that the GST remained unpaid until the audit report finalization, justifying the disallowance made by the Assessing Officer and upheld by the CIT(A).Judgment and Reasoning:The Tribunal found in favor of the assessee, noting that the GST amount was not treated as an expenditure in the profit and loss account, but as current liabilities. As the GST was paid before filing the return of income, the provisions of \u/s 43B were deemed not applicable. The Tribunal distinguished the present case from precedents cited by both parties, ultimately allowing the appeal.Conclusion:The Tribunal allowed the appeal of the assessee, ruling that the disallowance made \u/s 43B was not justified as the GST amount was paid before the due date of filing the return of income.Note: The summary is based on the judgment of the Appellate Tribunal ITAT Ahmedabad in the case involving a dispute over the disallowance made under \u/s 43B of the Income Tax Act, 1961 for the assessment year 2020-21.