2003 (7) TMI 304 - AT - Income Tax

Revenue's Appeal Dismissed, CIT(A)'s Decision Upheld on Sales Tax Disallowance

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to cancel the disallowance of Rs. 44,99,417 for unpaid sales-tax liability. ... Rectification of mistakes Issues:1. Challenge to the action of the learned CIT(A) in allowing relief of Rs. 44,99,417 out of the disallowance made by the AO under s. 43B on account of unpaid sales-tax liability by making prima facie adjustment.Analysis:The appeal filed by the Revenue challenged the order of the CIT(A) allowing relief of Rs. 44,99,417 from the disallowance under s. 43B for unpaid sales-tax liability. The AO initially processed the return of income filed by the assessee, noting the unpaid sales-tax amount of Rs. 44,99,417. The AO sought to rectify this under s. 154, as the due date for payment had passed. The assessee claimed eligibility for deferment based on being a sick industrial unit and relief undertaking. The AO disallowed the amount, leading to an appeal by the assessee to the CIT(A), who canceled the order under s. 154(1)(b) by the AO. The CIT(A) cited lack of approval for the adjustment and the controversial nature of the issue, ultimately canceling the order.Further, the Revenue appealed the CIT(A)'s decision, and the Tribunal analyzed the case. It was observed that the initial exemption from sales-tax liability had expired, but there was no mention of further extension in the balance sheet note. The Tribunal noted that the assessee's status as a relief undertaking was extended, indicating eligibility for deferment. The AO's conclusion of disallowing the entire sales-tax liability was deemed unsupported and highly debatable. The Tribunal referenced a Bombay High Court decision emphasizing the need for proper procedures in such cases. It concluded that the disallowance made by the AO was outside the scope of permissible adjustment under s. 143(1)(a) and s. 154(1)(b), leading to the dismissal of the Revenue's appeal.In summary, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to cancel the disallowance of Rs. 44,99,417 for unpaid sales-tax liability, as the AO's actions were deemed unjustified and outside the permissible scope of adjustment under the relevant provisions.