2025 (8) TMI 532 - AT - Income Tax

ITAT sets aside tax liability where assessee did not claim expenditure under Section 43B, favoring assessee's position

The ITAT Raipur held that since the assessee did not claim the amount as an expenditure or deduction under section 43B, the authorities erred in treating ... Adjustment u/s 43B - assessee has not claimed the amount as an expenditure HELD THAT:- As decided in Grand Motors [2024 (11) TMI 1390 - CHHATTISGARH HIGH COURT] it is admitted position on record that the appellant / assessee did not claim the amount in his profit and loss account as an expenditure / deduction, nor the appellant claim deduction in respect of that account u/s 43B - AO, CIT(A) and the ITAT, all three authorities have concurrently erred in holding that the appellant has claimed deduction / expenditure u/s 43B of the IT Act adding to its taxable income. Accordingly, the impugned order passed by the ITAT holding that the appellant is liable to pay tax is liable to be and is hereby set aside. The substantial question of law is answered in favour of the assessee. ISSUES: Whether disallowance under section 43B of the Income Tax Act is justified when the assessee has not claimed the relevant amount as an expenditure or deduction in the Profit & Loss account'Whether the deletion of adjustment made under section 43B by the Commissioner of Income Tax (Appeals) is legally sustainable'Whether unpaid tax liabilities not routed through the Profit & Loss account can be disallowed under section 43B? RULINGS / HOLDINGS: The Court held that section 43B is not attracted where the assessee 'did not claim the amount... in his profit and loss account as an expenditure / deduction,' and thus disallowance under section 43B cannot be made on such amounts.The deletion of adjustment made under section 43B by the Commissioner of Income Tax (Appeals) was upheld as the decision was based on binding jurisdictional High Court precedent, which held that disallowance is not permissible if the amount was not claimed as a deduction.For unpaid entry tax amounts that were routed through the Profit & Loss account and not paid before the due date under section 139(1), disallowance under section 43B is confirmed. RATIONALE: The Court relied primarily on the statutory provision of section 43B of the Income Tax Act, which mandates that certain deductions are allowable only on actual payment.Binding precedent from the jurisdictional High Court in the case interpreting section 43B was applied, particularly the decision in the case where it was held that 'the question of disallowing the deduction not claimed would not arise' if the amount was not debited to the Profit & Loss account.The Court distinguished between amounts not claimed as expenses (which cannot be disallowed under section 43B) and amounts claimed as expenses but unpaid by the due date (which are subject to disallowance).The Court noted that the Revenue's reliance on Supreme Court precedent was considered and discussed in the jurisdictional High Court decision, which was binding and took precedence.The Tribunal followed the principle of stare decisis, respecting the binding nature of the jurisdictional High Court judgment and the consistent approach of coordinate benches.