AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 652
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....e and hence the basis on which the proceedings are completed is not in accordance with the law. 2 That the Id. CIT(A) erred in sustaining addition of Rs. 6232262/- on account of VAT, which has not been debited to profit & loss account. The case of the appellant is covered by Jurisdiction High Court decision in the case of Ganpati motors v/s State of Chhattisgarh and Hon'ble ITAT Raipur Bench in the case of Payal Verma v/s ITO ward- (l) 3, Bhilai, (C.G.). 3 The CIT(A) erred in upholding the disallowance of Rs. 6232262/- in terms of provisions of section 143(1) of the Act in the Intimation by invoking provisions of section 43B as the incorrect claims. Since the claim was in conformity with the judgement of the jurisdictional High Court in the case of Ganpati Motors. 4 In the facts and circumstances of the case the learned CIT (Appeal) ought to have appreciated that provisions of section 43B are not applicable to the appellant and hence disallowance of Rs. 6232262/- cannot be made under section 43B. The ld CIT (Appeal) ought to have deleted the whole amount. 5 The learned CIT (Appeal) erred in not considering the fact that the amount of Rs. 6232262, in respect of VAT payab....
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....e Tax Act due to the inconsistencies between ITR and TAR (Tax Audit Report) which was filed in Form 3CD on 30.3.2019. 5.2 It is observed from records that the appellant had filed original Form 3CD on 30.3.2019 for the A.Y. 2018-19, wherein the auditor has reported unpaid statutory liabilities of Rs. 2,50,90,568/- as on 31.3.2018 as under:- 26(i)(B)(b) Not paid on or before the aforesaid date Section Nature of liability Amount Tax, Duty, Cess, Fee etc ENTRY TAX 728661 Tax, Duty, Cess, Fee etc VAT TAX 24229739 Tax, Duty, Cess, Fee etc CST PAYABLE 132168 5.3 The appellant has filed a revised Tax Audit Report in Form3CD on 24.08.2022 for the A.Y. 2018-19 wherein the auditor has reported the unpaid salutatory liabilities at Rs. 67,41,366/- as on 31.03.2018 as under: b. not paid on or before the aforesaid date. Sl. No. Section Nature of liability Amount 1 Sec.43B(a)-tax, duty, cess, fee etc ENTRY TAX Rs. 2,95,902 2 Sec.43B(a)-tax, duty, cess, fee etc VAT TAX Rs.62,65,069 3 Sec.43B(a)-tax, duty, cess, fee etc SERVICE TAX PAYABLE Rs.1,80,395 On comparison of the above two tables, it is observed that the....
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....d cannot be invoked under section 143(1) is rejected. The AO(CPC) utilized clauses (a)(iv) of subsection (1) of section 143(1) to disallow the GST payable. The broad scope of 'intimation' under section 143(1)(a), allowing adjustments based on errors apparent from the return of income, is supported by a relevant decision of the Hon'ble Madras High Court. AA520 in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. vs. DCIT (2022) 138 taxmann.com 571 Therefore, the appellant's claim that CPC cannot make such adjustments is deemed invalid. 5.4.5 Considering the legal stance and presented facts, the AO(CPC)'s adjustment of VAT payable to the extent of Rs. 62,32,262/- for the current year (A.Y. 2018-19) is confirmed. However, the disallowance made for the opening balance of Rs. 1,79,97,376/- is hereby deleted as it pertains to earlier years. Further, JAO is directed to verify the opening balance of VAT of 1,79,97,376/- in the earlier years and disallow the same in the earlier years if it is not paid before filing return of income u/s. 139(1). 5.5 Entry Tax: The appellant states an opening balance of Rs. 4,32,759/- , with a current payable of....
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....ng of return u/s 139(1) of the Act. It was the submission of Ld AR, that the amount of VAT was not debited to the profit and loss account, as exclusive method of accounting was followed by the assessee. Ld. AR further added that under similar facts and circumstances additions were vacated by the ITAT, Raipur, which was further approved by the Hon'ble Jurisdictional High Court, thus, the assessee has the support of settled jurisprudence in its favour which the Ld. CIT(A) had not accepted. Ld. AR on this aspect had placed reliance and averred that the issue in present case is squarely covered by the order of Hon'ble Jurisdictional High Court in the case of Ganapati Motors vs State of Chhattisgarh in Tax Case (Income Tax Appeal) No. 30 of 2016 dated 25.04.2017. Ld. AR further adduced the decision of "SMC" bench, ITAT, Raipur passed in the case of Ganeshan Purushottaman Achari VS DCIT in ITA No. 146 to 148/RPR/2022 CPC dated 27.03.2023, wherein similar issue was discussed and decided in positive for assessee, following the analogy drawn from the order of Hon'ble High Court of Chhattisgarh. Referring to such decisions and its applicability on the facts and circumstances of the present c....
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....e, noticed that the assessee's claim regarding the treatment of VAT in the Books of Accounts has been verified from the Books and that has been found to be in order. The Assessing Authority also found that VAT has been found separately accounted for in the Books of Accounts. The only ground on which the Assessing Authority refused to exclude the VAT collected by the dealer from the profit of business is on the basis that the VAT component was not paid off on or before the due date for furnishing the return in relation to the previous year under Section 139(1) of the Income Tax Act. The First Appellate Authority also noticed that it is an undisputed fact that the Appellant did not charge VAT to the Profit and Loss account. It was therefore noted by the First Appellate Authority that in such circumstances, the liability may still be unpaid, but it cannot be disallowed being not claimed as deduction in the Books of Accounts. 4. With the aforesaid fact situation, we are unable to hold that the Tribunal was in error in law in dismissing the revenue's appeal making a reference to the decisions referred to by it. 5. The decision of the Apex Court in Chowringhee Sales Bureau (P) Lt....
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....ase where the assessee had not charged VAT to its profit and loss account, then, despite the fact that the liability may still be unpaid it could not have been added u/s. 43B of the Act as the same was not claimed as a deduction in the books of accounts. For the sake of clarity, the relevant observations of the Hon'ble High Court are culled out as under: "2. Heard learned Counsel for the revenue and learned Counsel for the respondent-assessee. The fundamental issue that arises for decision is, as to whether a particular amount which is subject matter of the appeal is to be treated as relatable to Value Added Tax (VAT) payable by the assessee and, if so, whether it has to be actually paid by him before filing of the return under the Income Tax Act. This question is relevant, having regard to the manner in which the question of law has been framed. The issue as to whether Section 43-B of the Income Tax is attracted even when the assessee does not claim any deduction on the strength of that provision may also be relevant. 3. The Assessing Authority, on the instant issue, noticed that the assessee's claim regarding the treatment of VAT in the Books of Accounts has been verified....
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....dality of the accounting system adopted by the assessee is an outstanding phenomenon which goes in favour of the assessee. Under such circumstances, it is not necessary for the authorities to consider, whether Section 43-B of the Income Tax is to be relied on by the assessee to claim any deduction. 7. For the aforesaid reasons, on the facts and circumstances of the case in hand, we answer to the question formulated in these appeals in the negative, that is to say, against the revenue and in favour of the assessee." 12. Considering the aforesaid judgment of the Hon'ble Jurisdictional High Court as per which, no addition can be made of an assessee's unpaid VAT tax liability that was not charged to the profit and loss account, there is substance in the claim of the Ld. AR that there was no justification for the A.O. to have made an addition u/s. 43B of the amount of VAT payable of Rs. 5,33,962/- as the same was not charged to the latters profit and loss account. I, say so, for the reason that as the aforesaid claim of the assessee was in conformity with the aforesaid judgment of the Hon'ble Jurisdictional High Court in the case of M/s. Ganapati Motors (supra), therefore, the same ....
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....see to claim any deduction." (emphasis supplied by us) 12. Adverting to the analogy drawn by the Hon'ble Jurisdictional High Court that in aforesaid case, wherein the modality of the accounting system adopted by the assessee are not doubted by the revenue authorities below, then in that case the question to invoke provisions of section 43B does not arise or necessitate, as answered in favour of the assessee, with a precise remark that, under such circumstances it is not necessary for the authorities to consider, whether Section 43-B of the Income Tax is to be relied on by the assessee to claim any deduction. Coming to the order of Ld. CIT(A) in the present case, wherein he categorically offered his comments qua defect in accounting of the assessee and that the method of accounting adopted by the assessee, rendering the same as inconsistent with the statutory requirements. To interpret the categorical findings of Ld. CIT(A) in cognizance with the conditional directions of the Hon'ble Jurisdictional High Court, the relevant observations of Ld. CIT(A) are extracted again as under: 5.4 VAT: The appellant argues that the VAT liability of Rs. 2,42,29,739/- comprises an opening balanc....
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....ities in the accounting system of the assessee, stating in loud and clear words that, the assertions of the assessee that it was following the exclusive accounting method by not debiting the amount of taxes to its profit and loss account, is untenable. It was further observed by him (Ld. CIT(A)) that, such accounting treatment is not tenable under the statutory provisions and accounting standards, necessitating the assessee to include the amount of VAT in turnover, which the assessee has not followed in an attempt to avoid disallowance u/s 43B, through alternative accounting methods which are impermissible. Ld. CIT(A) further rejected the claim of assessee, referring to "Implementation of Income Computation and Disclosure Standards" (ICDS) and section 145 of the Income Tax Act, which mandates the inclusion of VAT in total turnover, thus, the exclusive method of accounting adopted by the assessee was rendered as inconsistent with the statutory requirements. 14. To understand the applicability of section 145A(ii) in terms of the controversy raised by the assessee in present case, the relevant provision of the Act, as amended by Finance(No.2) Act, 2018 w.r.e.f. 01.04.2017 applicable ....
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.... shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36. (b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received. 15. The aforesaid provisions of Section 145A(ii) are self-explanatory, that any tax, duty, cess or fee paid or incurred has to be taken into account for valuation of goods. Accordingly, it was not at the option for the assessee to adopt a method of accounting wherein valuation of the goods or service can be accountant for without including any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation. Our aforesaid view on this aspect is further fortified by judgment of the Hon'ble Bombay High Court, in the case of CIT vs. Knight Frank (India) Pvt. Ltd., in Income Tax Appeal No. 247 of 2014, dated 16.08.2016, wherein, Hon'ble Court has touched the issue regarding applicability of provisions of section 145A(ii) and opined to include any tax, duty, cess or f....
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....ssue against the revenue. In view of such facts and circumstances, the contention of assessee that the issue in the present case is totally covered by the order of Hon'ble Jurisdictional High Court is found to be devoid and bereft of substance, as the facts of the present case are distinguishable from the facts in the case of Ganapati Motors (supra). Herein, it is pertinent to mention that the decision of Hon'ble Jurisdictional High Court is binding on the tribunal, the tribunal is under abundant duty to adopt the same by ritually following each and every word emanating from the said judgment, therefore, going by the Judicial discipline, respectfully adhering to the ratio of law laid down by Hon'ble Jurisdictional High Court, wherein the question of law was answered in favour of the assessee, conditionally, directing the revenue not to invoke the provisions of section 43B de hors any adverse inference regarding accounting modalities of the assessee, however, in the present case the very condition / inferences / doubt on accounting system is discernible in the order of Ld. CIT(A), moreover specifying the reasons for such adverse inference, absence of which was the foundation of the ....