TaxTMI 
TaxTMI 
2026 (5) TMI 995
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....ncome Tax Appeals ("CIT(A)") are based on incorrect appreciation of facts of the case and incorrect interpretation of law and therefore, bad in law and are liable to be quashed. Without prejudice to the foregoing: 2:0 Re .: Addition of Rs. 345,28,51,548/- towards refund of Goods & Service Tax, Sales Tax and Service Tax not credited to the Profit & Loss A/c: 2:1 The CIT(A) has erred in upholding the action of the CPC Bangalore / Assessing Officer in making an addition of Rs. 345,28,51,548/- towards refund of Goods & Service Tax, Sales Tax and Service Tax not credited to the Profit & Loss A/c as a revenue receipt. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the addition made by the CPC-Bangalore / Assessing Officer is misconceived, incorrect, erroneous and not in accordance with the law and the CIT(A) ought to have held as such. The CIT(A) erred in holding that any benefit arising from the remission or cessation of a liability earlier incurred in the course of business would be taxable under Section 41(1) of the Income-tax Act, 1961 ("the Act"). The CIT(....
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....terest so levied on it and to re-compute its tax liability accordingly. 5:0 Re .: Excessive levy of interest u/s. 234C of the Income-tax Act, 1961: 5:1 The CPC-Bangalore / Assessing Officer has erred in levying excessive interest to the extent of Rs. 9,77,47,256/- u/s. 234C of the Income-tax Act, 1961. 5:2 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject no further interest is leviable u/s. 234C over and above the interest computed and paid by the Appellant at the time of filing its return of income and hence the action of the CPC-Bangalore / Assessing Officer in this regard is incorrect, erroneous and not in accordance with the law and the CIT(A) ought to have held as such. 5:3 The Appellant submits that the CPC-Bangalore / Assessing Officer be directed to delete the excess interest so levied on it and to re-compute its tax liability accordingly. 6:0 Re .: General: 6:1 The Appellant craves leave to add, alter, amend, substitute and / or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal. 3. We....
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....ing system where taxes are recorded separately and not routed through the profit & loss account, it cannot alter the essential nature of the transaction. Further, the ld. Addl/JCIT(A)-2, Mumbai held that the exclusive method of accounting cannot be used as a device to exclude legitimate business receipts from taxation. The method only determines the manner of presentation in the accounts, and not the scope of taxable income under the Act. Considering the above, the ld. Addl/JCIT(A) held that the assessee had received a clear and tangible benefit representing remission of trading liability and the same is taxable either u/s 41(1) or alternately u/s 28(i) of the Act and accordingly dismissed this ground of appeal. 6.1 Further, with regard to the addition of Rs. 14,37,29,950/- on account of margin on finished goods converted into capital assets as reported in clause 16(a) of the tax audit report, the ld. Addl/JCIT(A) held that apart from self-prepared breakup, the assessee had not produced any supporting ledgers, journal vouchers or documentary evidence to substantiate that the said figures in fact have been credited or debited to profit & loss account and correspondingly included ....
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.....R. of the assessee Sri T. Suryanarayana Advocate vehemently submitted that for the AY 2023-24 the assessee has filed this appeal mainly for the two issues i.e. (i) for the addition of Rs. 345,28,51,548/- towards refund of GST, sales tax and service tax not credited to profit & loss account and (ii) the addition of Rs. 14,37,29,950/- towards the margin on finished goods converted into capital assets. With regard to the first addition of Rs. 345,28,51,548/-, the ld. A.R. of the assessee vehemently submitted that the ld. Addl/JCIT(A) misdirected himself in holding that the benefit arise from the remission or cessation of a liability earlier incurred in the course of business would be taxable u/s 41(1) of the Act. Further, it is submitted that the ld. Addl/JCIT(A) grossly erred in holding that refund of GST, sales tax and service tax would alternatively be liable to be taxed u/s 28(i) of the Act especially when the GST element was not routed through the profit & loss account by consistently following the exclusion method by the assessee company. Further, with regard to the addition of margin on finished goods converted to capital assets, the ld. Counsel of the assessee vehemently subm....
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....xing the GST refunds does not arise in the case of the assessee. Thus, when the payment of GST is not claimed as expenditure by debiting the same to the profit & loss account, then in our opinion refund of the GST cannot be liable to be taxed for alleged non crediting the same to profit & loss account. We also take note of the fact that the assessee had categorically submitted before the ld. Addl/JCIT(A) that these refunds do not represent taxable income since the assessee consistently followed the exclusive method of accounting for GST, wherein such indirect taxes paid are neither debited to the profit & loss account nor claimed as deduction. We are of the considered opinion that the ld. Addl/JCIT(A) could not understand the real crux of the issues in the present case. We are also of the considered opinion that the ld. Addl/JCIT(A) also misdirected himself in holding that the benefit arise from the remission or cessation of a liability earlier incurred in the course of business would be taxable u/s 41(1) of the Act or, alternatively be liable to be taxed u/s 28(i) of the Act. 10.1 Undisputedly, in the present case, the assessee is following the exclusion method of accounting fo....
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....) had not disproved the claim of the assessee that it had neither debited the expenditure pertaining to GST/Service tax/sales tax to the profit & loss account nor credited the corresponding refund amount as per the accounting policy followed by the assessee company consistently over the number of years. 10.2 We noticed that the ld. Addl/JCIT(A) was himself confused whether the refund of GST, Sales Tax and service tax is taxable u/s 41(1) of the Act or section 28(1) of the Act without proper understanding the crux of the issue in hand. Thus, where the assessee is following exclusive method of accounting for GST consistently and has not debited the GST/sales tax/service tax to profit & loss account then the question of taxing the refunds of the same does not arise in the case of the assessee and accordingly, we allow this ground of appeal of the assessee for both these AYs in appeal before us. 11. Now the ground No.3 as raised by the assessee company is with regard to the alleged double addition of Rs. 14,37,29,950/- towards margin on finished goods converted into capital assets. Before us, the ld. Counsel for the assessee contended that the CPC had made an addition of Rs. 14,3....
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....e the interest chargeable u/s 234B of the Act while passing the OGE and also recompute the interest u/s 234C of the Act by taking into consideration the returned income filed by the assessee and accordingly, this ground of appeal is also allowed for statistical purposes. 13. In the result, the appeal filed by the assessee in ITA No.2889/Bang/2025 is allowed for statistical purposes. ITA No.2890/Bang/2025: 14. The assessee has raised the following grounds of appeal in ITA No.2889/Bang/2025 for the AY 2024-25: - 1:0 Re .: Validity of the adjustments made to the returned income in spite of the clarification being provided in response to Intimation in terms of first proviso to section 143(1)(a) of the Income- tax Act, 1961: 1:1 The Centralized Processing Center ('CPC-Bangalore') / Assessing Officer has erred in making an adjustment to the returned income of the Appellant in spite of the clarification being provided to the variance proposed in amounts reported in the Form No. 3CD and Form No. ITR-6 in terms of first proviso to section 143(1)(a) of the Income-tax Act, 1961. 1:2 The Appellant submits that considering the facts and circumstances ....
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....se and the law prevailing on the subject, the stand taken by the CPC-Bangalore / Assessing Officer in this regard is misconceived, incorrect, erroneous and illegal and the CIT(A) ought to have held as such. 3:3 The Appellant submits that the CPC-Bangalore / Assessing Officer be directed to delete the excess interest so levied on it and to re-compute its tax liability accordingly. 4:0 Re .: Excessive levy of interest u/s. 234C of the Income-tax Act, 1961: 4:1 The CPC-Bangalore / Assessing Officer has erred in levying excessive interest to the extent of Rs. 3,00,25,583/- u/s. 234C of the Income-tax Act, 1961. 4:2 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject no further interest is leviable u/s. 234C over and above the interest computed and paid by the Appellant at the time of filing its return of income and hence the action of the CPC-Bangalore / Assessing Officer in this regard is incorrect, erroneous and not in accordance with the law and the CIT(A) ought to have held as such. 4:3 The Appellant submits that the CPC-Bangalore / Assessing Officer be directed to delete t....
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....d under barences with government authorities under other cument assots. (Refor Note @ and Note 14 le the financial statements for the year ended March 31. 2023) Observation 15 of TAR Others Clause 18000 ts jeg: nome as ridicated in this clause, other than those mentioned under this clause have been created to the Sovemert of costemed by the Managersent. The amount reported against Cluse 3600 has been aonited by the concerned authorties within the previous your ended March 31. 2023. Reknd of GST dickused as above has hees credand son GST roland receivable accout is balance sheet and net routed Bireugh the profit and loss account Document 2 16. Amounts not credited to the profit and loss account, being. - (al. The items falling within the scope of section 28 52. No Description Amount 1 Margin on finished goods convened to capital asset Rs. 14,37.29.960 (). The proforma crodies, dosbacks, nelunds of duty of customs or excise or service tax, or nelunds of sales tax or value added tax or Goods & Services Tax, where such credits, drawbacks or nelunds are admited as due by the authorities concerned 3. NO Description Amount 1 Refund of Goods & Ser....