TaxTMI 
TaxTMI 
2026 (8) TMI 1822
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.... books of account of the appellant were duly audited, unless disallowance should be made without rejection of book results. 4) The Learned CIT(A)/NFAC erred in upholding the disallowance of GST expense of Rs 59,84,531 on the ground of non allowability under GST provisions without appreciating that non refundable input tax credit forms part of business expenditure allowable under the Income Tax Act 1961. 5) The Learned CIT(A)/NFAC erred in confirming the assessed total income of Rs 6,26,40,766 as against returned income of Rs 2,87,02,380 thereby sustaining unjustified additions aggregating to Rs 3,39,38,386. may please be deleted." 2. Brief facts of the case are as under:- The assessee is a private limited company engaged in the business of job work of processing of yarn and cloth. For the year under consideration, the assessee filed its return of income on 05/10/2023 declaring total income of Rs. 2,87,02,380/-. The accounts of the assessee were audited and the audit report in Form 3CD was furnished along with the return of income. The return was processed u/s 143(1) and subsequently, the case was selected for scrutiny under CASS on the issue of low net profi....
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....59,84,531/- observing that the amount had been rejected by the GST authorities and that the assessee had failed to satisfactorily controvert the findings of the Ld. AO. Aggrieved by the order passed by Ld.CIT(A), the assessee is in appeal before this Tribunal. 4. The substantive grounds challenge is against the confirmation of addition of: (i) Rs. 76,75,657/- on account of labour charges; (ii) Rs. 1,21,06,298/- on account of bad debts; (iii) Rs. 81,71,900/- being 50% disallowance of repairs and maintenance expenses; and (iv) Rs. 59,84,531/- on account of GST expenses. 5. Ground No. 1 is in respect of adhoc disallowance of Labour Charges of Rs. 76,75,657/- 5.1. The Ld.AO however disallowed Rs. 76,75,657/- out of the total labour charges of Rs. 9,99,30,132/- essentially on the ground that the labour charges had increased by 32.43%, whereas staff salary had increased by 22.26%. The Ld. AO considered the increase corresponding to 22.26% to be genuine and disallowed the balance increase of 10.17%. 5.2. The Ld.AR submitted that, the increase in labour expenditure was commensurate with the increase in business operations. The revenue from....
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.....DR, on the other hand, supported the orders of the lower authorities and submitted that the assessee had failed to satisfactorily substantiate the impugned expenditure. It was submitted that the findings recorded by the Ld.AO and confirmed by the Ld.CIT(A) did not call for any interference. The Ld.DR accordingly prayed for dismissal of this ground. We have perused the submissions advanced by both sides in light of records placed before us. 8. In our considered view, the aforesaid factual aspects require verification before the allowability of the claim can be adjudicated. In particular, the nature and origin of the outstanding receivable, the opening balance, the adjustment of Rs.19,32,000/-, the correspondence with the debtor, the subsequent liquidation proceedings and the actual write-off of Rs.1,21,06,298/- in the books of account require examination. The assessee shall also place on record the relevant material evidencing the liquidation proceedings and its status therein, to the extent available. 8.1. In these circumstances, and since the aforesaid factual aspects have not been examined in their entirety by the Ld. CIT(A), we deem it appropriate to restore this is....
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....ompared with the preceding year and the expenditure incurred on spare parts and accessories. The assessee, on the other hand, submitted that the increase was attributable to the nature of its textile-processing business, increased utilisation of machinery and operation in three shifts, and that ledger accounts and invoices had been furnished. 10.1. We find that the supporting details furnished by the assessee have not been examined and verified by the lower authorities. In the absence of such verification, the disallowance of 50% of the expenditure cannot be properly adjudicated. Accordingly, we restore the issue to the file of the Ld. CIT(A) for necessary verification of the ledger accounts, invoices and other supporting documents and for fresh adjudication in accordance with law, after affording reasonable opportunity of being heard to the assessee. Accordingly, Ground No.3 raised by the assessee stands allowed for statistical purposes. 11. Ground No. 4 raised by the assessee is against disallowance of GST Expenses of Rs. 59,84,531/-. The assessee claimed GST expenses of Rs. 59,84,531/-. The record shows that the assessee had accumulated input tax credit of Rs. 96,19,....
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....verning refund under the CGST Act. The Ld.AR drew our attention to the limitation of two years from the relevant date for claiming refund. It is submitted that, in the case of refund of unutilised input tax credit under clause (ii) of the first proviso to section 54(3), Explanation (e) specifies the relevant date with reference to the due date for furnishing the return u/s 39 for the period in which such claim for refund arises. 12.1. It is submitted that the significance of the aforesaid provisions is that the entitlement to refund is governed by the statutory mechanism and the statutory period prescribed therein. It is further submitted that the amount which is not refundable under the GST law cannot thereafter be treated as an amount recoverable by the assessee merely because the corresponding input tax credit had originally arisen in its books. 12.2. Based on the above the question before us is not whether the amount of Rs. 59,84,531/- is refundable under the GST law. That aspect stands governed by the GST authorities and the statutory provisions applicable thereto. The question before us is whether, once the amount of input tax credit has ceased to be recoverable/refunda....