2021 (12) TMI 1293 - AT - Income Tax

Rectification of mistake u/s 154 - disallowance u/s 43B - HELD THAT - Auditors have specifically answered as NO to the question as to whether any Sales Tax/GST, Customs Duty, Excise Duty or any indirect tax has been passed through profit loss account. In response to intimation u/s 143(1), the assessee submitted that GST payable was not routed through the profit loss account and therefore, disallowance u/s 43B was not warranted but these contentions were not accepted. The assessee also filed application u/s 154 mentioning the facts of the case. The application u/s 154 was also rejected and aggrieved by the intimation u/s 154, the assessee filed this appeal. I find that the documents placed on record prove that the GST outstanding declared in the balance sheet was not routed through the profit loss account and therefore, the addition sustained by learned CIT(A) u/s 43B is not warranted. In the case of CIT vs. S. B. Foundry 1990 (4) TMI 43 - ALLAHABAD HIGH COURT has dismissed the appeal of the Revenue wherein under similar circumstances the additions were made by the Assessing Officer and Appellant Assistant Commissioner had deleted the same which were confirmed by the Tribunal. As decided in INDIA CARBON LIMITED VERSUS INSPECTING ASSISTANT COMMISSIONER OF INCOME-TAX AND ANOTHER 1992 (9) TMI 83 - GAUHATI HIGH COURT in the instant case, the question was whether section 43B would apply and not the question whether or not the sales tax collected formed part of the business or trading receipts. What would be the effect of showing such sum as payable by way of tax on the liabilities side in the balance sheet without actually paying the same was a different question. The petition, was, therefore, allowed and the addition was quashed. - Decided in favour of assessee.

Summary

Issues:
1. Acceptance of returned income
2. Acceptance of application filed u/s 154
3. Addition made by CPC beyond scope of adjustments under u/s 143(1)(a)
4. Disallowance of GST not routed through profit & loss account
5. Order passed against merit and legal aspects

Issue 1 - Acceptance of returned income:
The appellant contested that the income returned should have been accepted. The counsel argued that the addition made on account of GST payable was not routed through the profit & loss account, thus disallowance was not warranted. The appellant relied on various case laws to support this argument. The Tribunal examined the profit & loss account and auditor's report, concluding that the GST outstanding declared in the balance sheet was not routed through the profit & loss account. Citing the judgment of the Hon'ble Allahabad High Court in a similar case, the Tribunal allowed the appeal, emphasizing that the addition made by the CIT(A) under section 43B was not justified.

Issue 2 - Acceptance of application filed u/s 154:
The appellant had filed an application u/s 154 mentioning the facts of the case, which was rejected. The Tribunal noted that the application u/s 154 was rejected, leading the appellant to file the appeal. However, based on the evidence presented, the Tribunal found that the disallowance under section 43B was not warranted, and hence, the appeal was allowed.

Issue 3 - Addition made by CPC beyond scope of adjustments under u/s 143(1)(a):
The appellant raised concerns about the addition made by the CPC, arguing that it was beyond the scope of adjustments permissible under section 143(1)(a). The Tribunal did not delve deeply into this issue as the primary focus was on the disallowance of GST not routed through the profit & loss account.

Issue 4 - Disallowance of GST not routed through profit & loss account:
The crux of the matter revolved around the disallowance of GST payable that was not routed through the profit & loss account. The Tribunal meticulously analyzed the profit & loss account, auditor's report, and legal precedents cited by the appellant to determine that the disallowance under section 43B was not justified. Relying on judicial precedents and factual evidence, the Tribunal allowed the appeal, emphasizing that the GST outstanding declared in the balance sheet was not routed through the profit & loss account.

Issue 5 - Order passed against merit and legal aspects:
The appellant contended that the order passed was against the merit, circumstances, and legal aspects of the case. However, the Tribunal, after thorough examination of the evidence and legal precedents, found in favor of the appellant, highlighting that the disallowance under section 43B was not warranted. Consequently, the appeal was allowed, overturning the order of the CIT(A).

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing that the disallowance of GST outstanding not routed through the profit & loss account under section 43B was not justified based on the evidence and legal precedents presented during the proceedings.