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2022 (8) TMI 1219 - AT - Income TaxAddition u/s 43B - non deposit of GST before the due date of filing of return of income under section 139(1) - accounting treatment to the GST - assessee has contended before the authorities below that the assessee has not claimed the deduction of GST in the profit and loss account and therefore, no disallowance can be made under section 43B - DR has submitted that the assessee has bye-passed the profit and loss account and directly taken the GST amount to the balance-sheet which is not permissible - HELD THAT - There is no dispute that the assessee has not paid the GST within the time limit as prescribed under section 43B and shown in the Balance-Sheet as outstanding. This fact is also evident from the Audit report in Form No. 3CB, balance-sheet as on 31.03.2019 wherein this amount as shown as outstanding being GST payable. Auditor has also reported this amount in para 26 in respect of the sum which is referred under section 43B. Even otherwise, the assessee has not disputed this fact that it has not paid the GST. The only contention of the assessee is that it has not debited this amount in the profit and loss account but directly taken to the balance-sheet. This modus operandi of the assessee is not acceptable as the GST is part and partial of the sales and turnover of the assessee and it has to be shown as part of the inventory / closing stock. The assessee is required to maintain the books of accounts as per the accounting standards which are notified in the official gazette from time to time as per section 145 of the Act. The method of accounting is required to be regularly followed by the assessee. Even as per the provisions of section 145A, the valuation of the purchase and sales of goods and services and sale of inventory shall be adjusted to include the amount of duty, cess or fee actually paid or incurred by the assessee. Hence, the contention of the assessee that it has not claimed any deduction on account of GST by taking the same directly to the balance-sheet and not taking through the profit and loss account is not acceptable. The assessee cannot be permitted to adopt a modus operandi and giving an accounting treatment to the GST without passing through the profit and loss account to circumvent the provisions of section 43B. - Decided against assessee.
Issues Involved:
1. Disallowance under section 43B of the Income Tax Act, 1961, due to non-deposit of GST before the due date of filing the return of income under section 139(1). Issue-wise Detailed Analysis: 1. Disallowance under Section 43B due to Non-deposit of GST: The primary issue in this appeal is the disallowance made by the Assessing Officer (AO) under section 43B of the Income Tax Act, 1961, due to the assessee's failure to deposit GST before the due date of filing the return of income under section 139(1). The assessee argued that since the GST was not claimed as a deduction in the profit and loss account and was directly taken to the balance sheet, no disallowance should be made under section 43B. The learned Departmental Representative (DR) contended that the GST is an inseparable part of the sales and turnover, and therefore, non-deposit of GST within the prescribed time under section 43B would attract its provisions. The DR also referred to the tax audit report, which specifically reported the GST amount as disallowable under section 43B. The Tribunal considered the submissions and found no dispute that the GST was not paid within the time limit prescribed under section 43B and was shown as outstanding in the balance sheet. The Tribunal noted that the assessee's method of bypassing the profit and loss account by directly taking the GST amount to the balance sheet was not acceptable. The GST is part of the sales and turnover and must be shown as part of the inventory/closing stock. The Tribunal emphasized that the assessee is required to maintain books of accounts as per the accounting standards notified under section 145 of the Act, which includes adjustments for taxes, duties, cess, or fees as per section 145A. The Tribunal held that the assessee's contention that it did not claim any deduction on account of GST by taking it directly to the balance sheet and not through the profit and loss account is not acceptable. The assessee cannot adopt an accounting treatment to circumvent the provisions of section 43B. The Tribunal referred to the decision of the Hon'ble Supreme Court in Chowranghee Sales Bureau P. Ltd. vs. CIT, which held that sales tax collected by the assessee is a revenue receipt even if shown under a non-revenue head. The Tribunal also referred to the decision of the ITAT Cochin Bench in the case of "M/s. Kunnel Engineers & Contractors (P) Ltd.", which dealt with a similar issue involving service tax. The Tribunal noted that the Cochin Bench had decided the issue in favor of the revenue, holding that non-payment of service tax within the stipulated time attracts disallowance under section 43B, even if the service tax was not claimed as an expenditure in the profit and loss account. The Tribunal concluded that the non-payment of GST liability into the government account on or before the due date of filing the ITR under section 139(1) clearly attracted disallowance under section 43B, irrespective of whether the GST component of the sales was credited/debited to the profit and loss account. The Tribunal upheld the CIT(A)'s order, which had followed various decisions of the Tribunal and the Supreme Court, and dismissed the appeal of the assessee. The Tribunal's decision was pronounced in the open court on 25.08.2022 at Varanasi, U.P.
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