2017 (9) TMI 385 - HC - Income Tax

Deduction under Section 43B - payment of excise duty - no evidence for payment of excise duty was produced for verification - Held that - As one of the mandatory requirement of the proviso to Section 43B(a) of the Act was not satisfied so as to permit any deduction under the said provision. In view of the above, the question formulated above is answered in favour of the Department and it is held that the Tribunal is not justified in conforming the order of the CIT (Appeals) in allowing the deduction in respect of excise duty of ₹ 2,65,35,000/- under Section 43B of the Act without any evidence being produced to establish the payment for the purposes of verification. We direct the CIT (Appeals) to consider it afresh in the light of the observations made herein above

Summary

Issues:
- Deduction under Section 43B of the Income Tax Act, 1961 for excise duty payment.

Analysis:
The case involved an appeal by the Income Tax Department against the order of the Income Tax Appellate Tribunal (ITAT) regarding the deduction claimed by a corporative society engaged in manufacturing and sale of sugar under Section 43B of the Income Tax Act, 1961. The society claimed a deduction for an amount alleged to have been deposited as excise duty for the previous year before filing the return for the assessment year in question. The Assessing Officer initially declined the deduction due to lack of evidence for the excise duty payment. However, the Commissioner of Income Tax (Appeals) allowed the deduction, which was then upheld by the Tribunal, leading to the Department's appeal.

The main issue for consideration was whether the Tribunal was justified in confirming the order of the Commissioner of Income Tax (Appeals) in allowing the deduction under Section 43B of the Act. The relevant provision, Section 43B, mandates that any sum payable by the assessee by way of duty is deductible for computing income under Section 28 of the Act if paid in the previous year or on or before the due date for filing the return, along with evidence of payment. The provision emphasizes the necessity of furnishing evidence of payment along with the return to enable verification.

In this case, it was found that while the excise duty amount was paid before the return filing due date, no evidence of payment was produced for verification. The Assessing Officer's finding regarding the lack of evidence was not overturned by the Commissioner of Income Tax (Appeals) or the Tribunal. As a result, the mandatory requirement of furnishing evidence of payment for verification, as per the proviso to Section 43B(a) of the Act, was not met. Therefore, the Tribunal's decision to allow the deduction without evidence of payment was deemed unjustified.

Consequently, the High Court set aside the orders of the Tribunal and the Commissioner of Income Tax (Appeals), directing the latter to reconsider the deduction claim in light of the observations made. The appeal was disposed of accordingly, ruling in favor of the Department due to the absence of evidence establishing the excise duty payment for verification purposes.