2023 (3) TMI 766 - AT - Income Tax

Addition u/s. 43B of the VAT payable - VAT tax liability was not paid on or before due date for furnishing of her return of income for the year under consideration u/s.139(1) - HELD THAT - Hon ble High Court of Chhattisgarh in the case of Assistant Commissioner of Income Tax-1, Bhilai, Dist. Durg (C.G.) Vs. M/s. Ganapati Motors, Tax Case 2017 (4) TMI 1613 - CHHATTISGARH HIGH COURT had held, that in a case where the assessee had not charged VAT to its profit and loss account, then, despite the fact that the liability may still be unpaid it could not have been added u/s.43B of the Act as the same was not claimed as a deduction in the books of accounts. No addition can be made of an assessee s unpaid VAT tax liability which was not charged to the profit and loss account, there is substance in the claim of the Ld. AR that there was no justification for the A.O to have disallowed u/s.43B VAT payable as the same was not charged to the latters profit and loss account. We say so, for the reason that as the aforesaid claim of the assessee was in conformity with the aforesaid judgment of the Hon ble Jurisdictional High Court in the case of M/s. Ganapati Motors 2017 (4) TMI 1613 - CHHATTISGARH HIGH COURT therefore, the same by no means could have been dubbed as an incorrect claim and brought within the realm of the adjustments contemplated in clause (a) of Section 143(1) of the Act. Accordingly, the order of the CIT(Appeals) is set-aside and the addition made by the A.O of VAT payable is vacated. Appeal of assessee allowed.

Summary

Issues Involved:
The appeal concerns the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 14.07.2022, arising from the order passed by the A.O, CPC under Sec. 143(1) of the Income-tax Act, 1961 for the assessment year 2018-19. The key issues raised in the appeal are as follows:

Issue 1 - Disallowance under section 43B - Rs. 25,06,246:
The appellant contested the disallowance under section 43B of the Act, arguing that the provisions of section 43B were not applicable to them. They maintained that the VAT payable was not debited to the profit & loss A/c, and therefore, should not be disallowed under section 43B. The appellant emphasized their exclusive method of accounting and the Tax Auditor's report stating no impact on their profit due to the accounting method.

Issue 2 - Excess levy of interest under sections 234A, 234B, and 234C:
The appellant challenged the excessive levy of interest under sections 234A, 234B, and 234C of the Act, claiming that the amounts levied were incorrect as per their computations in the return of income. They argued that the NFAC failed to adjudicate on these grounds and did not consider the correct amounts as computed by the appellant.

Judgment Details:
The appellant, engaged in the trading business, filed their return of income for A.Y. 2018-19, which was processed under Sec. 143(1) of the Act. The assessing authorities added the VAT payable by the appellant, resulting in an increased taxable income. The CIT(Appeals) upheld this addition, citing that the VAT collected by the appellant formed part of total sales/turnover, despite not being paid to the Government account.

Upon appeal, the Judicial Member considered the two main issues raised by the appellant. Firstly, referencing a High Court judgment, it was observed that no addition could be made for the unpaid VAT tax liability not charged to the profit and loss account. Therefore, the addition of VAT payable was deemed unjustified, and the order of the CIT(Appeals) was set aside.

In conclusion, the appeal of the assessee was allowed based on the High Court judgment, and the addition of VAT payable was vacated. The judgment was pronounced on 14th March 2023 by the Judicial Member.