TIRLOK CHAND SHARMA, F-133, IST FLOOR, ASHOK VIHAR, NEW DELHI,NEW DELHI vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 61(1), CIVIC CENTRE, DELHI, NEW DELHI

Facts of the case, in brief, are that the assessee is an individual and derives income from business. For the A.Y-2020-21 the assessee filed return of income on 22.01.2021 declaring total income of Rs. 23,51,210/-. The CPC, Bangalore passed the Intimation under Section 143(1) dated 28.10.2021, inter alia, making adjustment u/s 143(1)(a) of the Act of Rs. 11,14,348 on account of inconsistency of amount disallowed under section 43B in any preceding previous year but allowable during the previous year claimed in return. In appeal the said before us.

It is the case of the assessee that the assessee has GST receivable, GST cash and credit balance of Rs.27,09,738/- which is more than the GST payable of Rs.11,50,351/- meaning thereby no GST payable as on 31.03.2020 which is evident from the paper book filed before us; the list of other current assets and list of expenses payable forming part of balance sheet reflecting the credit as well as debit balance of GST. It is the case made out by the assessee that the GST has not routed through the profit and loss account as reported by the auditor itself. When any expenses/liability has not been reduced from the profits particularly when it has not routed through profit and loss account no addition is called for. He has relied upon tax audit report at the time of hearing of the matter.

In spite of basic documents being the balance sheet, profit and loss account having been placed before the Ld. CIT(A), the Ld. CIT(A) failed to consider the fact and observed that the assessee himself has admitted that the same was reported as unpaid in tax audit report and no adjustment made in the return of income and therefore, there was no error on the part of the CPC in making adjustment to the submitted by the Ld. AR.

It is further noted that a rectification application under Section 154 of the Act, was preferred by the assessee but on 08.03.2022 the said application was disposed of by computing the income of the assessee at Rs.34,73,060/- as against the income declared is the return at Rs.23,51,210/- resulting income disallowance of Rs.11,21,850/-.

Having heard the Ld. Counsels appearing for the parties and having regard to the facts and circumstances of the matter particularly from the documents placed before the Bench wherefrom it is found that the assessee is having closing GST liability of Rs.11,50,351/- and GST credits of Rs.27,69,738/- (GST Cash ledger of Rs.6,24,704/-, GST Credit Ledger of Rs.15,61,408/- and GST receivable of Rs.5,83,626/-). Thus, it is an admitted fact that the GST is not liable to be paid by the assessee rather it is to be adjusted against the balance available. The GST adjustment was made before the due date of filing of return of income. It further appears that the auditor in its tax report for the year under consideration has wrongly reported unpaid liability of the statutory dues under Section 43B of the Act in the tax audit report. Furthermore, when the same has not been routed through the profit and loss account the addition cannot be made as already decided by the jurisdictional High Court in the case of CIT vs. Noble and Hewitt (I) P. Ltd. reported in (2008) 166 taxman 48 (Delhi HC) as relied upon by the Ld. AR wherein the assessee did not deposit part of service tax collections with concerned authorities neither claimed any deduction in this regard nor did it debit the said amount as an expenditure in the profit and loss account, the addition made by the Ld. AO disallowing the said amount was rightly deleted by the Coordinate Bench as observed by the Hon’ble Jurisdictional High Court. The Ld. AR has also relied upon the order passed by the Coordinate Bench in the case of ATS Real Estate Builders (P) Ltd. Vs. DCIT reported in (2025) taxmann.com 611 (Delhi – Tribu), wherein the assessee neither claimed deduction on account of GST nor debited amount to profit and loss account and therefore, the provisions of Section 43B has not attracted; the impugned disallowance made under Section 43B on account of directed to be deleted.

Thus, having regard to the entire aspect of the matter particularly the reporting by the tax auditor in para 26(1)(B)(b) that the amount of Rs.11,14,348/- has not been paid before the due date is factually wrong, the impugned addition made by the Ld. CIT(A) to the tune of Rs.11,50,351/- is found to be not sustainable in the eyes of law and thus, deleted.

The appeal preferred by the assessee is allowed.