CHANDRAIAH BALANA KALAL,MUMBAI vs. DCIT 4(1)(1), AAYKAR BHAWAN

The present appeal preferred by the Assessee is directed against the order, dated 08/07/2025, passed by National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 30/03/2015, passed under Section 143(3) of the Act for the Assessment Year 2012-2013. 2. The Assessee has raised following grounds of appeal :

On the facts and circumstances of the case, the Ld. CIT(A) failed to appreciate that the VAT payable disallowed under section 43B was paid in FY 2012-13 & FY 2016-17, therefore if any disallowance required in FY 2011-12 then the same needs to be allowed in FY 2012-13 & FY 2016-17.”

The relevant facts in the brief are that the Assessee is an individual running proprietorship concern in the name of C.B. & Sons at the relevant time. For the Assessment Year 2012-13, the Assessee filed return of income on 30/09/2021 which was selected for regular scrutiny. The Assessing Officer passed the Assessment Order under Section 143(3) of the Act on 30/03/2015, inter alia, making addition of INR 1,50,78,103/- under section 43B of the Act. The issue traveled to the Tribunal. Vide Order, dated 19/03/2019, passed in ITA No. 1495/Mum/2017, the Tribunal remitted the issue of addition under Section 43B of the Act back the file to the Assessing Officer.

Sequent to the above order passed by the Tribunal, the Assessing Officer passed Order giving effect on 30/09/2021 making an addition of INR.1,14,31,307/- under Section 43B of the Act. Being aggrieved, the Assessee preferred appeal before the Ld. CIT(A) which is dismissed vide impugned Order, dated 08/07/2025. The Assessee has now preferred the present appeal before the Tribunal on the grounds reproduced in paragraph No. 2 above.

The Ld. Authorized Representative for the Assessee submitted that the Assessee was following mercantile system of accounting and had deposited VAT amount after due date of filling return of income. It was submitted that Assessee did not debit the said amount as expenditure in Profit & Loss Account. The Assessee had credited the VAT account under liability head. Therefore, the provisions of Section 43B of the Act would not be attracted. In this regard,

Per contra the Ld. Departmental Representative relied upon the order passed by the Assessing Officer and by the Ld. CIT(A). It was submitted that the Assessee had failed to fulfill the condition required to claim deduction under Section 43B of the Act and therefore, the order passed by the Ld. CIT(A) should be sustained.

We have given thoughtful consideration of the rival submissions and have perused the material on record. As regard the first submission made on behalf of the Assessee that deduction under Section 43B of the Act would not be attracted to the fact of the present case since the Assessee has not routed the expenses through Profit & Loss Account is concerned, we find no merit in the same. After the introduction of Section 145A of the Act, an Assessee did not have an option to follow exclusion method and was mandated to follow inclusion method. A co-joint reading of Sections 145A and Section 43B of the Act would show that as per Section 145A of the Act the business profits are firstly required to be mandatorily computed by following the 'Inclusive method', by loading the amount of tax or duty etc. on purchase, sale and inventories and thereafter, if some part of tax or duty is unpaid, the unpaid amount is be added back in the computation of income as per Section 43B of the Act to arrive at income chargeable under the head “Profits & Gains of Business‟. Thus, on following the mandate of Section 145A of the Act, in effect, deduction would be claimed by the Assessee though, in some cases, the net impact may come out to be ‘Nil’ on account of increase of value of closing stock being set off with the increase in the value of opening stock/purchases on account of inclusion of the taxes.

01.2013 FY 2012-13 (AY 2013-14) 3 FY 2011-12 (AY 2012-13)

01.2013 FY 2012-13 (AY 2013-14) 4 FY 2011-12 (AY 2012-13)

02.2013 FY 2012-13 (AY 2013-14) 5 FY 2011-12 (AY 2012-13)

02.2013 FY 2012-13 (AY 2013-14) 6 FY 2011-12 (AY 2012-13)

12.2016 FY 2016-17 (AY 2017-18)

In terms of paragraph 7 above, the present appeal preferred by the Assessee is partly allowed.

अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध ,आयकर अपीलीय अदधकरण ,म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.