CAUVERY IRON AND STEEL INDIA LIMITEDITED,HYDERABAD vs. CENTRAL CIRCLE 7(3), MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM I.T.A. No.4068/Mum/2025 (Assessment Year: 2020-21) Cauvery Iron and Steel India Central Circle 7(3) Limited Office of the Central Circle 7(3), C/o P. Murali & Co., Chartered Mumbai Vs. Accountants, 6-3-655/2/3, Somajiguda, Hyderabad, Telangana-500082 PAN: AABCC3576F Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

: Shri P Murli Mohan (Virtually Assesseeby appeared) & Shri Laxmikant Rathi (Physically appeared) Revenueby : Shri Virabhadra Mahajan, Sr. DR Date of Hearing : 12.03.2026 Date of Pronouncement : 03.06.2026 O R D E R Per Arun Khodpia, AM: This present appeal is preferred by the assessee, directed against the order of the Commissioner of Income Tax Appeals, ADDL/JCIT (A)- 2, Chennai [in short, “the Ld. CIT(A)”], dated 30.10.2023 for the assessment year 2020-21, arises from the intimation under section 143(1) of the Income Tax Act, 1961 [in short, “the Act”] dated 20.12.2021, passed byCentralized Processing Center,

ITA No. 4068/Mum/2025 Cauvery Iron and Steel India Limited Bengaluru [in short,“the CPC”].The grounds of appeal raised by the assessee, are as under: “1.The order of the Ld. CIT(A) u/s 250 of the Act dt. 30.10.2023 for the AY 2020-21 is erroneous both on facts and in law to the extent the order is prejudicial to the interests of the appellant. 2.The Ld. CIT(A) erred in partly allowing the additions made in the Intimation order passed by CPC, Bangalore, without giving full relief to the appellant. 3.The Ld. CIT(A) erred in upholding the disallowance made by the AO for an amount of Rs. 91,07,403/- u/s 37 of the Act without fairly appreciating the facts and circumstances of the case. 4.The Ld. CIT(A) ought to have considered that the Duties, Customs & Central Excise collected of Rs. 91,07,403/- on behalf of the department and as such it could not be routed through Profit & Loss A/c and hence, no deduction u/s 43B of the Act is warranted. 5.The case laws relied upon by the Ld. CIT(A) are not related to the facts of the case and they are quite distinguishable and hence, the disallowance made of Rs. 91,07,403/- is not sustainable. 6. The Ld. CIT(A) failed to consider that the decision of Hon'ble Supreme Court in the case of Chowranghee Sales Bureau P. Ltd. Vs CIT is not related to the facts of the case as the assessee is following a separate account towards Customs & Central Excise Duties and directly paid to the Department.”

ITA No. 4068/Mum/2025 Cauvery Iron and Steel India Limited Bengaluru had made a disallowance with respect to provident fund payment and ESI payments for Rs.49,125/-. The assessee preferred an appeal before the Ld. CIT(A) and has submitted that the items which were disallowed by the Ld. AO are taxes and duties, which were never debited to statement of profit and loss account, hence the adjustment/addition was bad in law and liable to be annulled. It is submitted that the liability of Custom and Central Excise Duty and Income Tax are nothing but contingent liability and, therefore, the said items are never debited to P & L account and no such expenses were claimed by the assessee during the relevant assessment year. Regarding payment of PF and ESI, it is submitted that such payments were made by the assessee before the due date of filing of return u/s 139(1) of the Act, therefore, following the decision of ITAT Hyderabad in the case of Value Momentum Software Services Private Limited vs. Deputy Commissioner of Income Tax in ITA No. 2197/Hyd/2017 for AY 2013-14, the disallowance was vacated. 4. Ld. CIT(A), further, deliberated on the issues, had deleted the disallowance on account of Income tax liability amounting to Rs.4,87,39,163/-, however, had confirmed the amount of Customs/Central Excise duty for Rs.91,07,403/-, stating that such items are part and parcel of turnover of assessee and, therefore, inseparable from the turnover as well as closing stock. Accordingly, the non-payment of Custom/Central Excise Duties within the time limit prescribed u/s 43B, would attract the provisions of section 43B. Ld. CIT(A)

ITA No. 4068/Mum/2025 Cauvery Iron and Steel India Limited also deleted the disallowance of PF and ESI as such payments were made within the due dates as stipulated under the PF Act. 5. Being aggrieved with the decision of Ld. CIT(A), in confirming the payments of Central Excise and Custom Duty, considering the same as 43B item, the assessee is in appeal before us. 6. Before us, the Ld. Authorized Representative of the assessee submitted that such items are furnished in the form for tax audit report at Sr. no.21(g), as the liability of contingent nature and therefore, the same cannot be considered as crystallized liability of the assessee. Further, such amounts were never debited in the P & L account, as clarified before the Ld. CIT(A) also, the same cannot be disallowed, once are not claimed as expenditure by the assessee. It is also submitted that the adjustment in the instant case wereout of the scope of adjustment u/s 143(1)(a) of the Act, which are limited to the extent of arithmetical errors, incorrect claims apparent from information in the return or disallowance or loss claimed without required return. Reliance was placed on the decision of ITAT Ahmedabad “D” Bench reported in [2025] 174 taxmann.com 843(Ahmedabad Trib.) in the case of Assistant Commissioner of Income-tax vs. Mahesh Mohanbhai Patel (HUF), wherein the identical issue was decided by the Tribunal in favour of assessee with the following observation: “7. We have carefully considered the orders of the lower authorities, the materials placed in the paper book, and the submissions recorded before the CIT(A). It is an undisputed fact that the addition of Rs.4,20,39,630/-was made solely on the basis of disclosure under clause 21(g) of the tax audit report, without there being any corresponding debit in the profit and loss account. This fact is corroborated by the financial statements and the revised audit report dated 18.02.2022 furnished by the 4

ITA No. 4068/Mum/2025 Cauvery Iron and Steel India Limited assessee. The copy of the Auditor's certificate indicating the facts that the amount was inadvertently reported in the original tax audit report and the same is rectified in the revised form 3CD annexure to the tax audit report in form 3CB. The coordinate benches in Dwarkadish Spinners Ltd. (supra) and Kay Bee Industrial Alloys Pvt. Ltd. (supra) have held that contingent liabilities which are not debited to the profit and loss account cannot be added merely on the basis of disclosure in the audit report. Further, under section 143(1)(a), the scope of adjustment is limited to arithmetical errors, incorrect claims apparent from any information in the return, or disallowance of loss claimed without required return. The adjustment made in the present case does not fall under any of these categories, as it requires verification beyond the return itself.”

“9. We have heard both the parties and perused the material placed on record which includes audited financial statements and the statement showing computation of total income for the year under consideration. On the first issue of addition of Rs.1000/-, admittedly, it is a fact on record that assessee had already added back this amount while computing its total income. Accordingly, yet another disallowance made while processing the return is not justified as it amounts to double addition. We, thus do not find any infirmity in the findings arrived at by the ld. CIT(A) in this respect. 9.1. On the second issue in respect of liability of contingent nature, assessee has evidently demonstrated that this amount has been reported in its financial statements as part of its disclosure requirements and does not have any bearing on the profit and loss account to arrive at total income for the year and reported in its return. We find that ld. CIT(A) has taken note of the inadvertent error made by the tax auditor while reporting it in column 21(g) of the tax audit report. Based on his examination of the records, he has noted that assessee did not claim the contingent liability as an expense, neither in the profit and loss account nor in the return of income as a deduction while computing its total income. This is a verifiable fact from the records which were already available with the Department when the assessee filed its return of income on its portal. Considering the facts and the material on record, we do not find any infirmity in the 5

ITA No. 4068/Mum/2025 Cauvery Iron and Steel India Limited fact based findings arrived at by ld. CIT(A) in granting relief to the assessee. Accordingly, grounds raised by the Revenue are dismissed.”

“6. I have considered the submissions of the assessee made before the authorities below as well as the submissions of the learned Sr. DR. There is no dispute that tha 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 31-3-2019 wherein this amount of Rs. 22,21,501/- is shown as outstanding being GST payable. The 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

ITA No. 4068/Mum/2025 Cauvery Iron and Steel India Limited 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 43B/The through the profit and loss account to circumvent the provisions of section 43B.”

ITA No. 4068/Mum/2025 Cauvery Iron and Steel India Limited such amounts. Further, it is stated that such adjustments are not permissible within the scope of adjustments u/s 143(1)(a) of the Act. Assessee relied on the decision of ITAT Ahmedabad in the case of Assistant Commissioner of Income-tax vs. Mahesh Mohanbhai Patel (Supra.) wherein the Tribunal has decided the issue in favour of assessee on the basis of auditor’s certificate indicating the fact that amounts were inadvertently reported in the original tax audit report and the same is rectified on the revised form 3CD – annexure to the tax audit report in form 3CD. The contingent liabilities are not debited to the profit and loss account but are merely added for the sake of disclosure in audit report. A similar view was adopted by ITAT Mumbai in the case of Assistant Commissioner of Income-tax vs. Fitrite Packers (Supra)to the facts of the present case, since the assessee had disclosed its contingent liability at Sr. no.21(g) of the tax audit report as a matter of disclosure, the same cannot be added back to the income of assessee as a disallowance,being such expenditure were never claimed by the assessee in its profit and loss account to reduce its taxable income. 13. Adverting to the contention by Ld Sr. DR, as per decision in the case of Smt. Husna Parveen vs. Commissioner of Income Tax (Appeal), ITAT Varanasi Bench has held that, provisions of section 43B cannot be circumvented merely by taking particular liabilities to balance-sheet instead of claiming them as expenditure in the profit and loss account, in violation of provisions of section 145A of the Act. We note that, on a bare perusal of financial statement of the 8

ITA No. 4068/Mum/2025 Cauvery Iron and Steel India Limited assessee, it cannot be figured out that the contingent liabilities, which the assessee has disclosed in tax audit report, are part of liability in the balance sheet or they are claimed as expenditure in the profit and loss account. the disallowance of Custom and Central Excise confirmed by the Ld. CIT(A) was uncalled for and cannot survive. However, the financial statement of the assessee needs to be verified by the Ld. AO and also the assessee needs to assist by furnishing a certificate from the statutory auditors that such liabilities were never claimed by the assessee in profit and loss account or are taken directly to the balance-sheet to circumvent the provisions of section 43B of the Act. 15. We thus, in terms of aforesaid deliberations allow the appeal of the assessee, subject to factual verification by the Ld. AO and furnishing of a certificate from Chartered Accountant as was done by the assessee in the case of Assistant Commissioner of Income-tax vs. Mahesh Mohanbhai Patel (HUF) (Supra). 16. In result, the appeal of assessee is allowed, in above terms. Order pronounced in the open court on 03-06-2026.

Sd/- Sd/- (ARUN KHODPIA) (AMIT SHUKLA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated : 03-06-2026. Ankit K., Sr. PS

ITA No. 4068/Mum/2025 Cauvery Iron and Steel India Limited Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai