INCOME TAX OFFICER, WARD-2, REWARI, INCOME TAX OFFICE, REWARI vs. NAVITASYS INDIA PRIVATE LIMITED, BAWAL, REWARI, HARYANA

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ITA 4775/DEL/2026Status: DisposedITAT Delhi13 November 2026AY 2021-227 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the CIT(A) had provided a detailed order. However, the Tribunal observed that while the CIT(A) discussed the audit report, no such report was produced before the Tribunal, and the details were not available on record. The CIT(A)'s observations were made without discussing or quoting from the audit report. Therefore, considering the fitness of things, the Tribunal was of the view that the matter should be remanded back to the file of the CIT(A) to re-examine the issue in light of the discussion made. The Tribunal held that the addition made by the CPC under section 143(1) was not sustainable in law, as the GST collected on sales and GST refund, in the facts of the present case where the exclusive method of accounting was followed and the amounts were not credited to the profit and loss account, did not constitute income. The adjustment made under section 143(1) was beyond the permissible scope of prima facie processing. The CIT(A)'s direction to delete the addition was noted. However, due to the lack of the audit report before the Tribunal, the appeal filed by the revenue was allowed for statistical purposes, remanding the matter to the CIT(A).

What were the facts?

The assessee, Navitasys India Private Limited, is engaged in manufacturing batteries. For Assessment Year 2021-22, the assessee received Rs. 416,60,76,798/- as GST on sales and a refund of Rs. 268,80,92,633/- on account of unutilized GST. These amounts, totaling Rs. 6,85,41,69,431/-, were disclosed in Form 3CD but inadvertently omitted from the Income Tax Return (ITR) at Sr. No. 5 of 'Part A - OI'. The Central Processing Centre (CPC) processed the ITR under section 143(1) and made an addition of Rs. 6,85,41,69,431/- on account of this mismatch, raising a demand. The assessee contended that no prior intimation was given before this addition. The CIT(A) deleted the addition, holding that GST collected and refunded does not constitute income when not credited to the profit and loss account and that the adjustment under section 143(1) was beyond its scope. The Revenue appealed this deletion.

What were the issues?

1. Whether the addition of Rs. 6,85,41,69,431/- made by the CPC under section 143(1) of the Income Tax Act, 1961, on account of the mismatch in disclosing GST collected and refunded, was erroneous, considering it was an issue involving accounting treatment and the scope of section 145A, and whether it was made without affording the assessee an opportunity of being heard? Assessee's Contentions: - The GST collected and refunded does not impact the profit and loss account and is a statutory levy. - The tax audit report indicated that these amounts do not impact the profit and loss account and that the accounting method renders the exercise tax neutral. - The adjustment under section 143(1) was impermissible as it required examination of the method of accounting and the interplay of section 145A. - No prior intimation was issued under the first proviso to section 143(1)(a), violating the mandatory requirement of an opportunity to be heard. - Relied on the order of the CIT(A). Revenue's Contentions: - The CIT(A) erred in deleting the addition amounting to Rs. 6,85,41,69,431/- made by the CPC under section 143(1) on the grounds of mismatch in filing the return of income/forms, which was the assessee's part.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 145A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: MS. MADHUMITA ROY & SHRI KRINWANT SAHAY

PER SH.KRINWANT SAHAY, AM : This appeal is filed by the Department against the order of Ld. ADDL JCIT A-7, MUMBAI, NFAC, DELHI dated 18-Feb-2026 for the Assessment Year 2021-22.

2.

The Department has raised the following grounds of appeal:

“1. On the basis of the facts and circumstances of the case the Ld. CIT/ADDL/JCIT(A) has erred in law in deleting the addition amounting to Rs. 6,85,41,69,431/- made vide order u/s 143(1) dated 22.09.2022 as the addition of Rs. 6,85,41,69,431/- made by the CPC u/s 143(1) of the Act was on the grounds of mismatch filing the return of income/forms which is on the part of assessee.”

3.

During proceedings before us the Ld. DR argued that the Ld. CIT(A)/Addl/JCIT(A) has erred in deleting the addition amounting to Rs.6,85,41,69,431/- made by the CPC during processing return u/s. 143(1).

4.

Brief facts of the case as given in the appellate order of Ld. CIT(A) which reproduced as under :-

2.1. The Appellant is an Indian company engaged in the business of manufacturing of smartphone batteries, power banks and automobile batteries. During the previous year relevant to the AY under consideration, the Appellant had received Goods and Services Tax ('GST') amounting to Rs.416,60,76,798/- from its customers on account of sales made to them, which has been deposited by the Appellant with the Government. In addition to this, the Appellant also received refund of Rs.268,80,92,633/- on account of unutilized GST from the GST Department under the inverted duty structure. The said details are tabulated below for ease of reference: Particulars Amount (in Rs.) GST received on sales from customers 416,60,76,798/- subsequently deposited with government Refund of unutilized GST from GST 268, 80,92,633/- department 685,41,69,431/- Total

2.2. On 08.02.2022, as per the mandate of rule 6G(1)(a) of the Income- tax Rules, 1962, the Appellant filed Form 3CD wherein at Clause 16 (i.e., 'Amounts not credited to the profit and loss account, being') the aforesaid details and amounts pertaining to GST were disclosed at sub-clauses:

(a) The items falling within the scope of section 28; and (b) The proforma credits, drawbacks, refunds of duty of customs or excise or service tax or refunds of sales tax or value added tax or Goods & Services Tax, where such credits, drawbacks or refunds are admitted as due by the authorities concerned; in the following manner : Sub- Sl. Description Amount (in Rs.) clause No. (a) 1. Goods and Services 416,60,798/- tax, however, it does not impact on profit & loss account (b) 1. Refunds of Value 268,80,92,633/- Added Tax

2.3. Thereafter, the Appellant filed its return of income ('ITR') under section 139(1) of the Act on 12.03.2022 vide acknowledgement no. 334463000120322 declaring loss of Rs. 1,51,07,46,576/- and computing refund of Rs. 1,00,89,528/- on account of TDS and TCS. However, due to an inadvertent clerical error at time of filing the ITR, the aforesaid details and amounts pertaining to GST (which were previously disclosed in the afore- mentioned Form 3CD) were not disclosed at Sr. No. 5 of 'Part A - Ol' of the ITR. By way of notice dated 28.06.2022 issued under section 143(2) of the Act the ITR filed by the Appellant was selected Faceless Assessment Centre Na Acted for scrutiny assessment by the National Faceless Assessment Centre (NaFAC). 2.4. Thereafter, the ITR filed by the Appellant was processed by AO, CPC and additions totaling to of Rs.6,85,41,69,431/- was made to the Appellant's income on account of the aforesaid details and amounts pertaining to GST vide intimation order dated 22.09.2022 ('Impugned Order') passed under section 143(1) of the Act. Consequently, on account of the said addition, the income of the Appellant was assessed at Rs.5,32,76,14,850/- and a demand totaling Rs. 1,89,66,85,210/- was raised on the Appellant. However, it is pertinent to note that prior to passing the Impugned Order, the AO, CPC allegedly did not issue any intimation of such addition either in writing or in electronic mode as is the requirement laid down in the first proviso to section 143(1)(a) of the Act. Thus, the said additions were made without affording any opportunity of being heard to the Appellant.

2.5. It is also pertinent to note that while passing the Impugned Order and computing the total income of the Appellant, the AO, CPC also failed to set off the brought forward business losses and unabsorbed depreciation for AY 2020-21 amounting to Rs.55,78,39,614/-. Therefore, aggrieved by the aforesaid additions made by way of the Impugned Order, the appellant has preferred the present appeal.”

5.

Per contra the Ld. Counsel of the assessee relied on the order of the Ld. CIT(A). The assessee’s counsel has also filed papers showing that the findings given by the ld. CIT(A) are as per law.

6.

We have heard both the parties and we have also perused the orders, papers and details filed by the Ld. Counsel of the assessee. We find that the Ld. CIT(A) has given a detailed and speaking order on this issue. Important findings of the first appellate authority are as under :-

“5.4 On careful consideration, it is noted that GST collected from customers is a statutory levy collected on behalf of the Government and subsequently deposited. Similarly, refund of unutilized GST under the inverted duty structure represents a return of tax component and does not by itself partake the character of income unless it is otherwise credited to the profit and less account or represents remission of liability. The tax audit report clearly indicates that the Appellant follows the exclusive method of accounting and that GST does not impact the profit and loss account. The detailed quantitative impact of inclusion of GST under section 145A of the Act has also been tabulated in the audit report demonstrating that corresponding adjustments in purchases, sales and closing stock render the exercise tax neutral

5.5. Further, the Central Board of Direct Taxes, in Circular No. 23/20/17 dated 19.07.2017. has clarified in the context of TDS provisions, that GST component indicated separately is not to be treated as part of the income element Though issued in a different context, the underlying principle that GST is a pass-through statutory levy remains relevant

5.6. An adjustment under section 143(1)(a) of the Act is permissible only in respect of arithmetical errors, incorrect claims apparent from information in the return, or disallowances indicated in the audit report but not taken into account in computing total income. In the present case, the tax audit report itself discloses that the amounts in question were not credited to the profit and loss account and were reported as items not forming part of income. The AO, CPC has, in effect, treated the entire gross GST collection and refund as income without examining the corresponding accounting treatment and without considering the tax-neutral impact demonstrated in the audit report. Such an issue involves examination of method of accounting and interplay of section 145A of the Act and ICDS disclosures and cannot be reduced to a mere prima facie adjustment OME TAX DEPARTME

5.7. Moreover, the Appellant has contended that no prior intimation under the first proviso to section 143(1)(a) of the Act was issued before making the adjustment From the records placed, there is nothing to show that the Appellant was afforded an opportunity to respond to the proposed adjustment. The requirement of issuing an intimation and granting opportunity before making such adjustment is mandatory.

5.8. In view of the above, I am of the considered opinion that the addition of Rs.6,85,41,69,431/- made by the CPC under section 143(1) of the Act is not sustainable in law. The GST collected on sales and GST refund, in the facts of the present case where the exclusive method of accounting is followed and the amounts are not credited to the profit and loss account, do not constitute income. The adjustment made under section 143(1) of the Act travels beyond the permissible scope of prima facie processing. Accordingly, the addition of Rs.6,85,41,69,431/- is directed to be deleted. Ground Nos. 1 and 2 (including sub-grounds 2.1 to 2.5) are allowed.”

7.

The Ld. CIT(A) in his order has discussed something about audit report but during proceedings before us nothing as such was produced. From the documents filed by the Ld. Counsel of the assessee such details are not available on record. The Ld. CIT(A) has also given his observations without discussing and quoting from the audit report, therefore, in the fitness of things we are of this considered view that the matter should remanded back to the file of the ld. CIT(A) to re-examine the issue in the light of the discussion made above. Accordingly, the appeal filed by the revenue is allowed for statistical purpose.

8.

In the result, appeal filed by the revenue is allowed for statistical purpose.

Order pronounced in the open court on 13.11.2026.

Sd/- Sd/-

[MADHUMITA ROY] [KRINWANT SAHAY] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:13.11.2026 Neha, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi

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