SEG AUTOMOTIVE INDIA PRIVATE LIMITED,BENGALURU vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), BENGALURU

This appeal filed by the assesseeagainst Order passed by the CIT(A) – 15, Bangalore, vide Order dated 27.01.2025, on the following grounds of appeal:

Aggrieved from the above Order, assessee filed appeal before the CIT(A) and CIT(A), based on the submissions of the assessee, dismissed the appeal of the assessee by relying on the case laws of the jurisdictional Hon’ble High Court in the case of Mysore Thermal Electricals Pvt. Ltd., Vs. CIT (89 Taxamann 558) in which it has been held that the refund on account of VAT and GST are liable to be brought to tax in the year of receipt and some grounds raised by the assessee were remitted to the AO and accordingly, he partly allowed appeal of the assessee.

Aggrieved from the above Order, assessee filed appeal before ITAT.

The learned Counsel reiterated the submissions made before the lower authorities and submitted that GST and VAT refund addition made by the CPC is only on the basis of From3CD report at Sl.No.16 which is placed at Paper Book Page No.157 with the remark as under:

On the other hand, learned DR relied on the Order of learned CIT(A) and submitted that the learned CIT(A) has relied on the Order of the jurisdictional Hon’ble High Court which is in favour of the Revenue and it is squarely applicable to the present facts of the case and further submitted that nowhere in the Order of the CIT(A) has accepted that the assessee has not debited to the payments of VAT and GST in the P & L A/c and claimed as expenditure. Therefore, he requested that matter may be remitted to the AO for verifying whether the assessee has debited or not the VAT and GST in the P & L A/c or has claimed as expenditure earlier.

Considering the rival submissions, the CPC, while processing the return of assessee, has considered it as income to which refund of VAT and GST amount as per the report of the tax audit in Form 3CD and in proceedings under section 154 of the Act has been rejected by the CPC observing that the refund of GST and VAT should be considered as part of income of the assessee. The learned CIT(A) has relied on the judgment of the jurisdictional Hon’ble High Court. During the course of argument, the learned Counsel submitted that the assessee has never claimed as expenditure to the payment of VAT and GST. Therefore, the refund of VAT and GST should not be considered as part of the income in the year of receipt. However, we noted that these arguments of the learned Counsel have never been examined by the Revenue authorities. The learned CIT(A) has Page 5 of 6 also not examined this fact. Therefore, considering the facts of the case and in the interest of justice, we are remitting this issue back to the file of the AO for fresh examination as to whether the assessee has claimed the payment of VAT and GST as expenditure in the earlier period and has claimed as expenditure in the P & L A/c and decide the issue as per law. The AO is further directed to give reasonable oppourtunity of being heard to the assessee. The learned Counsel further submitted that the addition under section 143(1) of the Act cannot be made by the CPC only on the basis of audit report and he referred to section 143(1)(a) of the Act. In this regard, we noted that the addition has been made by the CPC as per the report of the tax auditor which falls under the provisions of section 143(1)(a)(iv) of the Act. Therefore, the addition made by the CPC is correct. Accordingly, we reject the arguments of the learned Counsel. The assessee is directed to produce necessary documents for substantiating its case. The other grounds raised by the assessee are consequential in nature.

In the result, appeal filed by the assessee is allowed for statistical purposes.