M/S PIONEER TORSTEEL MILLS PVT. LTD.,,HYDERABAD vs. ITO,WARD 16(2),, HYDERABAD

Brief facts of the case are, assessee company filed its e-return for the AY 2006-07 on 27/11/2006 admitting total income of Rs. 21,48,088/- and revised return of income on 08/02/2008 admitting total income of Rs. 23,27,752/-. The AO completed the assessment u/s 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) accepting the return of income. 2.1. Subsequently, the CIT vide order u/s 263 of the Act dated 24/08/2011 held that input credit to the extent of Rs. 15,40,545/- was not an allowable deduction on the ground that it pertained to purchase of certain capital items, and accordingly directed the AO to

Aggrieved by the order of AO, the assessee preferred an appeal only with regard to the addition of Rs. 3,09,666/- on account of input credit of VAT claimed on furnace oil, stores and oxygen.

Before the CIT(A), the assessee stated that it had filed evidences for purchase of furnace oil, stores and oxygen as required by the AO, but, the AO disallowed the same on the ground that the claim to such an extent of Rs. 3,09,666/- was not genuine and while doing so, the assessee was not given opportunity to reconcile the differences, if any.

The CIT(A) after considering the submissions of the assessee confirmed the addition made by the AO and rejected the contention of the assessee that an opportunity was not given to reconcile the differences.

Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: “1. The order of the CIT (A) is erroneous both on facts and in law. 2. On the facts and in the circumstances of the case, the CIT(A) erred in confirming the addition Rs. 3,09,666/ -, out of the input credit of VAT claimed on furnace oil, stores and oxygen.

With regard to ground No. 4 and additional ground, ld. AR vehemently argued that these are legal grounds and it was not appealed before ld. CIT(A), but that it can be raised before second appellate authorities. We noticed that the ground raised in Ground No. 4 and additional grounds are for the grievances out of the order u/s 263. Assessee has not challenged the order u/s 263. The order passed by the AO is as per the directions of CIT u/s 263. Therefore, these grounds are not coming out of the order passed u/s 143(3) r.w.s. 263. Accordingly, these grounds are dismissed.

With regard to ground Nos. 2 & 3, ld. AR submitted that assessee has submitted relevant purchase bills before the AO relating to purchase of furnace oil, stores and oxygen. Further, he submitted that assessee has maintained separate VAT ledgers for furnace oil, & stores and he brought to our notice the ledger extracts, which is placed on record at page 10 of paper book. These were also placed before the AO. But, AO has not given proper opportunity to explain

Considered the rival submissions and perused the material on record. We notice that AO has disallowed the VAT credit to the extent of Rs. 3,09,666/- as not genuine. According to the assessee, AO has not given proper opportunity to explain the transaction. But, now, assessee has filed before us the final VAT assessment order, which is part of paper book, as per which, the assessee has paid the total tax as per the purchases recorded in the books of account. The main authorities on purchase and sales have assessed the books of the assessee and completed the assessment. Therefore, there are no discrepancies relating to purchase and sales, and also in VAT credit availed by the assessee. Therefore, in our view, the ledger maintained on purchase of Furnace Oil, stores and oxygen are proved to be correct. Hence, ground Nos. 2 & 3 are allowed.

In the result, appeal of the assessee is partly allowed. Pronounced in the open court on 9th November, 2018.