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Facts
M/s. Quartzkraft LLP filed its income tax return for A.Y. 2021-22, declaring nil income. The AO found a discrepancy of Rs. 1,63,59,809/- between sales reported in GST returns and income tax returns/audited accounts, making an addition for understatement of turnover. The assessee contended this amount was F.Y. 2019-20 export turnover, initially omitted from GST returns due to bona fide belief and later included in F.Y. 2020-21 GST return.
Held
The Tribunal deemed the issue to be reconciliatory and verification-intensive. It set aside the impugned order and remanded the matter to the AO for a de novo examination, instructing to reconcile turnover between financial statements and GST returns for F.Y. 2019-20 and F.Y. 2020-21, verify USD-denominated invoices, and pass a speaking order.
Key Issues
Whether a difference in reported turnover between GST returns and income tax returns constitutes an understatement of income, particularly when the assessee claims it relates to a prior year's export turnover subsequently reported in GST.
Sections Cited
143(3), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by M/s. Quartzkraft LLP (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 20.03.2025 for the A.Y. 2021-22.
The assessee has raised the following grounds of appeal :
The brief facts of the case are that, the assessee is engaged in the manufacture of engineered Quartz slabs. It filed its return of income for A.Y. 2021–22 on 20.01.2022, declaring total income at Rs.
Nil. The case of the assessee was selected for complete scrutiny through CASS. After considering the submissions of the assessee, the Learned Assessing Officer (“Ld. AO”) compared turnover figures and noted that, as per GST returns, total sales of the assessee were Rs.12,91,89,389/-, whereas sales declared in the income-tax return/audited accounts were Rs. 11,28,29,580/-. Holding that there was an understatement of turnover of Rs.1,63,59,809/-, the Ld. AO completed the assessment under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (“the Act”) on 15.12.2022, making an addition of Rs. 1,63,59,809/-.
Aggrieved with the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), who upheld the addition made by the Ld. AO. Resultantly, the appeal of the assessee was dismissed by the Ld. CIT(A).
Aggrieved with the order of Ld. CIT(A), the assessee is now in appeal before us. The Learned Authorised Representative (“Ld. AR”) drew our attention to the immediately preceding year’s audited financial statements for F.Y. 2019–20 placed at page nos.32 to 39 of the paper book and submitted that the assessee had export turnover of Rs.1,63,59,809/- in that year. He further submitted that, under the GST law, exports are zero-rated/exempt for tax. Accordingly, the assessee, under a bona fide belief, did not report the said export turnover in the GST returns of F.Y. 2019–20. Subsequently, on advice, the assessee understood that even exempt/zero-rated supplies must be reported. As there was no provision then available to revise the already-filed GST returns of F.Y. 2019–20, the assessee included the said amount in the GST return of the subsequent year (i.e., F.Y. 2020–21, relevant to the year under consideration).
Reliance was placed on proviso to section 37(3) of the CGST Act (page no.57 of the paper book) to say that omitted details could be furnished before 30.11.2020/filing of the relevant annual return, whichever earlier. The Ld. AR also took us through (i) the GST return for September period of F.Y. 2020–21 showing Rs.1,63,59,809/- reported under exempt/zero-rated supplies (page no.71 of the paper book) and (ii) corresponding export invoices (page nos.51 to 56 of the paper book), submitting that all such invoices bear dates in F.Y.
2019–20. It was finally contended that the turnover pertains to F.Y.
2019–20 and had already been recognized in the books for that year (A.Y. 2020–21); hence, the addition for A.Y. 2021–22 deserves deletion.
Per contra, the Learned Departmental Representative (“Ld.
DR”) relied on the orders of the authorities below. He pointed out that the GST return for the September period of F.Y. 2020–21 (page no.70 of the paper book) belongs to F.Y. 2020–21; therefore, the turnover declared therein should be treated as turnover of that year, not of F.Y. 2019–20. He further submitted that, even as per the proviso to section 37(3) of the CGST Act (relied upon by the assessee), any such omission pertaining to F.Y. 2019–20 ought to have been rectified on or before 30.11.2020; however, the September return in question was filed on 03.12.2020. Thus, the assessee’s plea lacks credibility and the appeal deserves dismissal.
We have considered the rival submissions and perused the material available on record. We have gone through the export invoices placed at page nos. 51 to 56 of the paper book and, on perusal, we find that the invoice dates fall in F.Y. 2019–20; however, the invoice amounts are stated in USD. The mere presence of USD- denominated invoices with F.Y. 2019–20 dates, by itself, does not demonstrate how and when those values were recognized in the books of account, nor how they were subsequently reported in GST.
We note the assessee’s explanation that the export turnover of Rs.1,63,59,809/- pertaining to F.Y. 2019–20 was omitted from the GST returns of that year and later reported in the GST return of F.Y.
2020–21 (September period) under exempt/zero-rated supplies. If that be so, a comprehensive reconciliation is indispensable. Equally, the Ld. DR’s argument about the timeliness under section 37(3) of the CGST Act requires verification from the annual returns. In these facts, the issue is fundamentally reconciliatory and verification- intensive. We therefore consider it appropriate, in the interest of justice, to set aside the impugned order and remand the matter to the file of the Ld. AO for a de novo examination with the following specific directions:
(a) Reconciliation (both years): Prepare a year-wise reconciliation for F.Y. 2019–20 and F.Y. 2020–21 showing, at a minimum, turnover as
per audited financial statements (P&L) and books/ledgers; turnover as per GST periodical returns and annual returns.
(b) Where there is an increase in GST-reported turnover in F.Y. 2020– 21, examine whether there is a corresponding shortfall in GST- reported turnover in F.Y. 2019–20, and reconcile both with the audited financials. Any double counting or year-shift must be identified and neutralized.