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Facts
The assessee, a rice milling firm, claimed deduction for VAT/CST payments under Section 43B for AY 2012-13. The assessment was reopened under Section 147. During reassessment, the AO, based on bank confirmation, disallowed Rs. 8,27,230/- due to partial payment of VAT/CST. The first appeal was dismissed ex-parte.
Held
The Tribunal observed discrepancies between the assessee's claim, bank records, and Commercial Tax Department's liability statements. It found the facts of cited cases distinguishable and deemed proper verification necessary. The issue was set aside to the AO for fresh examination to determine the genuineness of the claimed payment and ensure it was credited to the Commercial Tax Department, providing the assessee a fair opportunity.
Key Issues
Whether the disallowance of VAT/CST payments under Section 43B was valid given conflicting records from bank confirmations and the Commercial Tax Department, and the need for proper verification of payment genuineness.
Sections Cited
250, 148, 147, 143(3), 43B, 37(1), 133(6), 142(1)
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
(निर्धारण वर्ा/Assessment Year:2012-13) M/s. Shubham Trading Company, Income Tax Officer, Vs. Ward-1, Nizamabad. Hyderabad. PAN: ABHFS9306F (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri P. Murali Mohan Rao, C.A. रधजस् व द्वधरध/Revenue by: Shri G. Saratha, SR-DR सुिवधई की तधरीख/Date of hearing: 15/07/2025 घोर्णध की तधरीख/Pronouncement: 18/07/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by M/s. Shubham Trading Company (“the assessee”), feeling aggrieved by the order passed by the Learned ADDL/JCIT(A)-9, Mumbai (“Ld. First Appellate Authority”), dated 15.04.2025 for the A.Y. 2012-13.
The assessee has raised the following grounds of appeal :
3. The brief facts of the case are that, the assessee is a partnership firm, engaged in the business of rice milling. It filed its return of income for Assessment Year 2012–13 on 29.09.2012, declaring a total income of Rs.5,24,860/-. During the year under consideration, the assessee had claimed deduction under section 43B of the Income Tax Act, 1961 (“the Act”) on account of payment of VAT of Rs.18,11,203/- and CST of Rs.44,043/-. To verify the genuineness of the said claim, the case of the assessee was reopened under section 147 of the Act. Accordingly, notice under section 148 was issued to the assessee on 23.03.2019. During reassessment proceedings, the Learned Assessing Officer (“Ld. AO”) issued notice under section 133(6) of the Act to the Branch Manager, State Bank of India, seeking confirmation regarding the genuineness of the payments towards VAT and CST. The Branch Manager confirmed only a payment of Rs.10,28,016/-. Accordingly, the Ld. AO disallowed the differential amount of Rs.8,27,230/- and added the same to the income of the assessee. The Ld. AO completed reassessment on 30.12.2019 under section 143(3) r.w.s. 147 of the Act, assessing total income at Rs.13,52,090/-.
4. Aggrieved with the order of Ld. AO, the assessee filed an appeal before the Ld. First Appellate Authority. However, the assessee failed to comply with the notices issued by the Ld. First Appellate Authority, and the appeal was dismissed ex-parte.
5. Aggrieved with the order of Ld. First Appellate Authority, the assessee is in appeal before this Tribunal. During the appellate proceedings before us, the Learned Authorised Representative (“Ld. AR”) drew our attention to the assessment order passed by the Commercial Tax Department placed at page nos. 1 to 8 of the paper book. It was submitted that the VAT liability of the assessee for the financial year 2011–12 was only Rs.5,005/- and that the total liability from 01.04.2008 to 31.03.2012 was Rs.488/-. It was contended that the impugned disallowance of Rs.8,27,230/- made by the Ld. AO is factually incorrect, as it far exceeds the actual liability as per the statutory records. The Ld. AR submitted that the order of the Commercial Tax Department is dated 31.05.2013 and reflects the actual statutory dues of the assessee. In support of their contentions, the assessee relied upon the following decisions of this Tribunal :
& 802/Hyd/2024 dated 04.12.2024 (Devi Agro Industries Vs. ITO) dated 20.07.2023 (Sri Gurukrupa Agro Industries Vs. DCIT) dated 16.08.2024 (Raja Rajeshwara Swamy Rice Mill Vs. ITO) dated 18.12.2024 (Anjaiah Munigela Vs. ITO)
5.1 Relying on the aforesaid decisions of this Tribunal the Ld. AR submitted that, under similar facts, this Tribunal has allowed relief to the assessee. Accordingly, the Ld. AR prayed before the bench to delete the addition made by the Ld. AO.
Per contra, the learned Departmental Representative (“Ld. DR”) invited our attention to the very same assessment order of the Commercial Tax Department relied upon by the assessee and submitted that the said order is dated 31.05.2013, while the reassessment order was passed by the Ld. AO on 30.12.2019. The Ld. DR further submitted that the Commercial Tax Department might have passed its order without full knowledge of the facts or without verifying the actual payments made to the department. It was also submitted that the Ld. AO relied on the certificate issued by the Branch Manager of SBI, which confirmed only partial payment. As regards the reliance placed by the assessee on the various decisions of this Tribunal, the Ld. DR submitted that the facts of the said case were distinguishable and, therefore, not applicable to the present case. It was finally submitted that the assessment order passed by the Ld. AO is based on available bank confirmation and there is no infirmity in the order of Ld. AO.
We have heard the rival submissions and also gone through the record in the light of the submissions made by either side. The primary issue before us relates to the disallowance of Rs.8,27,230/- under section 43B of the Act on account of alleged non- payment of VAT and CST liabilities. The assessee relied upon the assessment order passed by the Commercial Tax Department placed at page 1 to 8 of the paper book, which shows that the VAT liability of the assessee for financial year 2011–12 is only Rs.5,005/-, and the total outstanding liability till 31.03.2012 is Rs.488/-. We have gone through para no.7 of the order of Ld. AO, which is to the following effect :
“ 7. After considering the information furnished by the assessee the assessment is completed as under: 7.1 The assessee has claimed payment of VAT of Rs. 18,11,203/- and CST of Rs. 44,043/-. The assessee has submitted Challans & Bank Statement in support of his claim towards VAT/CST payment. Notice u/s. 142(1) was issued on 07/12/2019 requesting assessee to furnish the Certification letter issued by the Bank confirming the payments of VAT/CST. The rationale behind calling the said certificate is to establish the fact whether the claims made by the assessee in respect of VAT/CST payments are real in the context of the fake challans scam that was unearthed and the manner in which the scam occurred. It is worth stating in this context that the scam is about the creation of multiple fake challans by emulating the genuine challans and claiming of VAT/CST payments on the strength of such fake challans. Notice u/s. 133(6) dated 23/12/2019 was also issued to the Branch Manager, State Bank of India, Dubba Branch requesting to confirm the payments claimed towards VAT/CST were genuine or not. The Branch Manager, State Bank of India, Nizamabad certified the payment of Rs.10,8,016/- towards the payment of VAT and CST. Hence, the difference amount of Rs.8,27,230/- (Rs.18,55,246 – Rs.10,28,016) claimed towards VAT & CST payment is disallowed and added to the total income. (Addition: 8,27,230)” 7.1 On perusal of above, we find that, the Ld. AO disallowed Rs.8,27,230/- based on the difference between the claim made by the assessee and the confirmation received by the Ld. AO from the bank. Further, on perusal of the assessment order passed by the Commercial Tax Department, we find that the statutory liability of the assessee appears significantly lower than what has been disallowed by the Ld. AO. However, the assessment order of the Commercial Tax Department was not examined in detail by the Ld. AO before making the disallowance.
7.2 We have also gone through the decisions of this Tribunal, relied on by the assessee, and found that the facts of those cases were different from the facts of the assessee, hence not applicable to the present case on hand. In the facts and circumstances of the case, we are of the considered view that, the genuineness of the payment under section 43B needs to be properly verified by the Ld. AO, particularly in light of the statutory records and actual deposit of the same to the credit of the Commercial Tax Department. Accordingly, in the interest of justice and fair play, we deem it appropriate to set aside the issue to the file of the Ld. AO with a direction to verify whether the payment of Rs.8,27,230/- claimed by the assessee on account of CST and VAT was actually made; whether the said payment was credited to the account of the Commercial Tax Department; and to decide the issue as per law. Needless to say, the assessee shall be given reasonable opportunity of being heard and to furnish necessary documentary evidence in support of its claim.
In the result, the appeal filed by the assessee is allowed for statistical purposes.