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Facts
The assessee, engaged in the Rice Mill business, filed its return for AY 2012-13. Subsequently, information was received by the ITO regarding short payment of sales tax and claimed payments through fake challans. The AO reopened the assessment and made additions for disallowance of VAT payment and a deduction claimed under Chapter-VIA.
Held
The Tribunal held that the assessee failed to provide sufficient evidence, such as bank statements, to prove the VAT payments. The claim for deduction under Chapter-VIA was also unsubstantiated. Therefore, the additions made by the AO and sustained by the CIT(A) were confirmed.
Key Issues
Whether the reopening of assessment under Section 147 was valid, and whether the disallowance of VAT payment and Chapter-VIA deduction was justified due to lack of evidence.
Sections Cited
147, 148, 133(6), 143(3), 43B, 80C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “SM-A” BENCH: HYDERABAD
Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “SM-A” BENCH: HYDERABAD BEFORE SHRI MANJUNATHA G, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA.No.541/Hyd./2025 Assessment Year 2012-2013 Ganga Reddy Gidde, The Income Tax Officer, NIZAMABAD – 503 165 vs. Ward – 1, Nizamabad. PAN APJPG3500M (Appellant) (Respondent) For Assessee : CA, P Murali Mohan Rao For Revenue : Shri Ashutosh Pradhan, Sr. AR Date of Hearing : 26.06.2025 Date of Pronouncement : 03.07.2025 ORDER PER MANJUNATHA G. :
This appeal has been filed by the assessee against the order dated 04.02.2025 of the learned Addl./JCIT(A)-5, Mumbai, relating to the assessment year 2012-2013.
Briefly stated facts of the case are that, the assessee is an individual, engaged in the business of Rice Mill. The assessee has filed his return of income for the impugned assessment year 2012-13 on 05.10.2012, admitting total income of Rs.2,19,340/- after claiming
2 I.T.A.No.541/Hyd./2025 deduction of Rs.1,00,000/-. Subsequently, an information was received by the Income Tax Officer, Ward-2, Nizambad from Commercial Tax Officer, Bodhan Circle, Nizamabad Division that, the assessee was short payment of sales tax for the period from January 2011 to May 2014 and had claimed the payment through fake challan attracting disallowance u/sec.43B of the Income Tax Act, 1961. The Assessing Officer had carried-out necessary verification u/sec.133(6) of the Act and thereafter, reopened the assessment by issuing notice u/sec.148 of the Act on 23.03.2019. In response to the notice issued u/sec.148 of the Act dated 23.03.2019, the assessee had filed his return of income on 14.11.2019 again admitting total income of Rs.2,19,340/-. The Assessing Officer after considering the submissions of the assessee, computed the total income at Rs.8,13,468/- by making addition of Rs.4,94,128/- on account of disallowance of VAT payment and of Rs.1,00,000/- against the deduction claimed under Chapter-VIA vide order dated 23.12.2019 passed u/sec.143(3) r.w.s 147 of the Income Tax Act, 1961.
3 I.T.A.No.541/Hyd./2025 3. On being aggrieved by the assessment order passed by the Assessing Officer, the assessee carried the matter in appeal before the learned CIT(A). Before the learned CIT(A), it was the submission of the assessee that, the reopening of the assessment is bad in law since the Assessing Officer has to record reason for taking action u/sec.147 and reason to believe that income chargeable to tax has escaped assessment And further, an assessment cannot be reopened under suspicion/ presumption. He submitted that, no action can be initiated u/sec.147 of the Act after expiry of 04 years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment by reason for the failure on the part of the taxpayer to disclose fully and truly all the material facts necessary for his assessment, which evident from the record that, the notice u/sec.148 of the Act has been issued on 23.03.2019, which is after the expiry of a period of 04 years from the end of relevant assessment year and that, there is no failure on the part of the appellant to disclose fully and truly all the material facts necessary for the assessment.
4 I.T.A.No.541/Hyd./2025 Hence the notice issued under section 148 is invalid. The another contention of the assessee before the learned CIT(A) was that, the reopening of case by the Assessing Officer is merely on the basis of assumption/presumption and suspicions. In absence of clinching evidence, the assessment cannot be reopened u/sec.147 of the Act on presumptions/suspicion. It was the submission of the assessee before the learned CIT(A) that, the Assessing Officer has simply relied on the information from the Commercial Tax Officer, Bodhan and made the impugned addition and that, the contents of the said letter has not been forwarded to the assessee either by the Commercial Tax Officer, Bodhan or the Assessing Officer. Further, the assessee has audited it’s books of accounts and filed VAT/GST returns for the financial year 2011-2012 relevant to assessment year 2012-2013 and the concerned authority has passed assessment order in accordance with Rule 25(5) of Telangana VAT Rules, 2005. The Assessing Officer without verifying all these facts and also not communicating the letter addressed by the Commercial Tax Officer, Bodhan 5 I.T.A.No.541/Hyd./2025 and simply based on the said letter, making the impugned addition of Rs.4,94,128/- is bad in law and, therefore, it is not sustainable. With respect to disallowance of claim of assessee u/sec.80C of the Act at Rs.1 lakh by the Assessing Officer, it was the submission of the assessee before the learned CIT(A) that, the Assessing Officer has not called for any information with regard to the deduction claimed under Chapter-VIA during the course of re-assessment proceedings and, thereby, the Assessing Officer violated the principles of natural justice by not providing opportunity to the assessee to substantiate his claim. Therefore, the addition made by the Assessing Officer is not sustainable in the eye of law.
The learned CIT(A) after considering the submissions of the assessee and the assessment order, sustained the additions made by the Assessing Officer. The relevant observations of the learned CIT(A) are as under :
“5.2.2. In this proceeding the appellant had reiterated his submission which was made before the AO. The appellant has also furnished the same documents which were submitted before the AO and 6 I.T.A.No.541/Hyd./2025 were found to be not satisfactory. It may be mentioned that the appellant has submitted that his employee/consultant had embezzled Rs.4,94,128/- towards payment of VAT. Further the AO was in possession of the information that the appellant had claimed the payment of VAT through fake challans. In view of the same the AO had insisted on proof of payment of VAT by furnishing a certificate from the bank. In spite of a number of opportunities given and a show cause issued the appellant had not furnished such confirmation from the bank. Even in this appellate proceeding too the appellant has not furnished the certificate of bank. Therefore the claim which was made before the AO and found to be not acceptable has again been made in this proceeding. In this proceeding the appellant has claimed that loss on account of embezzlement is an allowable expense. However no document in the form of any FIR filed before the police authorities has been furnished. In the absence of such evidence in the claim made by the appellant is an unsubstantiated and non-verifiable claim. 5.2.3. Considering the factual matrix of the case and in the absence of the certificate from the bank certifying payment of VAT of Rs.4.94,128/-, I do not find any reason to differ from the findings of the AO.
7 I.T.A.No.541/Hyd./2025 Therefore the addition made by the AO is confirmed. These grounds of appeal are therefore dismissed. 5.3. Ground No.16 to 18: In these grounds the appellant has contended that the AO was not correct in making a disallowance of Rs.1,00,000/- on account of deduction claimed under chapter VIA. The appellant has claimed that the deduction was made under 80C for LIC payment and tuition fee. Neither before the AO nor in this proceeding the appellant has furnished the proof of payment of LIC or the tuition fee for claiming the exemption under chapter VIA. The onus was on the appellant to prove each and every claim made in the return. This onus has not been discharged by the appellant therefore the claim of deduction made under chapter VIA of Rs.1,00,000/- remains unproved. I therefore confirm the addition made of Rs1,00,000/-. These grounds of appeal are therefore dismissed.”
5. Aggrieved by the order of the learned CIT(A), the assessee is now in appeal before the Tribunal.
6. CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, the learned CIT(A) has erred in law in sustaining the additions made by the Assessing Officer towards VAT payments u/sec.43B of the Act without
8 I.T.A.No.541/Hyd./2025 appreciating the fact that, the assessee has paid relevant VAT through banking channel, for which, VAT returns filed for the relevant months has been filed before the authorities. Learned Counsel for the Assessee further referring to VAT returns for the month of January, 2011 to May, 2014 submitted that, the assessee is periodically paying VAT which is evident from the returns filed with the authorities, which contain seal of the bank for remitting the payments. Further, the Department has issued a ‘No Due Certificate’ for the period which clearly shows that there is no outstanding dues payable to the Department. The Assessing Officer without considering the relevant facts, simply on the basis of report received from Commercial Tax Officer, Bodhan Circle, Nizamabad Division regarding claim of fake challans for payment of VAT has made the additions. Although, these evidences has been brought to the notice of the learned CIT(A), but the learned CIT(A), ignored the evidences filed by the assessee and sustained the additions made by the Assessing Officer. In this regard, he relied upon the decision of ITAT, Hyderabad Bench, Hyderabad in the 9 I.T.A.No.541/Hyd./2025 cases of (i) Devi Agro Industries, Hyderabad vs., ITO, Ward- 2, Hyderabad, ITA.Nos.801 & 802/Hyd./2024, order dated 04.12.2024, (ii) Sri Dhanalaxmi Agro Industries, Nizamabad vs., ITO, Ward-1, Nizamabad, ITA.No.1798/Hyd./2018, order dated 15.03.2019 and (iii) Raja Rajeshwara Swamy Rice Mill, Hyderabad vs., ITO, Ward-1, Hyderabad, ITA.No.660/Hyd./2024, order dated 16.08.2024.
Shri Ashutosh Pradhan, learned Sr. AR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, the Assessing Officer made additions on the basis of report received from Commercial Tax Officer, Bodhan Circle, Nizamabad Division. The assessee is one of the dealer which claimed fake challans for payment of VAT. Further, the assessee has failed to file any evidences including relevant bank statements to prove payment of VAT to the authorities. In absence of any details, the Assessing Officer has rightly made the addition towards VAT payment u/sec.43B of the Act. The learned CIT(A) after considering the evidences filed by the assessee, has rightly
10 I.T.A.No.541/Hyd./2025 sustained the additions made by the Assessing Officer and the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that, the Assessing Officer has received information from Commercial Tax Officer, Bodhan Circle, Nizamabad Division regarding certain dealers claiming fake challan copies for payment of VAT without there being any actual payment. It is also not in dispute that the assessee could not file the relevant evidences to prove the payment of VAT to the authorities on or before the due date provided under the Act, which is evident from the monthly returns filed by the assessee which contains certain details. However, there is no supporting evidences like bank statements indicating payment through banking channel to the VAT authorities. Although, the assessee claims that monthly returns filed by the assessee contains seal of the bank for payment of VAT, but, in our considered view, that alone itself is not sufficient to accept the claim of the assessee, in absence of 11 I.T.A.No.541/Hyd./2025 corresponding bank statements indicating payment through banking channel. Further, although, the assessee claims that the department has issued ‘No Due Certificate’ for the period, but, the fact remains that assessee has failed to file any certificate from the VAT Authorities to support his arguments. Therefore, in our considered view, the assessee is unable to file any evidence in support of his arguments that, it has paid VAT and CST to the concerned authorities and there is no outstanding dues for the relevant period. Since the assessee could not file relevant evidences, the Assessing Officer has rightly made the additions towards VAT/CST payments as per the report received from the Commercial Tax Officer, Bodhan Circle, Nizamabad Division u/sec.43B of the Act. Even before the learned CIT(A), except making oral arguments, the assessee could not file any evidence to support his claim. Therefore, the learned CIT(A) sustained the additions made by the Assessing Officer. In respect of various case laws relied upon by the assessee, including the decision of Devi Agro Industries, Hyderabad vs., ITO, Ward-2, Hyderabad (supra) and other two
12 I.T.A.No.541/Hyd./2025 decisions, in our considered view, the Tribunal has given a factual finding that, the assessee has produced DCB reports in respect of CST and VAT demand. As per the said DCB report, there is no outstanding dues for the relevant period and in those facts, a direction has been given to verify the claim of the assessee and decide the issue. Since, in the present case, the assessee could not file any evidences to prove payment of VAT, in our considered view, there is no error in the reasons given by the learned CIT(A) to sustain the additions made by the Assessing Officer. Thus, we are inclined to uphold the order of the learned CIT(A) and dismiss the appeal filed by the assessee.
In so far as the addition of Rs.1 lakh towards deduction claimed under Chapter-VIA of the Act, the assessee neither furnished any evidences nor proved that, the impugned claim is allowable under Chapter-VIA of the Act. Therefore, in our considered view, there is no error in the reasons given by the Assessing Officer and the learned CIT(A) to sustain the addition towards deduction claimed under Chapter-VIA of the act. We, therefore, inclined to 13 I.T.A.No.541/Hyd./2025 uphold the order of the learned CIT(A) and reject the ground taken by the assessee.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on 03.07.2025.