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Facts
The assessee, an Association of Persons, declared income for AY 2018-19. The assessment was completed accepting the returned income. The Principal CIT initiated revision proceedings under Section 263 of the Income Tax Act, 1961, holding the assessment order erroneous and prejudicial to the Revenue concerning unutilized input tax credit of GST and GST written-off.
Held
The Tribunal held that the assessee had correctly claimed the unutilized input tax credit (VAT paid in earlier years) as a business expense, and the GST write-off was also a valid claim. Therefore, the assessment order was neither erroneous nor prejudicial to the interest of the Revenue.
Key Issues
Whether the Principal CIT correctly assumed jurisdiction under Section 263 by treating the AO's acceptance of unutilized input tax credit and GST write-off as erroneous and prejudicial to the Revenue.
Sections Cited
263, 143(3), 142(1), 43B
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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: DR.MANISH BORAD & MS.ASTHA CHANDRA
ORDER
PER DR. MANISH BORAD, AM:
This appeal filed by the Assessee is directed against the order of ld.Principal Commissioner of Income Tax, Pune-4, under section 263 of the Income tax Act, 1961 dated 26.03.2024 for [A] A.Y.2018-19. The Assessee has raised the following grounds of appeal :
1. On facts and circumstances prevailing in the case and as per provisions & scheme of the Income-tax Act, 1961 ("the Act") it be held that the Ld. Principal Commissioner of Income Tax ("PCIT") has erred in holding that order passed by the Learned Assessing Officer ("Ld. AO) u/s 143(3) of the Act dated 12th April, 2021 is erroneous and prejudicial to the interest of the Revenue. The Appellant be granted just and proper relief in this respect.
2. On facts and circumstances prevailing in the case and as per provisions and scheme of the Act, it be held that the PCIT has erred in not appreciating that where a legally permissible view is adopted while passing the Assessment order, the same cannot be considered as erroneous for the purpose of section 263 of the Act.
The Appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.”
2. The only grievance of the assessee is that ld.Pr.CIT erred in assuming jurisdiction under section 263 of the Act and also erred in holding the assessment order as erroneous and prejudicial to the interest of the Revenue.
Facts in brief : 3. Assessee is an Association of Persons(AOP) and declared income of Rs.8,25,83,930/- in the Return of Income furnished on 31.10.2018 for A.Y.2018-19. After the case being selected for scrutiny through CASS, valid notice under section 143(2) and notice under section 142(1) of the Act were served upon the assessee. The questionnaire was issued by Assessing Officer through ITBA Portal calling various details to which reply was duly submitted from time to time and all necessary details and documentary evidences were filed and after examining and verification of these details, the ld.AO accepted the returned income declared by the assessee. Assessment was completed on 12.04.2021.
Ld.Pr.CIT having the revisionary powers under section 263 of the Act, called-for the assessment records and observed that the Assessing Officer failed to conduct in depth verification of the assessee’s claim of expenses on the issue of unutilized input credit of Goods and Services Tax of Rs.17,19,319/- and GST written-off at Rs.18,71,321/-. A show-cause notice dated 19.02.2024 under section 263 of the Act, was issued to which detailed reply was furnished. However, ld.Pr.CIT was not satisfied and he directed the AO to reframe the assessment after due examination of the issue referred in show cause notice i.e.Unutilised Input Tax Credit of GST of Rs.17,19,319/- and GST written-off at Rs.18,71,321/- and to this extent the assessment order was held to be erroneous and prejudicial to the interest of the Revenue. Now, the assessee is in appeal before this Tribunal.
Ld.Counsel for the assessee referring to the paper book containing 59 pages, firstly, referred to the submissions filed to the notice issued under section 142(1) of the Act stating that the Audited Financial Statement were filed before Assessing Officer and all the details called-for were duly furnished including details of GST, TDS and other outstanding as on 31.03.2018 and also the [A] applicability of provisions of section 43B of the Act for which it was stated that no such disallowance under section 43B of the Act, is called-for. Thereafter, making due application of mind, ld.AO completed the assessment. It was further stated that since ld.AO has already examined the issue referred in the show cause notice under section 263 of the Act and has taken a permissible view, therefore, revisionary proceedings are uncalled for..
On the other hand, the ld.DR for the Revenue supported the order of ld.Pr.CIT.
We have heard rival contentions and perused the record placed before us. Assessee is aggrieved with the revisionary order passed under section 263 of the Act, where ld.Pr.CIT has held the assessment order dated 12.04.2021 as erroneous and prejudicial to the interest of the Revenue only to the limited extent that Assessing Officer has not examined the issue of Unutilized Input Tax Credit of GST on Rs.17,19,319/- and GST written-off at Rs.18,71,321/-. We find that the assessee has declared turnover of Rs.25.12 Crores and has declared Net Profit of Rs.8.25 Crores during the year. Books of Accounts are duly audited. All Schedules of audited balance sheet and profit and loss account were filed before the Assessing Officer during the course of scrutiny proceedings. All the details called-for by Assessing Officer in the Questionnaire has been replied with all evidences and documents by the assessee. Schedule 19 of the Audited Balance Sheet provides details of Indirect expenses and at S.No.9 and 12 of this schedule are the Inadmissible Tax of Rs.17,19,319/- and GST written-off at Rs.18,71,321/- are appearing. We notice that inadmissible tax at Rs.17,19,319/- are towards debiting the Unutilised Input Tax of GST. It is a known fact that GST Act was made applicable during F.Y.2017-18 i.e.A.Y.2018-19. Prior to GST Act, assessee was governed under Value-Added Tax(VAT) and there were input tax credit available with the assessee close of F.Y.2016-17 which were carry forwarded to the [A] F.Y.2017-18 i.e.year under appeal. The alleged sum of Rs.17,19,319/- is the VAT paid by the assessee for purchase made by it during preceding years. But the same could not be set-off against the output tax credit and therefore, in our considered view, legitimate business expanses have been claimed in the Profit and Loss Account and to this extent, we hold that order of Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue.
Coming to second issue, which relates to GST write-off at Rs.18,71,321/-, admittedly, there is no specific question raised by the Assessing Officer about the GST written-off, but the Assessing Officer has called-for details of inadmissible tax and detailed verification has been carried out in this regard. The details of this written-off have been attached by the assessee in Annexure-A filed before the ld.Pr.CIT and contains the details of various parties which have collected GST from assessee, but the input tax credit could not be claimed. Since the assessee was not [A] able to claim the alleged sum of Rs.18,71,321/-, as Input Tax Credit against the Output Tax Credit and complete details of party wise GST written-off stood filed before ld.Pr.CIT and no discrepancy has been observed by him. We find that a valid claim of GST written-off at Rs.18,71,321/- has been made by the Assessee and therefore, on this issue also, we find that the order of the Assessing Officer is not erroneous in so far as prejudicial to the interest of the Revenue.
In view of the above, we quash the impugned order passed u/s.263 of the Act, and accordingly, restore the assessment order for A.Y.2018-19 dated 12.04.2021. Accordingly, Grounds of appeal raised by the assessee are allowed.