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Facts
The assessee collected VAT but did not pay it to the department. The Assessing Officer (AO) invoked Section 147 and issued a notice under Section 148, rejecting the assessee's books of accounts due to non-maintenance of stock register and other discrepancies. The AO estimated the gross profit and made additions, including disallowance under Section 43B for unpaid VAT. The assessee appealed to the CIT(A), who partly allowed the appeal.
Held
The Tribunal noted that the assessee paid the VAT subsequently. The legal ground raised by the assessee regarding the reopening of assessment was dismissed. The Tribunal found that the CIT(A) rightly directed the AO regarding the VAT figure. The estimation of gross profit was also upheld as the assessee failed to maintain proper records and provided no stock details. The appeals and cross-objections were dismissed.
Key Issues
Whether the reopening of assessment under Section 147 was valid, and whether the disallowance of VAT and estimation of gross profit were justified.
Sections Cited
43B, 46A, 251(1)(a), 147, 148, 144, 145(3), 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: Ms. Suchitra Kamble & Shri Bijayananda Pruseth
Date of hearing : 17-07-2025 Date of pronouncement : 29-07-2025 आदेश/ORDER Per Suchitra Kamble, Judicial Member: to 771/Srt/2024 & CO Nos. 31 to 33/Srt/2024 Ansuya Pushvijaysinh Parmar, A.Y. 2015-16 to 2017-18
These three appeals filed by Revenue & three Cross Objections thereof filed by assessee are against the order dated 24-05-2024 passed by National Faceless Appeal Centre(NFAC), Delhi for assessment years 2015-16 to 2017- 18.
The grounds of appeal are as under:-
A.Y. 2015-16 “1. On the facts and circumstances of the case, the ld. CIT(A) erred in partly allowing the assessee's appeal in respect of an addition made u/s.43B for unpaid VAT collected by the assessee amounting to Rs.29,02,673/- did not pay to the VAT Department. 1.1 On the facts and circumstances of the case, ld. CIT(A) erred in admitting the additional evidence u/s 46A and allowing the assessee's appeal without getting them verified from the AO in violation of the provisions of rule 46A(3) of the Income Tax Rules, 1962. 1.2 On the facts and circumstances of the case, the ld. CIT(A) erred in not enhancing the income of the assessee, even though such information was made available before him by the assessee herself at the time of appellate proceedings in violation of the clause-a to section 251(1) of the Act. 1.3 On the facts and circumstances of the case, the Id. CIT(A) erred in allowing the assessee's appeal with a direction to verify the claim then allow, which is nothing but deemed setting aside the assessment, and such powers ceased to exist with effect from 01.06.2001 by the Finance Act, 2001.
2. On the facts and circumstances of the case, the ld CIT(A) erred in deleting the addition on account of the estimation of gross profit amounting to Rs. 17,70,305/- without considering the facts that the assessee did not comply with any of the statutory notices issued and the AO had no other alternative but to estimate the gross profit ratio. 2.1 On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition on account of the estimation of gross profit by observing that the AO, in his estimation of GP, has not gone into any research, either by means of looking into the returns of the appellant in subsequent years or by means of comparison with another concern in the similar business, without appreciating the fact that the AO has given sufficient grounds te non-maintenance of stock details, discrepancy and non-payment of VAT, etc. for rejection of books of accounts and estimation of profit. 2.2 The ld. CIT(A) erred in allowing the appeal of the assessee without considering the fact that if the amount of VAT collected [which 2 to 771/Srt/2024 & CO Nos. 31 to 33/Srt/2024 Ansuya Pushvijaysinh Parmar, A.Y. 2015-16 to 2017-18
is claimed to be included in the total turnover] is ignored for working out the gross profit ratio, then the percentage of gross profit ratio is much less than the normal gross profit ratio prevailing in this line of business.”
-Srt-2024 A.Y. 2015-16 “1. On the facts and circumstances of the case, the ld. CIT(A) erred in partly allowing the assessee's appeal in respect of an addition made u/s 43B for unpaid VAT collected by the assessee amounting to Rs. 1,52,65,743/-did not pay to the VAT Department. 1.1 On the facts and circumstances of the case, ld. CIT(A) erred in admitting the additional evidence u/s 46A and allowing the assessee's appeal without getting them verified from the AO in violation of the provisions of rule 46A(3) of the Income Tax Rules, 1962. 1.2 On the facts and circumstances of the case, the ld CIT(A) erred in not enhancing the income of the assessee, even though such information was made available before him by the assessee herself at the time of appellate proceedings in violation of the clause-a to section 251(1) of the Act. 1.3 On the facts and circumstances of the case, the ld. CIT(A) erred in allowing the assessee's appeal with a direction to verify the claim then allow, which is nothing but deemed setting aside the assessment, and such powers ceased to exist with effect from 01.06.2001 by the Finance Act, 2001.
2. On the facts and circumstances of the case, the ld. CIT(A) erred in deleting the addition on account of the estimation of gross profit amounting to Rs. 68,36,314/- without considering the facts that the assessee did not comply with any of the statutory notices issued and the AO had no other alternative but to estimate the gross profit ratio. 2.1 On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in deleting the addition on account of the estimation of gross profit by observing that the AO, in his estimation of GP, has not gone into any research, either by means of looking into the returns of the appellant in subsequent years or by means of comparison with another concern in the similar business, without appreciating the fact that the AO has given sufficient grounds i.e. non-maintenance of stock details, discrepancy and non-payment of VAT, etc for rejection of books of accounts and estimation of profit. 2.2 The ld. CIT(A) erred in allowing the appeal of the assessee without considering the fact that if the amount of VAT collected [which is claimed to be included in the total turnover] is ignored for working out the gross profit ratio, then the percentage of gross profit ratio is much less than the normal gross profit ratio prevailing in this line of business.”
-Srt-2024 A.Y. 2015-16 to 771/Srt/2024 & CO Nos. 31 to 33/Srt/2024 Ansuya Pushvijaysinh Parmar, A.Y. 2015-16 to 2017-18 “1. On the facts and circumstances of the case, the ld. CIT(A) erred in partly allowing the assessee's appeal in respect of an addition made u/s 43B for unpaid VAT collected by the assessee amounting to Rs 72,52,581/- did not pay to the VAT Department. 1.1 On the facts and circumstances of the case, ld CIT(A) erred in admitting the additional pieces of evidence u/s.46A and allowing the assessee's appeal without getting them verified from the AO in violation of the provisions of rule 46A(3) of the Act. 1.2 On the facts and circumstances of the case, the ld CIT(A) erred in allowing the assessee's appeal with a direction to verify the claim then allow, which is nothing but deemed setting aside the assessment, and such powers ceased to exist with effect from 01.06.2001 by the Finance Act, 2001.
2. On the facts and circumstances of the case, the ld. CIT(A) erred in deleting the addition on account of the estimation of gross profit amounting to Rs. 1,15,41,910/- without considering the facts that the assessee did not comply with any of the statutory notices issued and the AO had no other alternative but to estimate the gross profit ratio. 2.1 On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition on account of the estimation of gross profit by observing that the AO, in his estimation of GP, has not gone into any research, either by means of looking into the returns of the appellant in subsequent years or by means of comparison with another concern in the similar business, without appreciating the fact that the AO has given sufficient grounds i.e. non-maintenance of stock details, discrepancy and non-payment of VAT, etc. for rejection of books of accounts and estimation of profit. 2.2 The ld. CIT(A) erred in allowing the appeal of the assessee without considering the fact that if the amount of VAT collected [which is claimed to be included in the total turnover] is ignored for working out the gross profit ratio, then the percentage of gross profit ratio is much less than the normal gross profit ratio prevailing in this line of business.” C.O. No. 31/Srt/2024 A.Y. 2015-16 “1. Ld CIT[A], NAFAC has erred in law and on facts to upheld A.O's reopening of assessment u/s 147 and issued notice u/s 148 of the Act, which is in fact an incorrect non existing facts and law.”
C.O. No. 32/Srt/2024 A.Y. 2016-17 “1. Ld CIT[A], NAFAC has erred in law and on facts to upheld A.O's reopening of assessment u/s 147 and issued notice u/s 148 of the Act, which is in fact an incorrect non existing facts and law.”
C.O. No. 33/Srt/2024 A.Y. 2017-18 to 771/Srt/2024 & CO Nos. 31 to 33/Srt/2024 Ansuya Pushvijaysinh Parmar, A.Y. 2015-16 to 2017-18
“1. Ld CIT[A], NAFAC has erred in law and on facts to upheld A.O's reopening of assessment u/s 147 and issued notice u/s 148 of the Act, which is in fact an incorrect non existing facts and law.”
The assessee filed return of income for assessment year 2015-16 on 10-08-2015 declaring total income at Rs. 5,52,210/- which was revised on 31-10-2015 declaring total income at Rs. 5,46,250/-. The return of income was passed u/s. 143(1) of the Income Tax Act, 1961. As per the information received, the Assessing Officer observed that the assessee had collected VAT of Rs. 29,02,673/- and not paid the same to the VAT Department. In the backdrop of this fact, the Assessing Officer invoked provisions of Section 147 of the Income Tax Act and issued notice u/s. 148 of the Act dated 31-03-2021. In response to the statutory notice, the assessee filed submission dated 15-03-2022. Since the assessee has not filed any corroborative evidences, the Assessing Officer proceeded on the basis of Section 144 of the Act. The Assessing Officer rejected the books of accounts u/s. 145(3) of the Act as the assessee has not maintained the stock register for the relevant period and failed to disclose stock details in her audit report. The Assessing Officer further observed that the GP rate in respect of petroleum business is estimated at 10% of the total turnover which works to Rs. 25,28,179/- (10% of Rs. 2,52,81,796/-). The Assessing Officer further held that indirect expenses such as deed fees, bank charges, depreciation etc. as claimed by the assessee amounting to Rs. 7,57,874/- was allowed to set off against the estimated gross profit (GP) rate. Accordingly, the net profit of the to 771/Srt/2024 & CO Nos. 31 to 33/Srt/2024 Ansuya Pushvijaysinh Parmar, A.Y. 2015-16 to 2017-18 assessee from M/s. Pushpak Petroleum estimated at Rs.17,70,305/-. The Assessing Officer further held that the net profit declared by the assessee in respect of hotel business was at Rs. 3,33,654/- which was accepted by the Assessing Officer on the total turnover of Rs. 36,57,925/-. Thus, Assessing Officer held that the net profit of the assessee is determined at Rs. 21,03,959/-. The Assessing Officer further made disallowance u/s. 43B amounting to Rs. 29,02,673/- thereby observing that the assessee had not paid the VAT which was collected by the assessee from Petroleum Dealership business.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A), The CIT(A) partly allowed the appeal of the assessee.
At the time of hearing, the ld. A.R. submitted that the assessee has filed cross objection thereby taking the legal ground that the CIT(A) erred in upholding the Assessing Officer’s re-opening of assessment u/s. 147 of the Act and issued notice u/s. 148 of the Act which is in fact not correct as the reasons recorded totally ignored the fact that the assessee has paid the VAT collection to the relevant Government on 17th Jan, 2015. Thus, the A.R. submitted that on this ground itself, the assessment should be held invalid.
The D.R. submitted that the assessee at the time of filing the objections to the reopening has not taken this 6 to 771/Srt/2024 & CO Nos. 31 to 33/Srt/2024 Ansuya Pushvijaysinh Parmar, A.Y. 2015-16 to 2017-18 point and in fact participated in the assessment proceedings by filing the submissions. The VAT payment was made in the year 2020 and therefore the reopening was validly done by the Assessing Officer.
We have heard parties and perused all the relevant material available on record. From the perusal of the VAT challans, the assessee has paid the VAT on 9th April, 2015, 16th March, 2015, 17th January, 2015 but the same was not taken into account in the audit report and the auditor has not rectified the mistake. There was no stock details maintained by the assessee which prima facie has been taken into account by the Assessing Officer and has rightly reopened the assessment proceedings. Therefore, the legal ground taken by the assessee in the cross objection is not justified and hence dismissed.
Now, coming to the merits, the assessee subsequently in the year 2020 has paid the VAT as per the details and thus the CIT(A) has rightly directed the Assessing Officer in respect of this figure of Rs. 29,02,973/- whether included in the sales turnover and not claimed as expenses in the profit & loss account nor credited as liability provisions for VAT payable in the balance sheet and thereafter granted the relief as per the provisions of the Income Tax Act. Thus, ground no. 1 to 1.3 raised by the Revenue is dismissed.
As regards ground no. 2 to 2.2, the estimation of gross profit amounting to Rs. 17,70,305/-, the same has been 7 to 771/Srt/2024 & CO Nos. 31 to 33/Srt/2024 Ansuya Pushvijaysinh Parmar, A.Y. 2015-16 to 2017-18 estimated as the assessee has not maintained stock register and in fact the books of account of the assessee was rejected by the Assessing Officer. Further, the estimation was rightly done by the CIT(A) as the assessee has not filed any return in response to the notice u/s. 148 of the Act and has not filed any stock register details/ledger related to the stock maintenance. Therefore, ground no. 2 to 2.2 was rightly considered by the CIT(A) by taking cognizance of the GP ranging from 2.2 % to 4% based on assessee’s own previous years. Thus, the assessee has shown 4% in the year of present appeal which is just and fair. Thus, disallowance of Rs. 29,02,673/- was rightly deleted by the CIT(A). Ground no. 2 to 2.2 taken by the Revenue is dismissed. Thus, CO 31/Srt/2024 for assessment year 2015-16 are dismissed.
Now coming to ITA 770/Srt/2024 and CO No. 32/Srt/2024 for assessment year 2016-17 ground nos. 1 to 1.3 are identical to that of assessment year 2015-16 as well as the CO for the legal ground is also identical to the legal ground taken by the assessee in assessment year 2015-16. Hence, ground nos. 1 to 1.3 of Revenue’s appeal and CO of the assessee are dismissed.
As regards to ground nos. 2 to 2.2 of assessment year 2016-17, the same are identical to assessment year 2015-16 hence dismissed. to 771/Srt/2024 & CO Nos. 31 to 33/Srt/2024 Ansuya Pushvijaysinh Parmar, A.Y. 2015-16 to 2017-18 and CO 33/Ahd/2024 for assessment year 2017-18 ground nos. 1 to 1.2 is identical to ground no. 1 to 1.3 of the appeal for assessment year 2015-16, hence dismissed. As regards ground nos. 2 to 2.2, the same is identical of assessment year 2015-16, hence dismissed. The CO filed by the assessee is on identical legal ground which has also been dismissed in the assessment year 2015-16.
In the result, all three appeals filed by the Revenue as well as all the three cross objections filed by the assessee are dismissed.
Order is pronounced on 29-07-2025.