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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per Anikesh Banerjee, JM:
The instant appeal was filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), Bathinda [in brevity the CIT(A)], bearing Appeal No. 298-IT/CIT(A)/BTI/15-16, order dated 28.02.2017, passed u/s 250(6) of the Income Tax Act, 1961 [in brevity the Act], in respect of Assessment Year 2013-14. The impugned order was generated from the order of the ld. Income
Nath Ram (HUF) v. ITO Tax Officer, Ward-2(1), Bathinda [in brevity the A.O.] passed u/s 143(3) of the Act, dated 14.03.2016.
Tersely, we advert the fact of the case. The assessee was assessed u/s 143(3) of the Act for the assessment year 2013-14 related financial years 01.04.2012 to 31.03.2013. The assessee claimed VAT payable amounting to Rs.43,94,677/-. The Chartered Accountant of the assessee in column No. 21B(a) of Form 23(1) of his audit report as mentioned that amount of VAT payable as on 31.03.2013 has been paid on 23.09.2013. During assessment proceedings, the assessee was asked to submit the challan of VAT payable. The challan was submitted before the revenue.
Observing the irregularities in the challan, ld. AO issued notice u/s 136(1) of the Act to the VAT Authority of the State Government at Bathinda. As per the information received from said Authority, it was revealed that the challans were paid beyond 23rd September, 2013. Accordingly, the ld. AO added back the VAT payable amounting to Rs.43,94,677/- with the total income of the assessee for violation section 43B of the Act. Also, the ld. AO disallowed all expenses of Rs.1 lac ad hoc on estimated basis. For the reasons behind the ad hoc disallowance is that in machinery labour charged amount to Rs.7,84,490/- the assessee had not maintained any master role and the vouchers were improper and the complete name and address of the labour were missing. The ad hoc disallowance made Rs. 1 lac and added back with the total income of the assessee. The assessee filed an Nath Ram (HUF) v. ITO appeal against the order of the ld. AO before the ld. CIT(A). The ld. CIT(A) upheld the order of the ld. AO. Being aggrieved, the assessee filed an appeal before us.
Here, we are reproducing the order of the ld. AO from point no. 5.2 to 5.3 is as under:
“5.2 To verify the actual date of payment of VAT, information has been called for u/s 133(6) of the Act from the Sales Tax department, Bathinda. The information has been received from the sales tax department vide letter dated 14.03.2016 according to which the assessee has made following payment of VAT during the F.Y. 2013-14:
31.10.2013 Rs. 8,67,732/- 30.01.2014 Rs.1878/- 30.01.2014 Rs. 16,00,000/- 31.03.2014 Rs. 26,00,000/-
5.3 Therefore, it is clear that the assessee has not paid any amount of VAT during the period 01.04.2013 to 30.09.2013. The detail of payment of VAT furnished by the assessee is not correct. The assessee has furnished false detail to justify the claim of deduction and to avoid tax liability. Copy of VAT-20 furnished by the assessee is also not correct. As the assessee failed to pay the VAT liability of Rs. 43,94,677/- on or before due date for filing of ITR, i.e. 30.09.2013. In view of the provisions of section 43B of the Act, the deduction of Rs. 43,94,677/- is not allowable to the assessee. Hence the amount of Rs. 43,94,677/ - is added back to the total income of the assessee.”
The ld. CIT DR vehemently argued and relied on the order of the ld. CIT(A) and relied on the page 9 of the order of CIT(A) which is extracted as follows:
“7. The appellant’s case, here, falls in the same mould. VAT was collected and retained without being treated as trading receipts. It was employed as the appellant’s own money for the purposes of making profit in as much as the collected amount was retained and not redeemed to the Government. There can be no manner of doubt in holding that the unpaid VAT liability of Rs. 43,94,677/- till the due date of filing of the Nath Ram (HUF) v. ITO return of income was the trading receipt and consequently income of the appellant. The AO is directed to enhance the returned income of the appellant with the said amount. Needless to say, deduction of the said amount from the trading receipts shall be effected only on its payments to the Government. It also needs to be reiterated here that the decision rendered by the Hon’ble jurisdictional High Court of Punjab and Haryana in the case of Sirsa Industries Ltd pertained to the assessment year, when the provision of section 43B was not on the statute.”
We considered the documents available in the record and expressed our thoughtful observation as follows. The fact that the assessee was unable to substantiate its claim of deduction u/s 43B related to VAT payable within the 23rd September, 2013 for financial year 2012-13. The observation of the Chartered Accountant in the tax audit report was in favour of the assessee and the Chartered Accountant accepted that the amount was paid within 23rd September, 2013 The order of the ld. AO point no. 5 is extracted as follows:
“5. From perusal of balance sheet the assessee, it was noticed that the assessee has shown liability on account of VAT payable at Rs. 43,94,677/-. The chartered accountant in the column 21B(a) of form 3CD of his Audit report has mentioned that the amount of VAT payable as on 31.03.2013 has been paid on 23.09.2013. During the course of assessment proceedings, the assessee was asked, vide questionnaire dated 31.07.2015, to furnish proof of payment of VAT amounting to Rs.43,94,677/-. The assessee filed reply on 22.09.2015 stating therein that VAT payable receipts are enclosed herewith.”
But during assessment, the State VAT Authority completely denied on the payment of the challan of the assessee. Both the Revenue Authorities did not cross verified from the Chartered Accountant and from the assessee by handing over the report of said VAT Authority. In this point the cross verification of the Chartered
Nath Ram (HUF) v. ITO Accountant who made the comment on the basis of assessee’s books of account should be checked by the ld. AO. We cannot ignore both the basis of calculation and observation for VAT payable and claim of deduction u/s 43B of the Act. We find that the matter should further be adjudicated by the CIT(A). We are setting aside the issue to the ld. CIT(A) for further adjudication. The assessee should get reasonable opportunity for substantiate its case. Related to ad hoc disallowance of Rs. 1 lac for discrepancies in the books of account is not accepted by us. The expenses which was disallowed, should be on reasonable basis. We find that no specific observation and verification of the VAT challan were made by the ld. AO during assessment proceedings. Here, we are setting aside this issue for further adjudication before the ld. CIT(A). On other hand, reasonable opportunity of the assessee should be granted.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 11.08.2022 Sd/- Sd/- (Dr. M. L. Meena) (Anikesh Banerjee) Accountant Member Judicial Member *GP/Sr. PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(A), (4) The CIT concerned