Grand Motors V. ITO Ward 2(1)

TAXC/207/2024

AI Insights

The case involves Grand Motors, a partnership firm engaged in trading of motor cars, which appealed against the order of the ITAT that upheld the disallowance of \\u20b962,32,262 under Section 43B of the Income Tax Act, 1961. The disallowance was initially made by the Assessing Officer due to non-payment of liabilities such as VAT, Entry Tax, and CST before the prescribed date of filing the return of income. The Commissioner of Income Tax (Appeals) partly allowed the appeal but confirmed the disallowance of the amount in question, which led to the appeal before the ITAT. The High Court found that the appellant had not claimed any deduction for the said amount in their profit and loss account, and thus, the ITAT's decision was set aside.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 799873 (HC-CHHATTISGARH)
• Appeal Type: Others
• Pronouncement Date: 25-11-2024
• Assessment Year: misc
• Other Referred Cases: Assistant Commissioner of Income Tax-I v. M/s Ganapati Motors, Commissioner of Income-tax v. Noble & Hewitt (I) (P.) Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AMIT CHAUDHARI; VIJAY CHAWLA
• Assessee Lawyers: S RAO
• Keywords: CST; Disallowance; Entry Tax; Income Tax; Section 143; Section 143; Section 43B; VAT
• Section: 143(1); 139(1); 43B; 260A

Judgement Text

"Page 1 of 6 (Tax Case No.207/2024) 2024:CGHC:46080-DB AFR HIGH COURT OF CHHATTISGARH AT BILASPUR TAXC No. 207 of 2024 (Arising out of order dated 9-7-2024 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.195/RPR/2024) Grand Motors, NH-200, Raipur Road, Bilaspur, Chhattisgarh, 495001 ... Appellant versus ITO Ward 2(1), Shri Ram Plaza, Vyapar Vihar Road, Bilaspur, Chhattisgarh, 495001 ... Respondent For Appellant : Mr. S. Rajeswara Rao, Advocate. For Respondent : Mr. Amit Chaudhari and Mr. Vijay Chawla, Advocates. Division Bench: - Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Radhakishan Agrawal, JJ. Judgment On Board (25/11/2024) Sanjay K. Agrawal, J. 1. This tax appeal under Section 260A of the Income-tax Act, 1961 (for short, ‘the IT Act’) has been preferred calling in question legality, validity and correctness of judgment & order dated 9-7- 2024 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur (for short, ‘the ITAT’) in ITA No.195/RPR/2024, by which SISTA SOMAYAJULU Digitally signed by SISTA SOMAYAJULU Date: 2024.11.26 14:24:37 +0530 Page 2 of 6 (Tax Case No.207/2024) the appellant’s appeal has been dismissed by the ITAT finding no merit. 2. The appeal was heard on the question of admission and was admitted for final hearing by formulating the following substantial question of law: - “Whether the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal are concurrently justified in upholding the disallowance of 62,32,262/- ₹ made under sub-clause (iv) of clause (a) of sub-section (1) of Section 143 of the Income Tax Act, 1961 by wrongly invoking the provisions contained in Section 43B of the IT Act and thereby recorded a finding perverse to the record?” 3. The aforesaid substantial question of law arises on the following factual backdrop: - 4. The appellant assessee is a partnership firm engaged in trading of motor cars, etc. and filed return of income for the assessment year 2018-19 on 31-3-2019 declaring total income of 9,42,610/-. The ₹ Assessing Officer, Centralised Processing Centre (CPC) processed the return of the assessee and issued intimation under Section 143(1) of the IT Act making certain disallowances and enhancing total taxable income of the assessee at 2,61,28,820/-. The specific ₹ disallowances are made under Section 43B of the IT Act on account of non-payment of liabilities such as VAT, Entry Tax, CST before the prescribed date of filing the return of income under Section 139(1) of the IT Act. Page 3 of 6 (Tax Case No.207/2024) 5. Feeling aggrieved against the order of the Assessing Officer, the appellant assessee preferred appeal before the first appellate authority i.e. the Commissioner of Income Tax (Appeals) under Section 246A(1)(a) of the IT Act and the CIT(A), by its order dated 15-3-2024, partly allowed the appeal of the appellant assessee to the extent of 1,79,97,376/- pertaining to opening balance for the ₹ assessment year 2018-19 deleting the same, but the balance disallowance of 62,32,262/- shown as payable in the balance sheet ₹ was confirmed against which the appellant assessee preferred further appeal before the ITAT which was also, in turn, dismissed finding no substance against which this appeal has been preferred. 6. Mr. S. Rajeswara Rao, learned counsel appearing for the appellant / assessee, would submit that the appellant did not claim any deduction of indirect taxes including VAT / other taxes in computing the income for the previous year and the appellant is following the exclusive method of accounting for indirect taxes as in the past. He would further submit that Section 43B of the IT Act mandates that a deduction otherwise allowable under the Act shall be allowed only in computing the income referred in Section 28 of that previous year in which such sum is actually paid by the assessee and since the appellant did not claim any deduction of indirect taxes in computing the income for the previous year i.e. the profit and loss account as expenditure, therefore, the CIT(A) and Page 4 of 6 (Tax Case No.207/2024) the ITAT, both, have concurrently erred in dismissing the appeal of the appellant assessee. He would rely upon the decision of this Court in the matter of Assistant Commissioner of Income Tax-I v. M/s Ganapati Motors1 to buttress his submission. 7. Mr. Amit Chaudhari, learned Standing Counsel for the Income Tax Department / Revenue, would submit that the appellant did not claim the said amount of 62,32,262/- in his profit and loss account ₹ as expenditure and the case is covered by the decision rendered by this Court in M/s Ganapati Motors’s case (supra). 8. We have heard learned counsel for the parties and considered their rival submissions made herein-above and also went through the record with utmost circumspection. 9. In order to consider the plea raised at the Bar, it would be appropriate to notice Section 43B(a) of the IT Act, which states as under: - “43B. Certain deductions to be only on actual payment. —Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of— (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or xxx xxx xxx” 1 2017 (4) TMI 1613 Page 5 of 6 (Tax Case No.207/2024) 10. In this regard, decision of this Court in M/s Ganapati Motors’s case (supra) would be more relevant in which the issue before the Court was, whether Section 43B of the IT Act is attracted even when the assessee does not claim any deduction on the strength of that provision and considering the said question, this Court held in paragraph 3 as under: - “3. The Assessing Authority, on the instant issue, noticed that the assessee’s claim regarding the treatment of VAT in the Books of Accounts has been verified from the Books and that has been found to be in order. The Assessing Authority also found that VAT has been found separately accounted for in the Books of Accounts. The only ground on which the Assessing Authority refused to exclude the VAT collected by the dealer from the profit of business is on the basis that the VAT component was not paid off on or before the due date for furnishing the return in relation to the previous year under Section 139(1) of the Income Tax Act. The First Appellate Authority also noticed that it is an undisputed fact that the Appellant did not charge VAT to the Profit and Loss account. It was therefore noted by the First Appellate Authority that in such circumstances, the liability may still be unpaid, but it cannot be disallowed being not claimed as deduction in the Books of Accounts.” 11. Similarly, the Delhi High Court in the matter of Commissioner of Income-tax v. Noble & Hewitt (I) (P.) Ltd.2 held in paragraph 6 as under: - “6. In our opinion since the assessee did not debit the amount to the Profit & Loss Account as an expenditure nor did the assessee claim any deduction in respect of the amount and considering that the assessee is following the mercantile system of accounting, the question of disallowing the deduction not claimed would not arise.” 2 [2008] 166 Taxman 48 (Delhi) Page 6 of 6 (Tax Case No.207/2024) 12. Reverting to the facts of the case, it is admitted position on record that the appellant / assessee did not claim the amount of ₹ 62,32,262/- in his profit and loss account as an expenditure / deduction, nor the appellant claim deduction in respect of that account under Section 43B of the IT Act. In that view of the matter, the Assessing Officer, the CIT(A) and the ITAT, all three authorities have concurrently erred in holding that the appellant has claimed deduction / expenditure under Section 43B of the IT Act adding to its taxable income. Accordingly, the impugned order passed by the ITAT holding that the appellant is liable to pay tax on 62,32,262/-, ₹ is liable to be and is hereby set aside. The substantial question of law is answered in favour of the assessee and against the Revenue. 13. The tax appeal is allowed to the extent indicated herein-above. Sd/- Sd/- (Sanjay K. Agrawal) (Radhakishan Agrawal) JUDGE JUDGE Soma "