INCOME TAX OFFICER-1, KORBA, KORBA V. M/S BUDHIA AUTO, MAIN ROAD

ITA 158/RPR/2025

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The case involves M/s Budhia Auto, a partnership firm, which was assessed for the Assessment Year 2012-13. The Income Tax Officer-1, Korba, had initially added Rs.4,00,18,841 to the assessee's income under section 43B of the Income Tax Act, 1961, due to non-payment of VAT and Service Tax within the due date of filing the return. The assessee appealed this decision, and the Commissioner of Income Tax (Appeals) deleted the addition, stating that the reassessment was based on a change of opinion and not on new material facts. The Income Tax Officer contested this decision, leading to the current appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 776992 (ITAT-RAIPUR)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2025
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 26-03-2025
• Other Referred Cases: Kedarnath Jute Manufacturing Co. Ltd v. CIT [1971] 82 ITR 363 (SC), Assistant Commissioner of Income Tax-I v. M/s Ganpati Motors, Grand Motors, NH-200 vs. ITO Ward 2(1), Commissioner of Income-tax v. Noble & Hewitt (I) (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: WAY OF TAX; DUTY; CESS OR
• Keywords: Set aside; Difference of opinion; Change of opinion; Question of law; Principle of natural justice; TDS; Reason to believe
• Section: 147; 148; 144; 143(3); 142(1); 43B

Judgement Text

"आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR Įी पाथ[ सारथी चौधरȣ, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / ITA No: 158/RPR/2025 (िनधाŊरण वषŊ Assessment Year: 2012-13) Income Tax Officer-1, Office of the Income Tax Officer-1, Korba-495677, C.G. v s M/s Budhia Auto, T. P. Nagar, Korba - 495677, C.G. PAN: AAFFB1799L (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से / Assessee by : None राजˢ की ओर से / Revenue by : Shri Ram Tiwari, Sr. DR सुनवाई की तारीख / Date of Hearing : 26.06.2025 घोषणा की तारीख / Date of Pronouncement : 16.09.2025 आदेश / O R D E R Per Arun Khodpia, AM: The captioned appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeal), NFAC, Delhi, [in short “Ld. CIT(A)”], passed under section 250 of the Income Tax Act, 1961 (in short “the Act”), dated 31.01.2025, for the Assessment Year 2012-13, which in turn arises from the order passed by Assistant Commissioner of Income Tax, Circle-Korba, (in short “Ld. AO”), u/s 144/147 of the Act, dated 14.12.2019. Printed from counselvise.com 2 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto 2. The grounds of appeal raised by the revenue are as under: (1) Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.4,00,18,841/- made by the Assessing Officer (AO) under section 43B of the I. T. Act, 1961, despite the fact that the assessee failed to pay the statutory liabilities towards VAT and Services Tax within the due date of filing of return of income. (2) Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in holding .that the reassessment was merely based on a “change of opinion” when in fact the assessment was reopened due to the failure of the assessee to pay VAT and Service Tax within the prescribed time limit, thereby attracting the provisions of section 43B of the Act. (3) Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the fact that the case was reopened under section 147 beyond four years as the assessee failed to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year. (4) Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the provisions of section 43B are mandatory in nature and any unpaid statutory liability is to be disallowed if not paid within the prescribed time limit, irrespective of whether it was debited in the profit and loss account or not. This position is supported by the decision of the Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd v. CIT [1971] 82 ITR 363 (SC), where it was held that the liability does not cease to exist merely because it was not debited in the books of accounts, and if a statutory liability remains unpaid within the prescribed time limit, it attracts disallowance under section 43B. (5) Any other ground which may be adduced at the time of hearing. 3. The brief facts of the case are that the assessee herein is a partnership firm, which had filed its Return of Income for the AY 2012-13 on 29.09.2012, declaring total income of Rs.15,10,110/-. The case of assessee was selected for scrutiny under ‘CASS’ and order u/s 143(3) of the Act, was passed on 03.02.2015 thereby, the assessed income of the assessee has been determined at Rs.17,58,840/-. Printed from counselvise.com 3 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto 3.1 Subsequently, the case of assessee has been taken up for reopening assessment u/s 147 for the reason that the assessee has shown liability of Rs. 2,63,772/- towards service tax payable in Schedule ‘5’ “provisions” of Balance sheet. It is observed by the Ld. AO that as per service tax challans available on record, the tax was paid on 31.03.2013 i.e., after the due date of filing of Income Tax Return (ITR) and also the VAT of Rs.3,92,55,069/- has not been paid till the date of filing of return under Income Tax Provisions. 3.2 A notice u/s 148 was issued on 26.03.2019 which was not responded by the assessee even by filing of a return or by way of any submission. Another notice u/s 142(1) of the Act was issued on 13.09.2019 calling assessee to furnish certain information, however, no compliance has been made. Accordingly, show cause notice was issued to assessee on 01.10.2019 but again there was no compliance. Further, considering the principle of natural justice, Ld. AO issued one more notice u/s 142(1) to comply on or before 29.11.2019 and thereafter a final show cause notice issued to the assessee for making compliance on or before 05.10.2019. However, the assessee has chosen not to respond towards all the aforesaid opportunities. Under aforesaid facts and circumstances, Ld. AO decided the matter ex-parte on merits, on the basis of material available on record. Printed from counselvise.com 4 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto 4. It is observed by Ld. AO that the assessee had shown its purchase and sales net of taxes i.e. excluding VAT and service tax. It is further observed that the applicability of provisions of Section 43B are clearly attracts on search transaction, however, as the assessee had not paid the amount of payable taxes as at the date of end of year regarding VAT and service tax before filing of ITR. Hence, according to provisions of Section 43B such amount is liable to be disallowed. Accordingly, an amount of Rs. 4,00,18,841/- (7,63,772+3,92,55,069) was added to the total income of the assessee and the assessment was completed enhancing the assessed income of the assessee at Rs.4,17,77,681/-. 5. Being aggrieved with the aforesaid addition by the Ld. AO, assessee preferred an appeal before the First Appellate Authority, wherein the Ld. CIT(A) had deliberated on the issues and after placing reliance on the judgment of Hon’ble Apex Court had allowed the appeal of assessee treading the reopening assessment in the case of assessee as the assessment passed on change of opinion and that there was no satisfaction drawn by the Ld. AO regarding failure on the part of the assessee to disclose fully all material facts, thus, the same covered by Proviso to section 147. The relevant findings of the Ld. CIT(A) are extracted hereunder for the sake of completeness: Printed from counselvise.com 5 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto 5. Decision: I have carefully considered the facts of the case, contention of the appellant and perused the order passed by LAO against which appeal has been preferred. 5.1 In this case, the appellant has challenged the assessment order passed by the AO, ex- parte, under section 144 of the ITAT, 1961. The only issue raised by the AO in this case is disallowance made u/s 43B of the I. T. Act, 1961. The appellant had filed its return of income on 29.09.2012 declaring income of Rs.15,10,110/-. The case was selected for scrutiny under CASS and the assessment order u/s 143(3) of the I. T. Act, 1961 was passed on 03.02.2015 determining assessed income of Rs.17,58,840/-. Further, the case of the appellant was reopened on the ground that the appellant had paid service tax of Rs.7,63,772/- on 31st March, 2013 i.e., after the due date of filing of return and VAT of Rs.3,92,55,069/- was not paid till date of filing of return. During the assessment proceedings, the appellant failed to file any submission. Therefore, the A.O. passed an ex-parte order u/s 144 r.w.s. 147 of the I. T. Act, 1961 on 14.12.2019 disallowing Rs.4,00,18,841/-(7,63,772+3,92,55,069) u/s 43B of the I. T. Act, 1961 on account of non payment/ paid after due date of VAT and Service Tax. 5.2 In the appeal proceedings, the appellant submitted that during the original assessment proceedings, the A.O vide query letter dated 27.09.2013 at query no. 10 specifically asked justification for unpaid statutory liabilities stipulated u/s 43B of the I.T Act, 1961. The appellant in its reply specifically submitted that as per balance sheet serviced tax payable of Rs.7,63,772/. entry tax payable 18,66,962/- and Vat Payable of Rs. 6,47,69,037/- is outstanding as payable as on 31.03.2012. However, the appellant had not charged the service tax and vat tax in its profit and loss account and had taken the same directly to it as balance sheet item and hence there is no question of disallowance of the said amount directly to balance sheet in liability side. The same fact was accepted by the A.O during the original assessment proceedings and assessment proceedings was completed after making some ad hoc disallowances in expenses. The appellant further submitted that the reasons recorded by the Assessing Officer for resorting to re assessment proceedings u/s.147/148 of the Act, are mainly on facts which are already Printed from counselvise.com 6 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto there at the time of original assessment. It is settled law that such view is not permitted within the scope of Income Tax laws. The Assessing Officer prima facie has to form \"reason to believe\" that income has escaped assessment before passing re-assessment order u/s. 147 of the Act and satisfaction to that extent has to be recorded. There cannot be any re-assessment on the ground of verification. The reasons recorded by the Assessing Officer are nothing but stating facts which are already in front of the Assessing Officer. There is no specific new material fact brought on record to suggest that income has escaped assessment. The appellant also furnished the copy of questionnaire issued by A.O and the reply submitted during the original assessment with its submission for reference. 5.3 On perusal of the submission of the appellant it is seen that the case of the appellant was reopened on the ground that the appellant had not paid VAT and service tax before due date. During the original assessment proceedings, the A.O vide questionnaire dated-27.09.2013 had specifically asked query regarding unpaid liabilities of Entry Tax, Professional tax, Service Tax, Income Tax TDS and VAT shown in balance sheet. The appellant had also furnished the justification regarding unpaid liabilities of balance sheet in its reply. The same is reproduced as follows: Printed from counselvise.com 7 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto In view of the above, it is observed that the case was reopened on the same issue, without any new material fact, which was already discussed during the original assessment proceedings, and 'hence the reopening is based on the change of opinion of the AO. Further, it is observed, that the notice u/s 148 has been issued beyond a period of 4 years, from the end of the relevant A. Y. where the prerequisite for reopening the assessment is that the assessing officer should established that there was a failure on the part of the assessee to disclose fully all material facts relating to the assessment of the income of the previous year. Any such failure on the part of the assessee has not been established. In fact, the appellant has disclosed the basic fact regarding the outstanding liability shown in the balance sheet vide his reply to the notice u/s 142(1). The apex court in the case of Parashuram Pottery Works Co Ltd reported in 106 ITR 1 has held as follows:- At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that state issue should not Printed from counselvise.com 8 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto be reactivated beyond a particular stage and that lapse of time must induce repose in an set at rest judicial and quasi- judicial controversies as it must in other spheres of human activity. So far as the income tax assessment orders are concerned, they cannot be reopened on the scope of income escaping assessment under section 147 of the Act of 1961 after the expiry of 4 years from the end of the assessment year unless there b$ omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, this cannot be said in the present case. The appeal is consequently allowed.\" Respectfully following the above decision of the apex court it is observed that the reopening of the assessment in this case is based on change of opinion and further the AO has also not drawn his satisfaction regarding the failure on the part of the assessee to disclose fully and truly all material facts. Therefore, the reopening of the assessment, in my considered opinion, is not valid as per law. 5.4 Moreover, the appellant has also not debited Service Tax and VAT in Profit and Loss Account hence there is no question of further disallowance, of the said amount u/s 43B of the I. T. Act, 1961. Therefore, the addition made on account of disallowance u/s 43B of the I. T. Act, 1961 is hereby deleted and appeal of the appellant is allowed. 6. At the outset, it is noticed that the present appeal is called for hearing on 06.05.2025, 05.06.2025 and again on 26.06.2025, however, the assessee has not been represented by any counsel or by the assessee itself through its Authorized Representative. Therefore, we find it appropriate to hear the matter and to adjudicate the same based on facts available on record and after hearing the petitioner i.e., Revenue. 7. The sole issue in the present matter qua the unpaid statutory liabilities in the form of Service Tax or VAT which is accounted for by the assessee directly Printed from counselvise.com 9 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto in the balance sheet and, therefore, has not been claimed by debiting the same to P&L Account, is no more res-integra as the same has been decided by Hon’ble Jurisdictional High Court in the case of Assistant Commissioner of Income Tax-I v. M/s Ganpati Motors reported in 2017(4) TMI 1613 and thereafter in the case Grand Motors, NH-200 vs. ITO Ward 2(1) passed in TAXC No. 207 of 2024 has held that , if the appellant / assessee did not claim the amount 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, the same cannot be added to the taxable income of the assessee. The relevant observations of Hon’ble High Court are extracted hereunder: “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?” 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. Printed from counselvise.com 10 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto 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” 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: Printed from counselvise.com 11 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto “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.” 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.” 8. Per contra, Ld. Sr. DR submitted that the Ld. CIT(A) was not justified in deleting the addition made by the Ld. AO u/s 43B of the Act as the assessee fail to pay statutory liabilities towards VAT and Service Tax within the due date of filing of return of income. It is further submitted that Ld. CIT(A) has misinterpreted the terminology “Change of opinion” as the assessment was reopened due to failure of assessee in paying the statutory liabilities in terms of provisions of Section 43B. It is also submitted that the assessee failed to disclose fully and truly all material facts Printed from counselvise.com 12 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto necessary for its assessment , therefore, the reopening u/s 147 beyond 4 year was justified. In terms of aforesaid observations, it was the prayer the order of Ld. CIT(A), suffering with errors is liable to be set aside and the additions vacated deserves to be restored. 9. We have considered the facts on record; submissions of the revenue and case laws relied upon. In backdrop of the aforesaid facts and circumstances and judicial pronouncement, we find that the controversy raised herein is no more res integra and the same is squarely covered by the judgment of the Hon’ble Jurisdictional High Court referred to supra, which is further followed by this Tribunal, therefore, respectfully following the same, in absence of any contradicting submissions or decision of the Hon’ble Jurisdictional High Court or Hon’ble Apex Court by the revenue, we do not find any merit in the controversy raised by the department. Accordingly, ground no. 1 of the appeal of revenue stands dismissed and the disallowance made by Ld. AO u/s 43B, therefore, is directed to be deleted. 10. Since we have vacated the substantive addition u/s 43B following the judgment of the Hon’ble Jurisdictional High Court (refer to supra) in terms of our observations hereinabove, therefore, we refrain from Printed from counselvise.com 13 ITA No. 158/RPR/2025 Income Tax Officer-1, Korba vs. M/s Budhia Auto adverting upon the other contentions raised by the revenue which became academic only. 11. In result, ITA No.158/RPR/2025 filed by the revenue stands dismissed in terms of our aforesaid observations. Order pronounced in the open court on 16/09/2025 u/r 34(4) of ITAT, Rules. Sd/- (PARTHA SARATHI CHAUDHURY) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर / Raipur; िदनांक Dated 16/09/2025 Vaibhav Shrivastav आदेशकी Ůितिलिप अŤेिषत / Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर / ITAT, Raipur 1. अपीलाथŎ/ The Appellant- Income Tax Officer-1, Korba 2. ŮȑथŎ/ The Respondent- M/s Budhia Auto, Korba 3. The Pr. CIT, Raipur (C.G.) 4. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 5. गाडŊ फाईल / Guard file. // सȑािपत Ůित True copy // Printed from counselvise.com "