QUARTZKRAFT LLP,HYDERABAD V. ITO., WARD-7(1), HYDERABAD

ITA 836/HYD/2025

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M/s. Quartzkraft LLP appealed against the order of the Learned Commissioner of Income Tax (Appeals), which upheld the addition made by the Assessing Officer for the Assessment Year 2021-22. The addition was based on the alleged understatement of turnover in the income tax return compared to GST returns. The assessee argued that the disputed turnover pertained to FY 2019-20 and was reported in the subsequent year's GST return under exempt/zero-rated supplies. The Tribunal found the need for a detailed reconciliation of the reported figures across the financial years and directed the Assessing Officer to verify the entries and pass a speaking order based on the findings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 777213 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2025
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2021-2022
• Appeal Filed On: 15-05-2025
• Laws Referred To: Income Tax Act, 1961, CGST Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: SACHIN KUMAR
• Assessee Lawyers: MOHD. AFZAL
• Keywords: Set aside; Business income; Opportunity of being heard
• Section: 143(3)

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad श्री विजय पाल राि, उपाध् यक्ष एिं श्री मिुसूदन सािडिया, लेखा सदस् य क े समक्ष । BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.836/Hyd/2025 (निर्धारण वर्ा/Assessment Year:2021-22) M/s. Quartzkraft LLP, Hyderabad. PAN:AAAFQ7566K Vs. Income Tax Officer, Ward-7(1), Hyderabad. (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri Mohd. Afzal, Advocate रधजस् व द्वधरध/Revenue by: Dr. Sachin Kumar, SR-DR सुिवधई की तधरीख/Date of hearing: 15/09/2025 घोर्णध की तधरीख/Pronouncement: 19/09/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by M/s. Quartzkraft LLP (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 20.03.2025 for the A.Y. 2021-22. 2. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA No.836/Hyd/2025 2 3. The brief facts of the case are that, the assessee is engaged in the manufacture of engineered Quartz slabs. It filed its return of income for A.Y. 2021–22 on 20.01.2022, declaring total income at Rs. Nil. The case of the assessee was selected for complete scrutiny through CASS. After considering the submissions of the assessee, the Learned Assessing Officer (“Ld. AO”) compared turnover figures and noted that, as per GST returns, total sales of the assessee were Rs.12,91,89,389/-, whereas sales declared in the income-tax return/audited accounts were Rs. 11,28,29,580/-. Holding that there was an understatement of turnover of Rs.1,63,59,809/-, the Ld. AO completed the assessment under section 143(3) r.w.s. 144B of the Printed from counselvise.com ITA No.836/Hyd/2025 3 Income Tax Act, 1961 (“the Act”) on 15.12.2022, making an addition of Rs. 1,63,59,809/-. 4. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), who upheld the addition made by the Ld. AO. Resultantly, the appeal of the assessee was dismissed by the Ld. CIT(A). 5. Aggrieved with the order of Ld. CIT(A), the assessee is now in appeal before us. The Learned Authorised Representative (“Ld. AR”) drew our attention to the immediately preceding year’s audited financial statements for F.Y. 2019–20 placed at page nos.32 to 39 of the paper book and submitted that the assessee had export turnover of Rs.1,63,59,809/- in that year. He further submitted that, under the GST law, exports are zero-rated/exempt for tax. Accordingly, the assessee, under a bona fide belief, did not report the said export turnover in the GST returns of F.Y. 2019–20. Subsequently, on advice, the assessee understood that even exempt/zero-rated supplies must be reported. As there was no provision then available Printed from counselvise.com ITA No.836/Hyd/2025 4 to revise the already-filed GST returns of F.Y. 2019–20, the assessee included the said amount in the GST return of the subsequent year (i.e., F.Y. 2020–21, relevant to the year under consideration). Reliance was placed on proviso to section 37(3) of the CGST Act (page no.57 of the paper book) to say that omitted details could be furnished before 30.11.2020/filing of the relevant annual return, whichever earlier. The Ld. AR also took us through (i) the GST return for September period of F.Y. 2020–21 showing Rs.1,63,59,809/- reported under exempt/zero-rated supplies (page no.71 of the paper book) and (ii) corresponding export invoices (page nos.51 to 56 of the paper book), submitting that all such invoices bear dates in F.Y. 2019–20. It was finally contended that the turnover pertains to F.Y. 2019–20 and had already been recognized in the books for that year (A.Y. 2020–21); hence, the addition for A.Y. 2021–22 deserves deletion. 6. Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the authorities below. He pointed out that the GST return for the September period of F.Y. 2020–21 (page Printed from counselvise.com ITA No.836/Hyd/2025 5 no.70 of the paper book) belongs to F.Y. 2020–21; therefore, the turnover declared therein should be treated as turnover of that year, not of F.Y. 2019–20. He further submitted that, even as per the proviso to section 37(3) of the CGST Act (relied upon by the assessee), any such omission pertaining to F.Y. 2019–20 ought to have been rectified on or before 30.11.2020; however, the September return in question was filed on 03.12.2020. Thus, the assessee’s plea lacks credibility and the appeal deserves dismissal. 7. We have considered the rival submissions and perused the material available on record. We have gone through the export invoices placed at page nos. 51 to 56 of the paper book and, on perusal, we find that the invoice dates fall in F.Y. 2019–20; however, the invoice amounts are stated in USD. The mere presence of USD- denominated invoices with F.Y. 2019–20 dates, by itself, does not demonstrate how and when those values were recognized in the books of account, nor how they were subsequently reported in GST. We note the assessee’s explanation that the export turnover of Rs.1,63,59,809/- pertaining to F.Y. 2019–20 was omitted from the Printed from counselvise.com ITA No.836/Hyd/2025 6 GST returns of that year and later reported in the GST return of F.Y. 2020–21 (September period) under exempt/zero-rated supplies. If that be so, a comprehensive reconciliation is indispensable. Equally, the Ld. DR’s argument about the timeliness under section 37(3) of the CGST Act requires verification from the annual returns. In these facts, the issue is fundamentally reconciliatory and verification- intensive. We therefore consider it appropriate, in the interest of justice, to set aside the impugned order and remand the matter to the file of the Ld. AO for a de novo examination with the following specific directions: (a) Reconciliation (both years): Prepare a year-wise reconciliation for F.Y. 2019–20 and F.Y. 2020–21 showing, at a minimum, turnover as per audited financial statements (P&L) and books/ledgers; turnover as per GST periodical returns and annual returns. (b) Where there is an increase in GST-reported turnover in F.Y. 2020– 21, examine whether there is a corresponding shortfall in GST- reported turnover in F.Y. 2019–20, and reconcile both with the Printed from counselvise.com ITA No.836/Hyd/2025 7 audited financials. Any double counting or year-shift must be identified and neutralized. (c) Verify that all USD-denominated invoices (page nos.51 to 56 of the paper book) converting the amount in Indian currency and verifying the same in F.Y. 2019–20 in the books. (d) After the above verification, pass a speaking order clearly bringing out the reconciliation and conclusions. If the assessee’s contention is borne out on verification, the Ld. AO shall delete or suitably restrict the addition to reflect only the real, unreconciled variance, if any. Conversely, if discrepancies persist, the Ld. AO shall quantify them with document-backed reasons. 8. The assessee is also directed to cooperate and furnish all reconciliations, ledgers, books, GST returns (including annual returns), and supporting documents as may be called for. The Ld. AO shall afford adequate opportunity of being heard and decide the matter expeditiously. In the light of the above, the impugned order is set aside and the matter is remanded to the file of the Ld. AO for Printed from counselvise.com ITA No.836/Hyd/2025 8 verification and fresh adjudication as per law, in line with the above said directions. 9. In the result, the appeal is allowed for statistical purposes. Order pronounced in the open Court on 19th Sept., 2025. Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad. Dated: 19.09.2025. * Reddy gp Copy of the Order forwarded to : 1. M/s. Quartzkraft LLP, 6-3-668/10/35, Durganagar Colony, Somajiguda, S.O. Khairatabad, Hyderabad-500082 2. The ITO, Ward 7(1), Hyderabad. 3. Pr.CIT, Hyderabad. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "