TIRLOK CHAND SHARMA, F-133, IST FLOOR, ASHOK VIHAR, NEW DELHI,NEW DELHI V. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 61(1), CIVIC CENTRE, DELHI, NEW DELHI

ITA 6136/DEL/2024

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The case involves Tirlok Chand Sharma, who appealed against the order of the CIT(A)-7, Kolkata, which confirmed the disallowance of Rs. 11,14,348 by the CPC, Bangalore under Section 43B of the Income Tax Act, 1961. The disallowance was initially made due to an inconsistency in the amount disallowed under Section 43B in a preceding year but claimed as allowable in the current year. The assessee argued that the GST, which was reported as a liability, was actually covered by GST credits and thus no payment was due. The Tribunal agreed with the assessee, referencing similar cases and the fact that the GST was not included in the profit and loss account, leading to the deletion of the disallowance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 706991 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Appeal Filed On: 30-12-2024
• Other Referred Cases: CIT vs. Noble and Hewitt (I) P. Ltd., ATS Real Estate Builders (P) Ltd. Vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 154; 43B

Judgement Text

"1 ITA No. 6136/Del/2024 Tirlok Chand Sharma A.Y. 2020-21 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI Ms. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 6136/DEL/2024 Assessment Year: 2020-21 Tirlok Chand Sharma, F-133, Ist Floor, Ashok Vihar, New Delhi. PAN- AKAPS 0865 P Vs DCIT, Central circle 61(1), Delhi. APPELLANT RESPONDENT Assessee represented by Shri Sudhir Sehgal, Adv. Department represented by Sh. Sanjay Kumar, Sr. DR Date of hearing 16.04.2025 Date of pronouncement 09.07.2025 O R D E R PER Ms. MADHUMITA ROY, JM: The instant appeal filed by the assessee is directed against the order dated 22.10.2024 passed by the Ld. CIT(A)-7, Kolkata [DIN: ITBA/APL/S/250/2024- 25/1069855849(1)], arising out of the intimation dated 28.10.2021 passed by the CPC, Bangalore under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2020-21, sustaining the disallowance of Rs. 11,14,348/- made by the CPC Under Section 43B of the Act. 2 ITA No. 6136/Del/2024 Tirlok Chand Sharma A.Y. 2020-21 The assessee has raised following grounds of appeal: “1. The Ld. Addl./JCIT(A) has erred on facts and law in confirming the action of ADIT CPC, Bangalore, vide order u/s 250 of the Act dt. 22.10.2024, of computing the income of the assessee at Rs. 35,00,720/- while processing the return vide order u/s 143(1) of the Act Dt. 28.10.2021 as against income of Rs. 23,51,210/-declared by the assessee in the return of income e-filed on 22.01.2021. 2. That the Ld. Addl./JCIT(A) has erred on facts and law in confirming the action of ADIT CPC, Bangalore, vide order u/s 250 of the Act dt. 22.10.2024, of disallowing Rs. 11,14,348/- u/s 43B of the Act on the basis of report of the tax auditor in tax audit report. 3. That the Ld. Addl./JCIT(A) has erred on facts and law in confirming the action of ADIT CPC, Bangalore, vide order u/s 250 of the Act dt. 22.10.2024, of disallowing Rs. 11,14,348/- u/s 43B of the Act on the basis of report of the tax auditor in tax audit report without appreciating the submissions filed during the course of appellate proceedings. 4. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.” 2. Facts of the case, in brief, are that the assessee is an individual and derives income from business. For the A.Y-2020-21 the assessee filed return of income on 22.01.2021 declaring total income of Rs. 23,51,210/-. The CPC, Bangalore passed the Intimation under Section 143(1) dated 28.10.2021, inter alia, making adjustment u/s 143(1)(a) of the Act of Rs. 11,14,348 on account of inconsistency of amount disallowed under section 43B in any preceding previous year but allowable during the previous year claimed in return. In appeal the said 3 ITA No. 6136/Del/2024 Tirlok Chand Sharma A.Y. 2020-21 disallowance was further confirmed by the Ld. CIT(A). Hence, the instant appeal before us. 3. It is the case of the assessee that the assessee has GST receivable, GST cash and credit balance of Rs.27,09,738/- which is more than the GST payable of Rs.11,50,351/- meaning thereby no GST payable as on 31.03.2020 which is evident from the paper book filed before us; the list of other current assets and list of expenses payable forming part of balance sheet reflecting the credit as well as debit balance of GST. It is the case made out by the assessee that the GST has not routed through the profit and loss account as reported by the auditor itself. When any expenses/liability has not been reduced from the profits particularly when it has not routed through profit and loss account no addition is called for. He has relied upon tax audit report at the time of hearing of the matter. 4. In spite of basic documents being the balance sheet, profit and loss account having been placed before the Ld. CIT(A), the Ld. CIT(A) failed to consider the fact and observed that the assessee himself has admitted that the same was reported as unpaid in tax audit report and no adjustment made in the return of income and therefore, there was no error on the part of the CPC in making adjustment to the 4 ITA No. 6136/Del/2024 Tirlok Chand Sharma A.Y. 2020-21 total income of the assessee in intimation under Section 143(1) of the Act as submitted by the Ld. AR. 5. It is further noted that a rectification application under Section 154 of the Act, was preferred by the assessee but on 08.03.2022 the said application was disposed of by computing the income of the assessee at Rs.34,73,060/- as against the income declared is the return at Rs.23,51,210/- resulting income disallowance of Rs.11,21,850/-. On the other hand, the Ld. DR relied upon the orders passed by the authorities below. 6. Having heard the Ld. Counsels appearing for the parties and having regard to the facts and circumstances of the matter particularly from the documents placed before the Bench wherefrom it is found that the assessee is having closing GST liability of Rs.11,50,351/- and GST credits of Rs.27,69,738/- (GST Cash ledger of Rs.6,24,704/-, GST Credit Ledger of Rs.15,61,408/- and GST receivable of Rs.5,83,626/-). Thus, it is an admitted fact that the GST is not liable to be paid by the assessee rather it is to be adjusted against the balance available. The GST 5 ITA No. 6136/Del/2024 Tirlok Chand Sharma A.Y. 2020-21 payable on 31.03.2020 was paid via adjustment with input tax credit and such adjustment was made before the due date of filing of return of income. It further appears that the auditor in its tax report for the year under consideration has wrongly reported unpaid liability of the statutory dues under Section 43B of the Act in the tax audit report. Furthermore, when the same has not been routed through the profit and loss account the addition cannot be made as already decided by the jurisdictional High Court in the case of CIT vs. Noble and Hewitt (I) P. Ltd. reported in (2008) 166 taxman 48 (Delhi HC) as relied upon by the Ld. AR wherein the assessee did not deposit part of service tax collections with concerned authorities neither claimed any deduction in this regard nor did it debit the said amount as an expenditure in the profit and loss account, the addition made by the Ld. AO disallowing the said amount was rightly deleted by the Coordinate Bench as observed by the Hon’ble Jurisdictional High Court. The Ld. AR has also relied upon the order passed by the Coordinate Bench in the case of ATS Real Estate Builders (P) Ltd. Vs. DCIT reported in (2025) taxmann.com 611 (Delhi – Tribu), wherein the assessee neither claimed deduction on account of GST nor debited amount to profit and loss account and therefore, the provisions of Section 43B has not attracted; the impugned disallowance made under Section 43B on account of 6 ITA No. 6136/Del/2024 Tirlok Chand Sharma A.Y. 2020-21 GST payable which was not charged to profit and loss account during the year was directed to be deleted. 7. Thus, having regard to the entire aspect of the matter particularly the reporting by the tax auditor in para 26(1)(B)(b) that the amount of Rs.11,14,348/- has not been paid before the due date is factually wrong, the impugned addition made by the Ld. CIT(A) to the tune of Rs.11,50,351/- is found to be not sustainable in the eyes of law and thus, deleted. 8. The appeal preferred by the assessee is allowed. Order pronounced in the open court on 09.07.2025 Sd/- (MADHUMITA ROY) JUDICIAL MEMBER Dated: 09.07.2025 Rohit, Sr.PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "