ITAT deletes addition made on account of non-inclusion of  GST on Sales in Profit and Loss Account [Read Order]

The Mumbai  bench Income Tax Appellate Tribunal ( ITAT ) deleted the addition made on the account of non -inclusion of Goods and Service Tax ( GST )on sales in profit and loss account .

In this case the assessee, Infinite Water Solutions Pvt. Ltd after filing the return of income under the normal provisions of the Income Tax  Act. . Return of the assessee was processed an amount of Rs. 8,07,66,818/- towards Goods and Service Tax ( GST ) collected from customers was added back.  Accordingly the assessee was informed via vide notice dated 18.5.2022, the same was replied by the assessee. As the response of the assessee was not considered while passing the original intimation. 

Assessee being aggrieved with this intimation, processed u/s. 143 (1) (A) preferred an appeal before the  CIT (A), who confirmed the action of CPC.Hence the assessee filed another appeal.

the tribunal after considering the provision of section 145A of the Act and Notification No. SO 3079(E), dated 29-9-2016 for Income Computation and Disclosure Standards and Circular No. 10/2017, dated 23-3-2017  observed that , “Clarifications on Income Computation and Disclosure Standards ( ICDS ) issued under section 145 of the Act, it is established position that the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee and by virtue of ICD” .

Furthermore the bench determined that the assessee has been recording its transactions of purchase, sales, and valuation of inventories, net of Goods and Service Tax ( GST ) consistently. Thus, if the sales are enhanced by the amount of GST attributable to it, then the amount of corresponding purchases should also be increased by the said amount which will result in tax neutral exercise-

Thus the CPC, Bengaluru erred in enhancing the value of the closing stock without giving effect to the purchases. Therefore enhancing the value of sales without giving corresponding effect to the valuation of opening stock/closing stock and purchase is not proper.

Therefore the two member bench of  Vikas Awasthy,( Judicial Member ) and  Shri Gagan Goyal, ( Accountant Member ) observed that  the CIT (A) erred in upholding the action of the CPC, of making addition on account of non-inclusion of the GST on sales in profit and loss account.

Accordingly the bench allowed the appeal filed by the assessee. Ronak Doshi, counsel appeared for the assessee and H.M. Bhatt , counsel appeared for the revenue.

To Read the full text of the Order CLICK HERE

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