ITAT Rejects Revenue's Rs. 39.52 Lakh Overstatement of purchase claim, upholds CIT(A) Ruling due to GST Period Difference [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal( ITAT ) rejected the Revenue’s claim of Rs. 39.52 lakh overstatement of purchases, upholding the Commissioner of Income Tax(Appeals)[CIT(A)] ruling due to the discrepancy between the Goods and Service Tax( GST ) return period of 9 months and the 12-month period covered in the assessee’s books of accounts.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The Revenue-appellant has filed this appeal against the National Faceless Appeal Centre (NFAC) order dated 14.05.2024 in the case of Aman Enterprise, respondent-assessee, for assessment year(AY) 2018-19. The assessee, engaged in construction, had filed a Nil income return, but scrutiny under Computer Assisted Scrutiny Selection(CASS) flagged issues in income accounting for high closing stock.

The assessment, completed under Section 143(3) on 04.02.2021, determined total income at Rs.10,22,11,440/- with additions for understated receipts (Rs.8,77,60,800/-), overstated purchases (Rs.39,52,298/-), and unaccounted expenditure (Rs.1,04,98,344/-).

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Dissatisfied with the Assessing Officer(AO)'s order, the assessee appealed to the First Appellate Authority(FAA), which decided in favor of the assessee through the impugned order. The revenue appealed before the tribunal aggrieved by the order of the CIT(A).

The issue was the addition of Rs. 39,52,298/- for inflated purchases. The AO found a discrepancy between the sundry creditor balance in the balance sheet and the GST return, with an excess of Rs. 39,52,298/- for four parties. The AO treated this as overstatement of purchases and made the addition. The Commissioner of Income Tax(Departmental Representative)[CIT-DR] noted that the addition was due to the assessee's failure to explain the discrepancy.

The two member bench comprising T.R Senthil Kumar(Judicial Member) and Narendra Prasad Sinha(Accountant Member)considered the rival submissions. The AO made the addition because the difference in the sundry creditor balance was not explained.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

However, the AO overlooked that the GST return covered only 9 months, while the books of accounts were for 12 months. The CIT(A) rightly granted relief after reviewing the assessee's explanation and confirming that there was no disparity between the books and the creditor details. As the CIT(A) correctly evaluated the facts, the tribunal dismissed the revenue's ground.

In short,the appeal filed by the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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