Amount Shown as Advance and Paid Before Due Date Cannot Be Treated as Revenue Receipt: ITAT Orders Fresh Verification on ₹6.12 Lakh Deemed Sales Tax Addition [Read Order]
The Tribunal relied upon produced documentary evidence for the adjudication.
ITAT - Deemed Sales Tax Addition - taxscan
ITAT - Deemed Sales Tax Addition - taxscan
The bench of the Income Tax Appellate Tribunal (ITAT), Raipur, ruled that an amount recorded as an advance and subsequently paid before the due date of filing the return cannot automatically be treated as a revenue receipt under the IncomeTax Act, 1961. Accordingly, the addition of ₹6,12,607 on account of deemed sales tax for fresh verification.
The appellant, Subramaniam Swaminathan Iyer, had filed his return of income for Assessment Year 2012-13 declaring total income of ₹2,23,52,780 along with agricultural income of ₹2,00,000. During scrutiny assessment under Section 143(3) of the Income Tax Act, 1961, the Assessing Officer (AO) noticed that the assessee had reflected a sum of ₹6,12,607 under “Advances and Other Deposits” with a narration of “Deemed Sales Tax.”
Relying on the Supreme Court’s decision in Sahney Steel & Press Works Ltd. v. CIT (1997), the AO treated the amount as a revenue receipt and added it to the total income. The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [CIT(A)], upheld this addition, finding no explanation or supporting evidence from the assessee.
Represented by Milind Bhusari, the appellant contended that the assessee was never given an opportunity by the AO to explain the nature of the “deemed sales tax” entry. It was submitted that the amount represented a liability shown under “Advances and Other Deposits” and not income.
It was submitted that the sales tax account had been debited by ₹6,12,607, and a corresponding payment was made to the State authorities on 14 April 2012 before the due date of filing the income tax return under Section 139(1). Further, copies of the Sales Tax Payable Account for Financial Years 2011-12 and 2012-13, bank statements, and a payment receipt showing that ₹6,65,030 was deposited on 14 April 2012 was submitted for consideration. Thus, the amount could not be treated as income under the Income Tax Act, 1961.
Represented by S. L. Anuragi, the Revenue urged that the addition made by the Assessing Officer was in accordance with the Supreme Court’s ruling in Sahney Steel & Press Works Ltd.(supra), where subsidies and similar incentives were held to be taxable as revenue receipts.
The Bench comprising of Judicial Member, Ravish Sood and Accountant Member, Arun Khodpia observed that the lower authorities had mechanically relied on Sahney Steel & Press Works Ltd.(supra), which dealt with subsidy receipts and not with advance tax liabilities. The Tribunal held that the appellant’s claim that the amount was part of sales tax payable and had been duly paid before the due date required verification through documentary evidence, such as bank statements and challans.
The Tribunal observed that since the amount had been shown as an advance and was reportedly paid before the due date of filing the return, it could not be summarily treated as a revenue receipt under the Income Tax Act, 1961. The Tribunal directed that these documents be duly considered during re-adjudication.
Therefore, the matter was remanded to the AO for fresh examination after granting the assessee an opportunity of being heard.
Accordingly, ITAT set aside the addition of ₹6,12,607 and allowed the appeal of the assessee on this ground.
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