KBH Energy and Infra Services Pvt. Ltd. Vs Centralized Processing Centre (CPC) (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, allowed the appeal filed by KBH Energy and Infra Services Pvt. Ltd. and deleted a disallowance of ₹45,62,808 made under Section 43B of the Income Tax Act, 1961 in respect of outstanding GST liability. The dispute arose from an adjustment made by the Centralized Processing Centre (CPC), Bengaluru, while processing the assessee’s return of income for Assessment Year 2019-20. The assessee had filed its return declaring business income of ₹35,92,068. During processing under Section 143(1), CPC made an adjustment of ₹45,62,808 on account of unpaid GST liability and ₹49,288 relating to provident fund contributions. A subsequent rectification application filed by the assessee was rejected, and the adjusted income was retained.
The assessee challenged the GST-related disallowance before the Commissioner of Income Tax (Appeals) [CIT(A)]. While the CIT(A) granted relief regarding the provident fund disallowance for statistical purposes, the GST disallowance was confirmed. The CIT(A) acknowledged that the GST liability had not been claimed as an expense in the profit and loss account. However, it held that GST liability forms an integral part of turnover and that accounting standards require appropriate treatment of such liability, thereby justifying the disallowance under Section 43B.
