Introduction: The ITAT Hyderabad has recently pronounced a significant ruling in the case of Sri Gurukrupa Agro Industries vs. DCIT. This verdict underscores the significance of DCB reports as relevant evidence concerning the non-existence of demand on proper payment of CST and VAT.
Analysis: The crux of the dispute revolves around the claim by Sri Gurukrupa Agro Industries, a partnership firm engaged in milling and trading, pertaining to CST and VAT payments made during the assessment year 2015-16. When the firm failed to produce original and self-certified copies of payment challans, the Assessing Officer added substantial amounts to their liability. While the learned CIT(A) had initially dismissed the appeal, the case took a turn when the Tribunal remitted the matter for fresh examination.
One pivotal point of contention was the firm’s inability to produce evidence due to the absconding accountant, which led them to rely on DCB reports. The firm’s argument emphasizes that if no demands exist in the DCB reports, it suggests that the amounts were appropriately paid. This argument, albeit innovative, required factual verification.
Conclusion: The ITAT Hyderabad, after examining the case’s nuances, opined that the DCB reports indeed bear significance. While they didn’t provide outright relief, they directed the Assessing Officer to consider the DCB reports’ evidentiary value in the context of non-existent demands, thus offering a more holistic approach to such disputes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
1. Aggrieved by the order dated 07/11/2022 passed by the learned Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Sri Gurukrupa Agro Industries (“the assessee”) for the assessment year 20 15-16, assessee preferred this appeal.
2. Brief facts of the case are that assessee is a partnership firm, engaged in the business of milling and trading of paddy, rice and broken rice at Nizamabad. While scrutinizing the return of income filed by the assessee for the assessment year 2015-16, learned Assessing Officer found that the assessee claimed the CST and VAT payments in the profit and loss account, but when called upon to produce the original and also the self-certified copies of the challans relating to the payment of CST and VAT, assessee failed to produce the same. Learned Assessing Officer, therefore, added a sum of Rs. 11,25,426/- and Rs. 74,97,596/- said to have been paid by the assessee towards CST and VAT payments.
3. Assessee preferred appeal before the learned CIT(A). The impugned order shows that on an earlier occasion, the learned CIT(A) dismissed the appeal, but a Co-ordinate Bench of the Tribunal by order dated 11/01/2019, remitted the matter to the file of learned CIT(A) with a direction to examine the issue afresh. Learned CIT(A) while considering the issue in the second round of appeal, directed the learned Assessing Officer to provide one more opportunity of hearing to the assessee to furnish the proof of payments of CST and VAT and if the amount claimed as ‘expenditure’ in the profit and loss account was paid before the due date of filing of return of income, the same shall be allowed. Simultaneously, evidence including the available challans of payment, copy of CST and VAT returns for the current year and subsequent year.
4. Aggrieved by such a direction, assessee preferred appeal before us stating that the learned CIT(A) erred in directing the learned Assessing Officer to verify the challan copies of CST and VAT, instead of treating the impugned amount as a loss due to embezzlement by one of the partners of the firm.
5. Learned AR submitted that due to absconding of the accountant, they are unable to produce any evidence other than the DCB report in respect of CST and VAT and to establish that there was no existing demand, which un-mistakably indicate that the amounts were properly paid. Learned AR prays that the learned Assessing Officer may be directed to consider the aspect that the VAT payment cannot separately be established, because such an amount is included in the challan and the payment of CST and VAT could be inferred from the non-existence of any demand.
6. Learned DR submitted that in the absence of any evidence whatsoever, the authorities are justified in denying the claim of the assessee. He submits that the new plea taken by the assessee that the payments towards CST and VAT could be inferred through DCB reports and the nonexistence of any demand in force, needs factual verification and per se the assessee is not entitled for any relief.
7. We have gone through the record in the light of the submissions made on either side. It could be seen from the impugned order that the plea of the assessee is that all the relevant material was kept with the accountant, who absconded himself without handing over any challans or other material. The assessee produced the DCB reports in respect of CST and VAT and submits that if there is any doubt in respect of non-existence of any demand in force, such a fact could be verified from the concerned departments and merely because the challans are not available with the assessee, assessee cannot be fastened with huge liability. We are in agreement with the submission of the learned DR that DCB reports and the submissions of the assessee that non-existence of demand would only go to show that there were proper payments to the concerned department, needs factual verification. We, therefore, further direct the learned Assessing Officer to take into consideration the DCB reports also and to consider the same in the light of the submissions of the assessee that non-existence of any demand for the relevant period towards CST and VAT amounts proper payment. We hold and direct so. Grounds are accordingly treated as allowed for statistical purposes.
8. In the result, appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on this the 20th day of July, 2023.