ITO Vs Budhia Auto (ITAT Raipur)
AO completed original scrutiny assessment u/s 143(3) in Feb 2015, accepting unpaid VAT & Service Tax as balance sheet items. Later, AO reopened assessment u/s 147 (notice issued in Mar 2019, beyond 4 years) alleging non-payment of Service tax ₹7.63 lakh (paid in Mar 2013, after ITR due date)& VAT ₹3.92 crore (unpaid at return filing date). AO added ₹4.00 crore u/s 43B, completing reassessment ex parte.
CIT(A) Findings
- During original assessment, AO had specifically asked about unpaid statutory liabilities.
- Assessee had clarified that VAT & Service Tax were not charged to P&L but only shown as liabilities in Balance Sheet.
- AO accepted this in 2015; hence, reopening in 2019 was on the same facts = change of opinion.
- As reopening was beyond 4 years, proviso to s.147 applied; there was no failure to disclose.
- Since no deduction was claimed in P&L, s.43B disallowance not applicable.
- Addition deleted.
Revenue’s Arguments in ITAT
- CIT(A) erred; non-payment attracts mandatory s.43B disallowance.
- Reopening not mere change of opinion; assessee failed to fully disclose.
- CIT(A) wrongly ignored SC ruling in Kedarnath Jute (liability exists even if not booked).
ITAT Decision
- Relied on Chhattisgarh High Court rulings in Ganpati Motors (2017) and Grand Motors (2024):
- If VAT/Service Tax is not debited to P&L and no deduction claimed, s.43B cannot apply.
- Also cited Delhi HC (CIT v. Noble & Hewitt): No disallowance of liability not claimed as deduction.
- Thus, addition of ₹4.00 crore deleted.
- Since main issue decided, other grounds became academic.
- Reassessment beyond 4 years held invalid as change of opinion.
ITAT held that unpaid VAT & Service Tax shown in balance sheet but not claimed in P&L cannot be disallowed u/s 43B. Reassessment after 4 years, based on same facts, was invalid change of opinion.
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