Grand Motors Vs ITO (ITAT Raipur)
Abstract: In a cross appeal filed by both the assessee and the department against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], the focus was on disallowances under Section 43B of the Income Tax Act for the assessment year 2018-19. The case stems from an intimation issued by the Centralized Processing Centre (CPC) under Section 143(1), increasing the assessee’s taxable income due to unpaid VAT, Entry Tax, and CST liabilities. The assessee argued that the VAT amounting to ₹6,23,2262, although unpaid within the prescribed timeline, was not debited to the profit and loss account, asserting it followed an exclusive accounting method. Despite citing case law, including Ganpati Motors and Payal Verma, the CIT(A) upheld the disallowance, relying on Section 43B and Income Computation and Disclosure Standards (ICDS), which mandate the inclusion of VAT in total turnover. The CIT(A) also noted discrepancies between the original and revised Tax Audit Reports, with liabilities dropping from ₹2,50,90,568 to ₹67,41,366. The assessee’s argument that the disallowance was debatable and should not be invoked under Section 143(1) was dismissed. The CIT(A) ruled in favor of the department, stressing that VAT is part of sales turnover and subject to statutory accounting principles, including the application of Section 43B.
