2025 (7) TMI 375 - AT - Income Tax

Disallowance of VAT payment u/s 43B - as per AO assessee could not file the relevant evidences to prove the payment of VAT to the authorities on or before the due date provided under the Act which is evident from the monthly returns filed by the assessee which contains certain details- HELD THAT - Although the assessee claims that monthly returns filed by the assessee contains seal of the bank for payment of VAT but in our considered view that alone itself is not sufficient to accept the claim of the assessee in absence of corresponding bank statements indicating payment through banking channel. Although the assessee claims that the department has issued No Due Certificate for the period but the fact remains that assessee has failed to file any certificate from the VAT Authorities to support his arguments. Therefore in our considered view the assessee is unable to file any evidence in support of his arguments that it has paid VAT and CST to the concerned authorities and there is no outstanding dues for the relevant period. Since the assessee could not file relevant evidences the AO has rightly made the additions towards VAT/CST payments as per the report received from the Commercial Tax Officer Bodhan Circle Nizamabad Division u/sec.43B of the Act. Even before the CIT(A) except making oral arguments the assessee could not file any evidence to support his claim. Therefore CIT(A) sustained the additions made by the AO. In respect of various case laws relied upon by the assessee including the decision of Devi Agro Industries Hyderabad 2024 (8) TMI 1586 - ITAT HYDERABAD the Tribunal has given a factual finding that the assessee has produced DCB reports in respect of CST and VAT demand. As per the said DCB report there is no outstanding dues for the relevant period and in those facts a direction has been given to verify the claim of the assessee and decide the issue. Since in the present case the assessee could not file any evidences to prove payment of VAT in our considered view there is no error in the reasons given by the CIT(A) to sustain the additions made by the AO. Thus we are inclined to uphold the order of the CIT(A) and dismiss the appeal filed by the assessee. Disallowance of claim of assessee u/sec 80C - Addition towards deduction claimed under Chapter-VIA - HELD THAT - As assessee neither furnished any evidences nor proved that the impugned claim is allowable under Chapter-VIA of the Act. Therefore in our considered view there is no error in the reasons given by the AO and CIT(A) to sustain the addition towards deduction claimed under Chapter-VIA of the act. We therefore inclined to uphold the order of CIT(A) and reject the ground taken by the assessee.

Summary

Issues Presented and Considered

1. Whether the reopening of the assessment under section 147 of the Income Tax Act, 1961, is valid, considering the time limits and the requirement to record reasons to believe that income chargeable to tax has escaped assessment.

2. Whether the Assessing Officer's addition of Rs. 4,94,128/- towards disallowance of VAT payment under section 43B of the Income Tax Act, 1961, is justified in light of the assessee's claim of payment through banking channels and submission of VAT returns.

3. Whether the deduction of Rs. 1,00,000/- claimed under Chapter VIA (specifically section 80C) of the Income Tax Act, 1961, is allowable in the absence of proof of payment for LIC and tuition fees.

Issue-wise Detailed Analysis

Issue 1: Validity of Reopening Assessment under Section 147

The legal framework governing reopening of assessments under section 147 requires the Assessing Officer to have a reason to believe that income chargeable to tax has escaped assessment. Additionally, the notice under section 148 must be issued within four years from the end of the relevant assessment year unless there is failure to disclose fully and truly all material facts.

The assessee contended that the reopening notice issued on 23.03.2019 was beyond the four-year period for AY 2012-13, and no failure to disclose material facts was demonstrated. The reopening was alleged to be based on mere suspicion and presumption, which is impermissible.

The Court observed that the reopening was predicated on information received from the Commercial Tax Officer regarding short payment of sales tax and use of fake challans. The Assessing Officer conducted verification under section 133(6) and proceeded with reopening. However, the judgment does not explicitly dwell on the time-bar issue or failure to disclose, focusing instead on the merits of the additions. Hence, the reopening was implicitly accepted as valid for the purpose of the appeal.

Issue 2: Disallowance of VAT Payment under Section 43B

Section 43B mandates that certain expenses, including taxes, are only allowable on actual payment. The Assessing Officer disallowed Rs. 4,94,128/- claimed as VAT payment, relying on information from the Commercial Tax Officer that the assessee had claimed payments through fake challans.

The assessee argued that VAT payments were made through banking channels, as evidenced by VAT returns filed for the months January 2011 to May 2014, which contained bank seals. The assessee also referred to a 'No Due Certificate' from the department, indicating no outstanding dues. The assessee contended that the Assessing Officer and the CIT(A) failed to consider these evidences.

The CIT(A) and Assessing Officer found the assessee's submissions unsatisfactory due to the absence of a bank certificate confirming payment and lack of any FIR or police report regarding alleged embezzlement by an employee. The CIT(A) emphasized that the onus was on the assessee to furnish proof of payment, which was not discharged despite multiple opportunities.

The Tribunal noted that while the assessee filed VAT returns containing bank seals, this alone did not constitute sufficient evidence of actual payment through banking channels. The assessee failed to produce corresponding bank statements or certificates from VAT authorities confirming payment or the 'No Due Certificate.' The Tribunal distinguished the present case from precedents cited by the assessee, where factual findings included production of DCB reports indicating no outstanding dues. Here, the absence of such supporting documents meant the Assessing Officer's addition under section 43B was justified.

The Tribunal applied the principle that claims of deduction or expense must be substantiated by cogent evidence. Mere filing of returns or oral assertions without documentary proof is insufficient to establish payment for tax purposes under section 43B.

Issue 3: Disallowance of Deduction under Chapter VIA (Section 80C)

The assessee claimed a deduction of Rs. 1,00,000/- under Chapter VIA, specifically section 80C, for LIC premium and tuition fees. The Assessing Officer disallowed this claim due to the absence of any proof of payment, and the CIT(A) upheld this disallowance.

The Tribunal concurred with the lower authorities, emphasizing that the onus lies on the assessee to prove entitlement to deductions claimed in the return of income. Since no evidence was furnished either during reassessment or appellate proceedings, the deduction claim remained unsubstantiated and was rightly disallowed.

Significant Holdings

"In the absence of the certificate from the bank certifying payment of VAT of Rs. 4.94,128/-, I do not find any reason to differ from the findings of the AO."

"The onus was on the appellant to prove each and every claim made in the return. This onus has not been discharged by the appellant therefore the claim of deduction made under chapter VIA of Rs. 1,00,000/- remains unproved."

"The assessee is unable to file any evidence in support of his arguments that, it has paid VAT and CST to the concerned authorities and there is no outstanding dues for the relevant period."

"Since the assessee could not file relevant evidences, the Assessing Officer has rightly made the additions towards VAT/CST payments as per the report received from the Commercial Tax Officer."

"The reopening of the assessment is not challenged on merits but the Tribunal has proceeded to decide the substantive issues on evidence and submissions made."

The core principles established include:

• The necessity of substantiating claims of payment under section 43B with concrete documentary evidence such as bank statements or certificates from tax authorities.
• The requirement that deductions under Chapter VIA must be supported by proof of payment; failure to do so results in disallowance.
• The reopening of assessment under section 147 must be based on tangible reasons to believe that income has escaped assessment, not mere suspicion; however, in this case, the reopening was implicitly accepted for adjudication of substantive claims.

The Tribunal's final determinations were to uphold the additions made by the Assessing Officer and confirmed by the CIT(A) regarding the disallowance of VAT payments under section 43B and the disallowance of deductions under Chapter VIA. Consequently, the appeal filed by the assessee was dismissed.