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2022 (2) TMI 164 - AT - Income TaxIncome of the assessee towards Excise duty, CST and VAT - unexplained Excise duty, VAT and CST debited to the profit and loss account - sales were shown net of Excise duty and taxes, in the profit and loss account, the assessee had debited these above duties and taxes along with purchases in its trading and profit and loss account - assessee ought to have debited purchases, net of taxes and duties, as in the case of sales, the taxes and duties so debited to the profit and loss account tantamounted to excess claim and the same was accordingly disallowed and added to the income of the assessee - HELD THAT:- The reasoning of the Ld. CIT(A) talks about entire CST sale made by the assessee in its different branches for dismissing this contention of the assessee, which does not address the specific contention of the assessee that the same related to Pune Branch alone and could be set off against CST sales in Pune which were not there. The fact that assessee had made total CST sales of 10.59 crores does not help the case of the Revenue in meeting and controverting the specific contention of the assessee as aforestated. The same therefore cannot form the basis for rejecting the assesses explanation, we hold. Similarly, we find that in the case of VAT while the assessee's explanation of VAT debited to the profit and loss account was that it represented the excess of amount of VAT receivable on purchases as against amount payable on sales and which was not available for set off, the Ld. CIT(A) has rejected the same by stating that the assessee has shown the same amount of VAT as debited in the profit and loss account as receivable in his balance sheet The presumption of the Ld. CIT(A), is therefore probably that the VAT receivable was very much available for set off as per the books of the assessee and as opposed to that claimed by it that it was not available for set off. We find that this finding of the Ld. CIT(A) is not based on correct appreciation of facts. Firstly as per double entry system of accounting which is universally followed for book keeping every transaction is represented by both debiting and crediting different accounts. And the outstanding debit and credit balances in the different accounts are reflected either in the profit and loss account or balance sheet as per its nature. As per the Ld. CIT(A) the assessee has both debited the profit and loss account and also shown the debit balance in the VAT receivable account in the balance sheet, which is not possible. A debit balance in an account can either be reflected in the profit and loss account as expense or as an asset in the balance sheet. It cannot be reflected in both the financial statements at the same time. Therefore surely the amount of VAT debited to the profit and loss account is not the same as that reflected as receivable in the balance sheet. This is further cemented by the fact on record that the said two amounts are not the same also. While the amount debited to the profit and loss account of VAT amounts to ₹ 6,02,804/- the amount reflected as receivable as per the Ld. CIT(A) himself amounts to ₹ 5,77,764/-. Therefore the basis of the Ld. CIT(A) for rejecting the assessee's explanation of VAT debited to the profit and loss account, we find, has no legs to stand on and is therefore dismissed. Thus we hold that the revenue authorities have proceeded on totally incorrect interpretation of facts of the case while making the impugned addition on account of Excise duty, VAT and CST debited to the profit and loss account which we find the assessee had duly explained for doing so and it is clearly not a case of any extra claim made on account of the same of the assessee. - Decided in favour of assessee.
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