The Income Tax Appellate Tribunal (ITAT) in Delhi has made a decision favoring KBH Energy & Infra Services Pvt. Ltd. for the financial year 2019-20. The tribunal overturned a tax penalty of over 45 lakh rupees that was previously imposed due to issues related to Goods and Services Tax (GST).
The company submitted its ITR declaring business income of nearly Rs 35,92,068. During return processing, the CPC added Rs 45,62,808 for the unpaid GST liability and Rs 49,288 regarding late PF payment, significantly increasing the taxable income.
The company countered the addition of GST, mentioning that the GST amount outstanding was never claimed as an expense in the Profit & Loss Account. Instead, the balance sheet showed it as a current obligation. Thus, the company argued that the deductions it claimed were subject to disallowance under section 43B.
The CIT(A) considered that the GST was not debited to the profit & loss account. Although CIT (A) again sustained the disallowance based on the fact that GST forms part of turnover and must have been accounted for in another way.
The taxpayer before the ITAT Delhi had put reliance on several judicial precedents, along with the decisions of Delhi and Ahmedabad Benches of the Tribunal, which held that section 43B is applicable merely in matters where a deduction has been claimed. A tax liability recorded on the balance sheet, but not claimed as an expense, is not subject to disallowance.
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The Tribunal, analysing facts, said that the GST liability of Rs. 45,62,808 was not shown in the Profit & Loss Account nor claimed as a deduction. It was observed by the Tribunal that the CIT(A) has considered the same aspect but has not provided any legal grounds for keeping the disallowance.
The Income Tax Appellate Tribunal (ITAT) referenced previous Tribunal decisions and High Court judgements, stating that Section 43B cannot be applied if no deduction has been claimed by the taxpayer.
| Case Title | KBH Energy and Infra Services Pvt. Ltd. V/S Centralized Processing Centre (CPC), Bangaluru |
| Citation | ITA No. 7541/Del/2025 :Asstt. Year: 2019-20 |
| Counsel For Appellant | Sh. D. C. Garg, CA |
| Counsel For Respondent | Ms. Ankush Kalra, Sr. DR |
| Delhi ITAT | Read Order |
