The ITAT remanded the case to the AO for fresh verification, holding that additions cannot be made solely on VAT mismatches without properly examining corrected records.
Vanshika verma | Apr 13, 2026 |
ITAT: VAT Mismatch Alone Cannot Justify Additions Without Verification
ITAT remanded the matter for fresh verification, emphasising that additions cannot be based solely on VAT mismatches without examining corrected records and supporting evidence.
The present appeal has been filed by ASP Engineers and Contractors against the Income Tax Officer, challenging an order dated October 13, 2025, passed by the CIT(A) for the Assessment year 2015-16.
Background of the case
The assessee had declared an income of about Rs 4,88,950 for AY 2015-16. During scrutiny, the Income Tax Officer noticed a mismatch between the sales and purchase figures reported in VAT returns and those shown in the company’s books. The AO found a difference of Rs 27,43,374. Based on this, the AO rejected the books of accounts and made an addition of Rs 27,43,374.
After which, the assessee filed an appeal before the CIT(A). But CIT(A) rejected this explanation, saying that no proper supporting evidence was submitted at the time and that VAT records are considered reliable unless officially corrected.
The assessee argued that the difference was due to a clerical error while filing VAT returns and that the correct figures were already reflected in audited financial statements, tax audit reports, and Form 26AS. In addition, they stated that the mistake was later fixed in a revised VAT audit report under the Gujarat VAT Act.
The assessee further approached the ITAT. The tribunal observed that the corrected VAT audit report is an important piece of evidence and had not been properly examined by the lower authorities.
Tribunal’s Decision
The tribunal further stated that additions shouldn’t be made solely because of discrepancies, especially if the taxpayer claims it was a genuine and correctable error.
The tribunal set aside the earlier orders and sent the case back to the Assessing Officer for fresh examination. The tribunal further directed the AO to verify the corrected VAT report and stated that the taxpayer must also be given a fair opportunity to present its case. As a result, the appeal was allowed for statistical purposes.
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