Deputy Commissioner Of Income Tax Circle 16(1) vs Noon E-Commerce India Private Limited

“1.

whether in facts and circumstances of the Case, Ld. CIT(A) erred in deleting the addition of Rs. 10.80 crore made on account of GST refund, without verifying the complete facts of the case?

2.

Whether in facts and circumstances of the Case, Ld. CIT(A) erred in deleting the addition made on account of GST refund by merely relying on Circular 35D dated 29.11.1966 without due verification?

3.

The appellant craves leave to alter, add, or amend any grounds at the time of hearing.”

3. Grounds of Appeal:

“1.

The learned CPC AO erred in making addition of INR 10,80,18,850 towards GST refund which was disclosed in clause 16(d) of the tax audit report only for disclosure purpose and no adjustment is required in total income since the same is not in the nature of income chargeable to tax.

2.

The learned CPC AO erred in not appreciating that the GST refund is not taxable under the Act.

3.

Without prejudice to the above, the Appellant wishes to submit that the Tax Auditor erroneously disclosed the GST refund to be INR 10,80,18,850 in clause 16(b) of the Tax Audit Report. However, the Appellant had a GST refund of INR 1,08,18,850 for the subject AY and the same can be substantiated vide Form GST RFD-06 and the letter from the Tax Auditor.

4.

The Appellant prays for leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, to enable the learned CIT(A) to decide this appeal according to law.”

4. Appellant's Submission:

In response to notice dated 08.08.2025, the appellant has filed its response on 14.08.2025, the relevant portion is reproduced as under:-

Commissioner of Income-tax (Appeals)

National Faceless Assessment Centre ('NFAC')

Income Tax Department

PAN: AADCL3442K

Dear Sir/ Madam,

Sub: Noon E-Commerce India Private Limited (hereafter referred to as 'Noon India' or 'the Company' or 'We' – Assessment Year ('AY') 2021-22 – Appeal number: NFAC/2020-21/10211657

Ref: Notice under section 250 of the Income-tax Act, 1961 ('the Act') - bearing Document Identification Number: ITBA/APL/F/APL_1/2024-25/1074150628(1) dated 7 March 2025 for the subject AY (Copy of notice enclosed as Annexure 1)

We refer to the aforesaid notice dated 7 March 2025 issued by your good-self's office in connection with the appeal filed for the subject AY.

We understand that your good-self has issued the aforementioned notice requesting for the relevant information in connection with the appeal filed for the subject year. In this regard, we wish to submit that a hearing notice under section 250 (DIN: ITBA/APL/F/APL_1/2024-25/1069186065(1) and DIN :ITBA/APL/F/APL_1/2024-25/1071381628(1)) was already issued on 27 September 2024 and on 19 December 2024 and we had filed our response along with relevant documents to the same on 10 October 2024 and on 23 December 2024 respectively. The notice and our submission are enclosed as Annexure 2 (A) & (B) and Annexure 3 (A) & (B) respectively. In addition to the same, the Company also filed responses against notices received dated 17 April 2023, 28 August 2023, 04 October 2023 and 14 June 2024. We have also provided our earlier detailed submission below, for ease of reference.

1. Background

- The Appellant is engaged in business support services, process outsourcing services and information technology enabled services.

- The Appellant had filed its Return of Income ('ROI') for the AY 2021-22 on 28 February 2022 declaring a total income of INR 13,51,60,420 computed under normal provisions of Income tax Act, 1961 ('the Act').

- Pursuant to filing the return of income, the Company has received an intimation under section 143(1)(a) the Act dated 31 May 2022 from Assistant Director of Income Tax, CPC ('the learned CPC AO') proposing addition of INR 10,70,18,850 as income chargeable to tax under the head business or profession.

- The addition was in relation to Goods and Services Tax ('GST') refund disclosed in clause 16(b) of the Tax Audit Report ('TAR') amounting to INR 10,80,18,850.

- The Tax Auditor had inadvertently disclosed the Input Tax Credit ('ITC') to be INR 10,80,18,850 in the TAR as against the refund applied for by the Assessee amounting to INR 1,08,18,850 due to a bonafide typographical error.

- The learned CPC AO has made an addition of INR 10,70,18,850 after considering the disallowance made by the Appellant amounting to INR 10,00,000 in relation to unascertained provision.

- The Company submitted the following response on the income tax e-filing portal against the proposed adjustments on 22 June 2022 (with limited word limit provided on the portal for response).

"When we purchase goods, we are entitled to claim GST on the same as input tax credit ('ITC') and when we export, this ITC can be claimed as refund. So, ITC is not claimed as an expense in the year of purchase – They are shown as a net off amount of credit available and availed as part of balances with Government Authorities in note 8 of the Balance Sheet. In other words, the refund is of GST paid by us that was not claimed as a deduction or expense. So, refund is not in the nature of income."

- The Assessee received another intimation under section 143(1)(a) of the Act vide mail communication dated 21 October 2022. However, the said intimation was not reflecting on the income tax portal. Hence, we were unable to provide an online response against the same.

- Subsequently, the Company has received intimation under section 143(1)(a) of the Act dated 21 October 2022 and the intimation under section 143(1) of the Act was received on 13 November 2022, without providing opportunity of 30 days to the Company to provide its response.

- Vide the said intimation under section 143(1) of the Act, the learned CPC AO has made the adjustments of GST refund due to inconsistency in amount mentioned in ROI and Tax audit report without considering the reply filed by the Company, pursuant to which total income has increased to INR 24,21,79,270 and demand of INR 3,45,05,110 is raised.

- Aggrieved by the above, the Appellant filed an appeal on 09 December 2022 (acknowledgment number: 840058860091222) against the adjustments made in the order of the learned CPC AO passed under section 143(1) of the Act.

- In addition to the above, the Company filed an online rectification and the learned CPC AO passed a rectification order under section 154 rws 143(1) of the Act without any changes to the above-mentioned intimation under section 143(1) of the Act.

- Aggrieved by the order, the Appellant filed an appeal on 08 February 2023 (acknowledgment number: 951204570080223) against the adjustments made in the order of the learned CPC AO passed under section 154 rws 143(1) of the Act.

- The Company also filed responses against multiple follow-up notices received, reiterating the previous submission.

2.2 Declaration in TAR is merely for the purpose of disclosure

As per the Guidance Note on Tax Audit under section 44AB of the Act, amounts which are to be offered to income under section 28 of the Act but not credited to profit and loss account are to be reported under clause 16(b) of the TAR. We have provided the extract of the Guidance Note with respect to clause 16(b) on reporting of refund amounts not credited to Profit and Loss as Annexure 4. Accordingly, the tax auditor has reported the amount of INR 10,80,18,850 as "amounts not credited to the profit and loss account, being, the proforma credits, drawbacks, refunds of duty of customs or excise or service tax or refunds of sales tax or value added tax or Goods & Services Tax, where such credits, drawbacks or refunds are admitted as due by the authorities concerned" under clause 16(b) of TAR. In this regard, the Assessee wishes to submit that the declaration made in the TAR is merely for the purpose of disclosure of the GST refund received during the subject AY.

Erroneous disclosure made in the TAR by the tax auditor

Without prejudice to our submission in the above paragraphs, the Appellant wishes to submit that the Tax Auditor had inadvertently disclosed the ITC to be INR 10,80,18,850 in the TAR as against the refund applied for by the Assessee amounting to INR 1,08,18,850 due to a bonafide typographical error. In this regard, we have enclosed the Form GST RFD-06 issued by the GST officer computing the refund to be INR 1,08,18,850 as Annexure 5. Further, we have enclosed the copy of the letter from the auditor stating the typographical error made in the quantum of refund in the TAR filed for the subject AY as Annexure 6. We humbly request your good-self to consider the GST refund received by the Company for the subject AY to be INR 1,08,18,850.

2.3 Taxability of GST refund under the Act

The Appellant wishes to re-iterate that the refund that GST refund is not in the nature of income to the Company and hence not taxable under the Act as it pertains to refund of GST input tax credit on account of exports. The GST paid by the Company during the course of import of goods was not claimed as a deduction or expense in any previous year. Consequently, the ITC received on export is not in the nature of income to the Company. Accordingly, considering that the above, amount being added of INR 10,80,18,850 to the returned income is erroneous and we request your good-self to delete the adjustment of INR 10,80,18,850 to the returned income.

3. Our Prayer

Based on the above submission and the various principles laid down in the judicial precedents as applied to the facts of the instant case, we pray that:

To delete the addition made of INR 10,80,18,850 towards GST refund; and To delete the consequential interest under section 234A, 234B and 234C of the Act.

We humbly submit that the appeal be favorably considered in view of our submission. We also pray that your good-self be pleased to provide us with a further opportunity to present our case / make submissions if the prayers are not acceptable for any reason.

We request your good-self to take the above on record.

We shall be obliged to provide any further information or explanation that your good-self may require in this regard.

Yours Sincerely,

For Noon e-Commerce India Private Limited

Parshant Maheshwari

Authorized signatory

5. Decision:

5.1

Ground Nos. 1 to 3 relates to the addition of Rs.10,80,18,850/- was made CPC. This is an appeal filed by the appellant against the intimation issued by the CPC under section 143(1) of the Income-tax Act, 1961, wherein an addition of Rs.10,80,18,850/- was made to the returned income on account of GST refund disclosed under Clause 16(d) of the Tax Audit Report.

I have perused the submissions made by the appellant, the documents placed on record including the Tax Audit Report, GST refund orders, auditor's clarification, and the applicable legal provisions and CBDT circulars.

5.1.1 Nature of GST Refund – Not Taxable

GST refund is merely a return of excess tax paid under the GST law and does not represent income derived from any business or profession. It is a capital/money flow transaction and is not covered under the charging provisions of section 4 of the Income-tax Act.

This position has been clarified by the Central Board of Direct Taxes (CBDT) in various contexts. Though there is no GST-specific circular, the principle laid down in CBDT Circular No. 35D [F. No. 10/78/66-IT(A-I)], dated 29/11/1966, continues to apply. It clearly states:

"Refund of indirect taxes or duties does not constitute income and hence is not to be treated as income taxable under the Income-tax Act."

Accordingly, refunds received under statutory provisions of indirect tax laws (including GST) are not taxable unless specifically brought within the scope of income under the Act – which is not the case here.

5.1.2 Disclosure in Tax Audit Report – Not Conclusive of Taxability

Clause 16(d) of Form 3CD requires disclosure of amounts not credited to the profit and loss account but which are otherwise considered taxable. However, this disclosure is only for reporting purposes and does not automatically attract taxability.

As the GST refund was not credited to the P&L account and does not constitute taxable income, its disclosure in Clause 16(d) does not warrant an addition unless the Assessing Officer independently establishes its taxability, which has not been done in this case.

5.1.3 Quantum of Refund – Clerical Error

The appellant has also submitted a clarification from the Tax Auditor stating that the figure of Rs.10,80,18,850/- was reported inadvertently, and the actual GST refund for the year was Rs.1,08,18,850/-. This is corroborated by the official Form GST RFD-06 issued by the GST Department.

Even if the refund were taxable (which it is not), the amount added is factually incorrect and unjustified.

5.1.4

In light of the above findings and relying upon the principles clarified by the CBDT in Circular No. 35D dated 29/11/1966, the addition made by the CPC on account of GST refund is untenable in law and on facts. Accordingly, all the grounds raised by the appellant are allowed, and the addition of Rs.10,80,18,850/- is directed to be deleted.

5.2

Ground No. 4 is general in nature and hence not adjudicated in detail and hence dismissed.

6.

In the result, the appeal is Partly Allowed.