The Commissioner has revised your assessment for a year before AY 2024-25 saying the officer never verified MSME trade payables. Can s.43B(h) support that?
No. Clause (h) of s.43B was inserted by the Finance Act 2023 with effect from 1 April 2024 and operates prospectively from AY 2024-25. For AY 2022-23 the Tribunal held the Commissioner could not found prejudice to the Revenue on the non-application of a provision that did not apply, and set the s.263 order aside.
Decided by the ITAT (Om Prakash Kant (Accountant Member) and Pawan Singh (Judicial Member)) on 2026-08-17, reported as ITA No. 4338/MUM/2026. It bears on section 43B(h), section 43B, section 263, section MSMED s.15 of the Income Tax Act 1961, in Revision & Rectification and Deductions & Disallowances matters.
This is the first order located that decides anything on clause (h) rather than reciting it. Commissioners have been issuing s.263 notices asking why MSME balances outstanding at the year end were not disallowed, for years to which the clause never applied. The answer is the commencement date, and it disposes of the ground without any argument on the merits of the payable.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessment for AY 2022-23 was completed under s.143(3) by order dated 31 March 2024. By order dated 28 March 2026 the PCIT (Central), Mumbai-3 revised it under s.263, raising nine issues: revenue from operations including sale of flats and project management consultancy fees; cost of construction including municipal charges and provisions for unfinished work; finance cost, being interest on delayed statutory payments of Rs. 191.13 lakhs said to have been allowed without considering s.43B; other expenses; MSME trade payables of Rs. 361.74 lakhs shown in Note 17 said not to have been verified for allowability under s.43B; statutory liabilities; employee benefit provisions; inter-corporate deposits and s.2(22)(e); and work-in-progress. The assessee appealed. On the MSME ground the assessment record showed that trade payables had been specifically covered by a notice under s.142(1).
The appeal was allowed and the PCIT's order of 28 March 2026 under s.263 was set aside. On the MSME trade payables ground the Tribunal held that clause (h) of s.43B, which deals with sums payable to a micro or small enterprise beyond the period stipulated under the MSMED Act, was inserted by the Finance Act 2023 with effect from 1 April 2024 and therefore operates prospectively from AY 2024-25, the year under consideration being AY 2022-23; the PCIT having himself acknowledged that position, he could not premise prejudice to the Revenue merely on the non-application of that provision (para 6.8.1).
The Tribunal took the commencement date as determinative of whether the assessment could be said to be erroneous on that head at all. A provision that does not apply to the year cannot generate an error in an order for that year, and the Commissioner's own acknowledgement of the commencement date removed any basis for saying otherwise (para 6.8.1). The record independently showed that trade payables had been the subject of a notice under s.142(1), so the premise that the head went unexamined did not hold either (para 6.8.1).
was inserted by the Finance Act, 2023 with effect from 01.04.2024, and therefore operates prospectively from AY 2024-25
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Handle my notice → Ask a CA on WhatsAppNo. Clause (h) of s.43B was inserted by the Finance Act 2023 with effect from 1 April 2024 and operates prospectively from AY 2024-25. For AY 2022-23 the Tribunal held the Commissioner could not found prejudice to the Revenue on the non-application of a provision that did not apply, and set the s.263 order aside. This was decided by the ITAT (Om Prakash Kant (Accountant Member) and Pawan Singh (Judicial Member)) and bears on section 43B(h), section 43B, section 263, section MSMED s.15 of the Income Tax Act 1961. It is reported as ITA No. 4338/MUM/2026. This is the first order located that decides anything on clause (h) rather than reciting it. Commissioners have been issuing s.263 notices asking why MSME balances outstanding at the year end were not disallowed, for years to which the clause never applied. The answer is the commencement date, and it disposes of the ground without any argument on the merits of the payable. If it applies to you, the first step is this: Check the assessment year first. Clause (h) bites from AY 2024-25; for AY 2023-24 and earlier the outstanding MSME balance is simply not a s.43B item.
The assessment for AY 2022-23 was completed under s.143(3) by order dated 31 March 2024. By order dated 28 March 2026 the PCIT (Central), Mumbai-3 revised it under s.263, raising nine issues: revenue from operations including sale of flats and project management consultancy fees; cost of construction including municipal charges and provisions for unfinished work; finance cost, being interest on delayed statutory payments of Rs. 191.13 lakhs said to have been allowed without considering s.43B; other expenses; MSME trade payables of Rs. 361.74 lakhs shown in Note 17 said not to have been verified for allowability under s.43B; statutory liabilities; employee benefit provisions; inter-corporate deposits and s.2(22)(e); and work-in-progress. The assessee appealed. On the MSME ground the assessment record showed that trade payables had been specifically covered by a notice under s.142(1). The matter was decided on 2026-08-17 by the ITAT (Om Prakash Kant (Accountant Member) and Pawan Singh (Judicial Member)). On those facts the ITAT held as follows. The appeal was allowed and the PCIT's order of 28 March 2026 under s.263 was set aside. On the MSME trade payables ground the Tribunal held that clause (h) of s.43B, which deals with sums payable to a micro or small enterprise beyond the period stipulated under the MSMED Act, was inserted by the Finance Act 2023 with effect from 1 April 2024 and therefore operates prospectively from AY 2024-25, the year under consideration being AY 2022-23; the PCIT having himself acknowledged that position, he could not premise prejudice to the Revenue merely on the non-application of that provision (para 6.8.1).
The Tribunal took the commencement date as determinative of whether the assessment could be said to be erroneous on that head at all. A provision that does not apply to the year cannot generate an error in an order for that year, and the Commissioner's own acknowledgement of the commencement date removed any basis for saying otherwise (para 6.8.1). The record independently showed that trade payables had been the subject of a notice under s.142(1), so the premise that the head went unexamined did not hold either (para 6.8.1). In the words reproduced by the source cited on this page: "was inserted by the Finance Act, 2023 with effect from 01.04.2024, and therefore operates prospectively from AY 2024-25"
It was decided by the ITAT on 2026-08-17 and is reported as ITA No. 4338/MUM/2026. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 43B(h), section 43B, section 263, section MSMED s.15, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the PCIT's order of 28 March 2026 under s.263 was set aside. On the MSME trade payables ground the Tribunal held that clause (h) of s.43B, which deals with sums payable to a micro or small enterprise beyond the period stipulated under the MSMED Act, was inserted by the Finance Act 2023 with effect from 1 April 2024 and therefore operates prospectively from AY 2024-25, the year under consideration being AY 2022-23; the PCIT having himself acknowledged that position, he could not premise prejudice to the Revenue merely on the non-application of that provision (para 6.8.1). It arises in Revision & Rectification and Deductions & Disallowances matters, on section 43B(h), section 43B, section 263, section MSMED s.15 of the Income Tax Act 1961, and was decided by Om Prakash Kant (Accountant Member) and Pawan Singh (Judicial Member). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the show-cause notice itself concedes the commencement date, quote that concession back - the Tribunal held it against the Commissioner here. Do not let the ground be reframed as a general failure of enquiry into trade payables; insist that the prejudice alleged is identified. For AY 2024-25 onwards this order gives you nothing on the merits; the substantive scope of clause (h) remains undecided.
Searched for later treatment; none was found. That is not the same as a source affirming it. Pronounced 17 August 2026. Searches for later orders citing it returned nothing; that is expected for an order of this age and is not a comment on its correctness. No decision doubting it was located. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order disposes of all nine s.263 grounds; only the clause (h) ground is set out here, and the reader should not take the rest as decided in the assessee's favour on reasoning summarised in this entry. Paragraph 6.8.1 appears to run together the s.142(1) point and the clause (h) point; separate retrievals returned different opening words for the same paragraph number, which is consistent with a long paragraph rather than with two different paragraphs. The quoted words 'operates prospectively from AY 2024-25' were returned identically by two retrievals; the underlying text carries obvious scanning artefacts around the date. This order decides the commencement date and nothing about the scope of clause (h). No order applying clause (h) on the merits - to a trader, to a purchase order, or to a supplier registered mid-year - was located. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the PCIT's order of 28 March 2026 under s.263 was set aside. On the MSME trade payables ground the Tribunal held that clause (h) of s.43B, which deals with sums payable to a micro or small enterprise beyond the period stipulated under the MSMED Act, was inserted by the Finance Act 2023 with effect from 1 April 2024 and therefore operates prospectively from AY 2024-25, the year under consideration being AY 2022-23; the PCIT having himself acknowledged that position, he could not premise prejudice to the Revenue merely on the non-application of that provision (para 6.8.1).
TaxSphere, “Wadhwa Group Holdings Pvt Ltd v PCIT (Central), Mumbai-3”, https://taxnotice.vittsphere.com/caselaw/case/wadhwa-group-holdings-v-pcit-43bh-prospective-from-ay-2024-25/ (validity last checked 2026-09-17)
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