THE DY. CIT- 1, DURG(CG) V. M/S. DYNAMIC CG EQUIPMENTS PVT. LTD., BHILAI(CG)

ITA 149/BIL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9089 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 11-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEETAL VERMA
• Section: 43B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.149/BIL/2013 ASSESSMENT YEAR : 2010 - 2011 DCIT, - 1, 32/32, BUNGLOW, BHILAI, DURG VS. DYNAMIC CG EQUIPMENTS PVT LTD., 6/33, DAKSHIN GANGOTRI BHILAI PAN/GIR NO. AACCD 9469 J (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SMT SHEETAL VER MA, DR DATE OF HEARING : 2 /05 / 2017 DATE OF PRONOUNCEMENT : 2 /05 / 2017 O R D E R PER GEORGE GEORGE K, JM THIS IS AN APPEAL FILED BY THE REVENUE AGA INST THE ORDER OF CIT(A) - BHILAI , DATED 6.8.2013 , FOR THE ASSESSMENT YEAR 2010 - 2011 . 2. THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDER: WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, THE IT(A) HAS ERRED IN DELETING THE ADDITION OF RS.21,28,910/ - ON ACCOUNT OF UNPAID SERVICE TAX LIABILITY AND DELETING THE ADDITION OF RS.1,54,36,159/ - MADE BY THE AO ON ACCOUNT OF UNPAID VAT TAX LIABILITY. 2 ITA NO.149/BIL/2013 ASSESSMENT YEAR :2010 - 2011 3. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEES BALANCE SHEET AS ON 31.3.2010 REFLECTED LIABILITY OF RS.58,75,624/ - AGAINST ENTRY TAX, SERVICE TAX OF RS.21,28,910/ - , AND RS.1,84,36,159/ - AGAINST VAT PAYABLE, RESPECTIVELY. THE ASSESSING OFFICER OBSERVED THAT SINCE IN THE INSTANT CASE, THE ASSESSEE HAS RECEIVED SERVICE TAX FROM HIS CUSTOMERS AND WAS NOT PAID BEFORE THE FILING OF RETURN U/S.139(1) OF THE ACT, THE UNPAID LIABILITY OF SERVICE TAX CONSTITUTE INCOME U/S.28 R.W.S 5 OF THE ACT AND, THEREFORE, THE HE MADE THE ABOVE ADDITION AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, THE CIT(A) DELETED THE ADDITION, INTER ALIA, BY OBSERVING AS UNDER: CONVERSELY, THE NATURE OF SERVICE TAX AND VAT IS DIFFERENT AND THESE TAXES ARE COLLECTED AT THE TIME OF OFFERING SERVICES/SALES AND THE APPELLANT CAN FOLLOW THE EXCLUSION METHOD, IN RESPECT OF THESE ITEMS, IF THEY ARE SEPARATELY COLLECTED INVOICE - WISE. HO WEVER, THAT IS NOT PERMISSIBLE, IF THE SAME IS INCLUDED IN THE SALE ON DAY TO DAY BASIS AND ONLY CREDITED TO THE SEPARATE ACCOUNT THROUGH A SINGLE ENTRY AT THE YEAR END. IN THE INSTANT CASE, THE APPELLANT HAS FILED COPY OF SALE BILL AND SERVICE CHARGE BILL TO SUPPORT HIS STAND AND IT IS FOUND THAT THESE TAXES ARE COLLECTED SEPARATELY INVOICE - WISE AND THE FINAL ACCOUNTS ALSO REFLECT THE EXCLUSION METHOD. THIS METHOD IS ALSO APPROVED BY THE GUIDELINES OF THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA U/S 44AB OF THE ACT. THEREFORE, NO FURTHER DISALLOWANCE IS CALLED FOR. THE DECISION IN THE CASE CIT VS. NOBEL AND HEWITT (INDIA) PVT. LTD. (SUPRA) ALSO EXPLAINS THE LAW IN THIS REGARD. FURTHER, LOOKING TO THE NATURE OF THESE ITEMS, THE AOS INTERPRETATION THAT THE SE RECEIPTS FROM PART OF APPELLANTS INCOME UNDER PROVISION OF SEC. 28 R.W.S. SEC 5 IS ALSO NOT CORRECT, BECAUSE THERE IS NO ELEMENT OF PROFIT INVOLVED IN THESE ITEMS. THE DECISION OF HONBLE TRIBUNAL IN THE CASE OF M/S MITCHELL DRILLING 3 ITA NO.149/BIL/2013 ASSESSMENT YEAR :2010 - 2011 INTERNATIONAL PVT LTD. (SUPRA) RELIED UPON BY THE APPELLANT ALSO CLARIFIES THAT THE SERVICE TAX DOES NOT FORM PART OF GROSS TURNOVER. THE LAW LAID DOWN IN THE CASE OF CHOWRINGHEE SALES BUREAU (P) LTD. (87 ITR 542 (SC) ALSO DOES NOT APPLY TO THE FACTS OF THE PRESENT CAE. IN THAT CASE, THE ASSESSEE, AS AN AUCTIONEER, HAD COLLECTED SALES TAX FROM HIS BUYERS AND AT THE SAME TIME DISPUTED THE VALIDITY OF THE STATUTORY PROVISIONS FASTENING THE LIABILITY UPON HIM. THEREFORE, THE HONBLE APEX COURT HAS HELD THAT THE AMOUNT OF SALES TAX COLLECTED, WHILE DISPUTING SUCH LIABILITY TO PAY, WAS REVENUE RECEIPT WITH THE RIDER THAT IF THE LIABILITY IS ULTIMATELY FIXED, THE ASSESSEE WOULD BE ELIGIBLE FOR DEDUCTION ON DISCHARGE OF THE SAME. THIS CASE WAS SUBSEQUENTLY DISTINGUISHED BY THE HONB LE SUPREME COURT IN THE CASE OF CIT VS. SHANKARAIAH & ORS. REPORTED IN (2001) 247 ITR 798 (SC). IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE BY THE AO IN RESPECT OF ENTRY TAX AMOUNTING TO RS.58,75,624/ - IS CONFIRMED AND THE ADDITIONS RELATING TO SERV ICE TAX AND VAT PAYABLE RESPECTIVELY AT RS.21,28,910/ - AND RS.1,54,36,159/ - IS DELETED. THIS GROUND OF APPEAL IS, THEREFORE, PARTLY ALLOWED. THE APPELLANT GETS RELIEF OF RS.1,75,65,069/ - . 5. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. WHEN T HE MATTER WAS CALLED FOR HEARING, NO ONE WAS PRESENT ON BEHALF OF THE RESPONDENT - ASSESSEE. THEREFORE, WE PROCEED TO DECIDE THE APPEAL OF THE REVENUE EXPARTE QUA THE RESPONDENT ASSESSEE AFTER HEARING LD D.R. AND ON THE BASIS OF MATERIALS AVAILABLE ON RECOR D. 7. LD D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER. 8. AFTER HEARING LD D.R. AND PERUSING THE ORDERS OF LOWER AUTHORITIES, WE FIND THAT ON SIMILAR ISSUE , THIS BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. GANPATI MOTORS IN ITA NO.146/BIL/2013 FOR A SSESSMENT YEAR 2010 - 2011 ORDER DATED 27.7.2016 HAS UPHELD THE FINDINGS OF THE CIT(A) DELETING THE 4 ITA NO.149/BIL/2013 ASSESSMENT YEAR :2010 - 2011 ADDITION MADE ON ACCOUNT OF NON - PAYMENT OF VAT FOLLOWING THE DECISION OF THIS TRIBUNAL DATED 31.10.2015 IN ITA NO.67/BIL/2012 FOR A.Y. 2009 - 2010, WHEREIN, I T HAS BEEN HELD AS UNDER: HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE AS RAISED BY THE REVENUE DEPARTMENT, NOW STOOD SQUARELY COVERED BY SEVERAL DECISIONS. IN THE CASE OF INDIAN CARBON LTD VS INSPECTING ASST.COMMISSIONER & ANR(1993) 200 ITR 759, THE HONBLE GAUHATI HIGH COURT HAS OPINED THAT SECTION 43B APPLIES ONLY WHEN ASSESSEE CLAIMS DEDUCTION FOR ANY AMOUNT PAYABLE BY WAY OF TAX OR DUTY. ACCORDING TO THE HONBLE COURT, WHERE NO CLAIM O DE DUCTION IS MADE AND THAT THERE WAS NO CHARGE MADE IN THE PROFIT AND LOSS ACCOUNT, THEN SUCH LIABILITY COULD NOT BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 43B OF THE I.T.ACT. FURTHER, IN THE CASE OF CIT VS. NOBLE & HEWITT (INDIA) PVT LD., (2008) 305 ITR 324 (DEL), IT WAS OPINED THAT ALTHOUGH THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND COLLECTED THE SERVICE TAX BUT IT WAS NOT DEBITED TO PROFIT AND LOSS ACCOUNT AS AN EXPENDITURE BY DISTINGUISHING CHOWRINGEE SALES BUREAU (P) LTD., VS CIG(1997) 110 ITR 385 (CAL), THE HONBLE DELHI HIGH COURT HAS HELD THAT THE QUESTION OF DISALLOWING U/S.43B DID NOT ARISE. IN THE LIGHT OF ABOVE DECISIONS AS WELL AS CONSIDERING THE ADMITTED FACTUAL POSITION THAT THE ASSESSEE HAS MAINTAINED AN EXCLUSIV E METHOD OF ACCOUNTING, HOWEVER, THE SAID VAT TAX ACCOUNT HAS REFLECTED THE DETAILS OF TAX COLLECTED AND TAX PAID WHICH WAS REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE AND DID NOT FORM PART OF THE P&L ACCOUNT, THEREFORE, THE VIEW TAKEN BY THE CIT(A) DES ERVES TO BE APPROVED. IN THE RESULT, WE FIND NO FORCE IN THE GROUND OF REVENUE WHICH IS DISMISSED. 9. LD D.R. SUBMITTED THAT THE REVENUE HAS FILED AN APPEAL BEFORE HONBLE HIGH COURT AGAINST THE ORDER OF THE TRIBUNAL IN CASE OF DCIT VS. GANAPATI MOTORS (SUPRA) AND SAME IS PENDING ADJUDICATION. SINCE NO CONTRARY JURISDICTIONAL HIGH COURT JUDGMENT WAS BROUGHT TO OUR NOTICE, WE ARE BOUND 5 ITA NO.149/BIL/2013 ASSESSMENT YEAR :2010 - 2011 TO FOLLOW THE CO - ORDINATE BENCH ORDER IN THE CASE OF GANPATI MOTORS (S U PRA). THEREFORE, WE FIND NO INFIRMITY IN THE ORDE R OF THE CIT(A) AND UPHOLD THE SAME. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCE D IN THE OPEN COURT ON 2 /05 /2017 IN THE PRESENCE OF PARTIES. SD/ - SD/ - (N.S. S AINI ) (GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER RAIPUR ; DATED 2 /05 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY 1. THE APPELLANT : DCIT, - 1, 32/32, BUNGLOW, BHILAI, DURG 2. THE RESPONDENT. DYNAMIC CG EQUIPMENTS PVT LTD., 6/33, DAKSHIN GANGOTRI BHILAI 3. THE CIT(A) BHILAI 4. PR.CIT , BHILAI 5. DR, ITAT, RAIPUR 6. GUARD FILE. //TRUE COPY// 6 ITA NO.149/BIL/2013 ASSESSMENT YEAR :2010 - 2011 DATE INITIAL 1. DRAFT DICTATED ON 2 /0 5 /17 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 2 /05 /17 (DICTATION PAD HAS BEEN ENCLOSED ALONG WITH ORIGINAL FILE) SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/P S 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE H.C. 9. DATE ON WHICH FILE GOES TO THE SPS 10. DATE OF DISPATCH OF ORDER.