Smt. Vinaya Vikrant Patil, Pune V. Addl CIT Rg-3 Pune, Pune

ITA 177/PUN/2012

• Counselvise Citation: 17724514 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 31-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNITA RAO
• Assessee Lawyers: NILESH KHANDELWAL
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.177/PN/2012 (ASSESSMENT YEAR: 2008-09) SMT. VINAYA VIKRANT PATIL C/O SHAH KHANDELWAL JAIN & ASSOCIATES CHARTERED ACCOUNTANTS LEVEL 3, BUSINESS BAY, PLOT NO. 84, WELLESLEY ROAD, NEAR RTO, PUNE 411 001 PAN : AHVPP0966A . APPELLANT VS. ADDL. COMMISSIONER OF INCOME TAX RANGE 3, PUNE. . RESPONDENT ITA NO.364/PN/2012 (ASSESSMENT YEAR: 2008-09) DY. COMMISSIONER OF INCOME TAX CIRCLE 3, PUNE . APPELLANT VS. SMT. VINAYA VIKRANT PATIL 5A, BHAGYASHREE APTS. NEAR HOTEL AJIT, DECCAN GYMKHANA, PUNE 411 038 PAN : AHVPP0966A . RESPONDENT APPELLANT BY : MR. NILESH KHANDELWAL RESPONDENT BY : MS. SUNITA RAO DATE OF HEARING : 13-06-2013 DATE OF PRONOUNCEMENT : 25-06-2013 ORDER PER G. S. PANNU, AM THE CAPTIONED CROSS-APPEALS, EACH BY THE ASSESSEE AND THE REVENUE, PERTAINING TO THE ASSESSMENT YEAR 2008-09, WERE HEA RD TOGETHER AND ARE BEING DISPOSED-OFF BY WAY OF A CONSOLIDATED ORDER F OR THE SAKE OF CONVENIENCE AND BREVITY. THE CAPTIONED APPEALS ARE DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - II, PUNE DAT ED 04.11.2011 WHICH, IN TURN, HAVE ARISEN FROM AN ASSESSMENT ORDER DATED 29.12.2010 PASSED BY ITA NO.177/PN/2012 ITA NO.364/PN/2012 SMT. VINAYA VIKRANT PATIL A.Y. 2008-09 THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), FOR THE ASSESSMENT YEAR 2008- 09. 2. FIRST, WE SHALL TAKE-UP THE APPEAL OF THE REVENU E WHEREIN THE ONLY DISPUTE IS WITH REGARD TO THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS.42,42,334/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF SERVICE TAX RECEIVABLE. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S AN INDIVIDUAL ENGAGED IN THE ACTIVITY OF TRAINING ON TECHNOLOGY, SOFT-SKILLS AND TRANSLATION SERVICES FOR VARIOUS CONCERNS UNDER THE NAME AND STYLE SYSTEM C ONSULTANTS. THE ASSESSEE EMPLOYS A POOL OF TRAINERS WHO ARE TECHNIC ALLY AND SOFT-SKILL EQUIPPED AND SUCH TRAINERS IMPART TRAINING FOR VARI OUS CLIENTS COMPANIES. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD RAISED BILLS ON ITS CLIENTS WHICH INCL UDED AN AMOUNT OF SERVICE TAX OF RS.42,42,334/- AND THE SAME WAS RECEIVABLE A S ON 31.03.2008. IN THE BALANCE-SHEET, THE AMOUNT OF RS.42,42,334/- WAS SHO WN AS A LIABILITY ON ACCOUNT OF SERVICE TAX CHARGED BUT NOT DUE. THE ASS ESSING OFFICER ADDED THE SAID AMOUNT OF RS.42,42,334/- AS INCOME OF THE ASSE SSEE FOR THE REASON THAT ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING WHEREBY THE RECEIVABLES HAVE TO BE ACCOUNTED FOR AS INCOME AND EXPENSES ARE TO BE RECOGNIZED WHEN LIABILITIES ARE INCURRED. ACCORDING TO THE ASSESSING OFFICER, THE AMOUNT OF SERVICE TAX CHARGED TO THE CLIENTS AM OUNTING TO RS.42,42,334/- WAS RECEIVABLE, AND AS THE PAYMENT HAS NOT BEEN ACT UALLY RECEIVED, THE CORRESPONDING LIABILITY TO DEPOSIT THE SAME WITH TH E CENTRAL GOVERNMENT HAD NOT ARISEN. ACCORDING TO THE ASSESSING OFFICER, SUC H AMOUNT OF SERVICE TAX, BEING RECEIVABLE WAS LIABLE TO BE ACCOUNTED FOR AS INCOME AND IN THE ABSENCE OF THE LIABILITY FOR PAYMENT HAVING ARISEN, IT WAS NOT TO BE ACCOUNTED FOR AS AN EXPENSE. IN THIS MANNER, THE AMOUNT OF RS.42,42,334 /- WAS ADDED TO THE INCOME OF THE ASSESSEE. ITA NO.177/PN/2012 ITA NO.364/PN/2012 SMT. VINAYA VIKRANT PATIL A.Y. 2008-09 4. IN APPEAL BEFORE THE CIT(A), ASSESSEE SUBMITTED THAT SERVICE TAX CHARGED BY THE ASSESSING OFFICER WAS A LIABILITY AN D NOT A REVENUE RECEIPT BECAUSE ASSESSEE WAS OBLIGED TO PAY THE SERVICE TAX TO THE GOVERNMENT AS PER THE RELEVANT PROVISIONS. THE ASSESSEE SUBMITTED THAT THE CHARGING OF SERVICE TAX DID NOT FORM PART OF THE TAXABLE INCOME AND NEITHER WAS IT A DEDUCTIBLE EXPENSE. THE CIT(A) NOTICED THAT THE SER VICE TAX CHARGED BY A SERVICE PROVIDER DOES NOT ASSUME THE CHARACTER OF I NCOME AS IT IS MERELY COLLECTED ON BEHALF OF THE GOVERNMENT. THE CIT(A) H AS REFERRED TO THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. REAL IMAGE MEDIA TECHNOLOGIES PVT. LTD. (2008) 306 ITR (AT) 10 6 (CHENNAI) IN THIS REGARD. THE CIT(A) ALSO NOTED THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOBLE & HEWITT (INDIA) (P) L TD. (2008) 605 ITR 324 (DEL) WHEREIN IT WAS HELD THAT EVEN IN CASE OF A MERCANTI LE ACCOUNTING WHERE AN ASSESSEE WAS NOT DEBITING THE SERVICE TAX AMOUNT TO THE PROFIT AND LOSS (P&L) ACCOUNT AS AN EXPENDITURE IN ORDER TO CLAIM AS DEDU CTION, THE QUESTION OF MAKING AN ADDITION WOULD NOT ARISE EVEN IF IT IS NO T PAID. AS PER THE CIT(A), THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF NOBLE & HEWITT (INDIA) (P) LTD. (SUPRA) AND THE DECISION OF THE CH ENNAI BENCH OF THE TRIBUNAL IN THE CASE OF REAL IMAGE MEDIA TECHNOLOGIES PVT. L TD. (SUPRA) COVERED THE CASE OF THE ASSESSEE AND ACCORDINGLY, THE CIT(A) DE LETED THE DISALLOWANCE. AGAINST THE ORDER OF THE CIT(A), REVENUE IS IN APPE AL BEFORE US. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE APPEARIN G FOR THE REVENUE HAS PRIMARILY RELIED UPON THE REASONING GIVEN BY TH E ASSESSING OFFICER IN SUPPORT OF THE CASE OF THE REVENUE WHICH HAS ALREAD Y BEEN NOTED BY US IN PARA 3 ABOVE AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE WHILE DEFENDING THE ORDER OF THE CIT(A) REFERRED TO A SUB SEQUENT DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PHARMA SEARCH VS. ACIT (2012) ITA NO.177/PN/2012 ITA NO.364/PN/2012 SMT. VINAYA VIKRANT PATIL A.Y. 2008-09 53 SOT 1 (MUMBAI) WHEREIN ALSO THE SIMILAR ISSUE WA S CONSIDERED IN FAVOUR OF THE ASSESSEE. IN THIS MANNER, THE ORDER OF THE CIT( A) IS SOUGHT TO BE DEFENDED. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF REAL IMAGE MED IA TECHNOLOGIES PVT. LTD. (SUPRA) OBSERVED THAT SERVICE TAX BILLED TO THE CUS TOMER DOES NOT BECOME PAYABLE TO THE CENTRAL GOVERNMENT TILL SUCH TIME TH E AMOUNT IS ACTUALLY RECEIVED FROM THE CUSTOMERS. AS PER THE TRIBUNAL, T HE SERVICE TAX BILLED, BUT NOT RECEIVED WOULD NOT ACQUIRE THE CHARACTER OF INC OME FOR THE REASON THAT A SERVICE PROVIDER IS MERELY ACTING AS AN AGENT OF TH E GOVERNMENT AND IS NOT ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF SERVICE T AX LIABILITY. THE HONBLE DELHI HIGH COURT IN THE CASE OF NOBLE & HEWITT (INDIA) (P ) LTD. (SUPRA) CONSIDERED A SITUATION WHERE ASSESSEE WAS MAINTAINING ACCOUNTS O N MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSEE HAD COLLECTED CERTAIN AMOU NT OF SERVICE TAX BUT THE ENTIRE AMOUNT WAS NOT DEPOSITED WITH THE GOVERNMENT AND A CERTAIN AMOUNT REMAIN UNPAID AT THE END OF THE YEAR. THE ASSESSEE DID NOT CLAIM ANY DEDUCTION IN THIS REGARD AS AN EXPENDITURE IN P&L A CCOUNT. THE AMOUNT REMAINING UNPAID WAS ADDED TO THE TOTAL INCOME, BEC AUSE AS PER THE REVENUE ASSESSEE WAS NOT FOLLOWING THE CORRECT ACCOUNTING P ROCEDURE. THE REVENUE CONTENDED THAT IF THE CORRECT ACCOUNTING PROCEDURE WAS FOLLOWED, THE UNPAID AMOUNT WAS TO BE DEBITED IN P&L ACCOUNT AND THEREAF TER ASSESSEE COULD CLAIM A DEDUCTION THEREON. THE HONBLE HIGH COURT DISAGRE ED WITH THE AFORESAID PROPOSITION CANVASSED BY THE REVENUE AND DELETED TH E ADDITION. 8. IN THE PRESENT CASE, WE ARE CONCERNED WITH THE A SSESSEE WHO HAS NOT CLAIMED ANY DEDUCTION ON ACCOUNT OF SERVICE TAX AND HAS NOT DEBITED THE AMOUNT IN P&L ACCOUNT AND THEREFORE THE ADDITION MA DE BY THE ASSESSING OFFICER WAS RIGHTLY DELETED BY THE CIT(A) FOLLOWING THE JUDGEMENT OF THE HONBLE DELHI HIGH IN THE CASE OF NOBLE & HEWITT (I NDIA) (P) LTD. (SUPRA). THE ITA NO.177/PN/2012 ITA NO.364/PN/2012 SMT. VINAYA VIKRANT PATIL A.Y. 2008-09 SAME IS HEREBY AFFIRMED AND ACCORDINGLY THE REVENUE HAS TO FAIL ON THIS ASPECT. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 10. NOW, WE MAY TAKE-UP THE CROSS-APPEAL OF THE ASS ESSEE IN ITA NO. 177/PN/2012 WHEREIN THE SOLITARY ISSUE RELA TES TO AN ADDITION OF RS.14,97,507/- MADE BY THE ASSESSING OFFICER AND FU RTHER SUSTAINED BY THE CIT(A). 11. IN THIS REGARD, THE RELEVANT FACTS ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED TO SUBMIT CONFIRMAT ION LETTERS FROM CERTAIN CREDITORS. ASSESSEE WAS UNABLE TO OBTAIN SUCH LETTE RS IN RELATION TO FOUR CREDITORS AMOUNTING TO RS. 14,97,507/-. NOT BEING S ATISFIED WITH THE EXPLANATION OFFERED AND THE EVIDENCE FURNISHED BY T HE ASSESSEE, ASSESSING OFFICER MADE AN ADDITION OF RS. 14,97,705/- UNDER S ECTION 68 OF THE ACT BY HOLDING SUCH CREDITORS AS UNEXPLAINED. 12. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE CIT(A) AND MADE DETAILED SUBMISSIONS WITH RESPECT TO EACH OF THE FO UR CREDITORS WHOSE CLOSING BALANCES STANDING IN THE ASSESSEES ACCOUNTS BOOK A MOUNTING TO RS.14,97,705/-, WERE TREATED AS UNEXPLAINED WITHIN THE MEANING OF SECTION 68 OF THE ACT. FOR EACH OF THE CREDITORS ASSESSEE SUBM ITTED DOCUMENTARY EVIDENCES IN THE SHAPE OF DELIVERY NOTES, INVOICES, PAYMENT DETAILS, BILLS, DETAILS OF TDS, ETC. AND SUBMITTED THAT FOUR CREDIT ORS WERE GENUINE AND THAT THE ASSESSEE HAD CARRIED OUT THE TRANSACTIONS WITH THEM IN THE ORDINARY COURSE OF BUSINESS. THE CIT(A) HAS NOT ADJUDICATED ON MERI TS OF THE CLAIM MADE BY THE ASSESSEE PRIMARILY FOR THE REASON THAT BEFORE T HE ASSESSING OFFICER THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE AGREED TO THE IMPUGNED ADDITION MADE UNDER SECTION 68 OF THE ACT. ACCORDINGLY, THE GROUND OF APPEAL ITA NO.177/PN/2012 ITA NO.364/PN/2012 SMT. VINAYA VIKRANT PATIL A.Y. 2008-09 CHALLENGING THE ADDITION OF RS.14,97,705/- UNDER SE CTION 68 OF THE ACT HAS BEEN DISMISSED. NOT BEING SATISFIED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 13. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY POINTED OUT THAT THE CIT(A) HAS NOT APPROPRIATELY CONSIDERED TH E FACTS AND CIRCUMSTANCES OF THE DISPUTE. IT IS POINTED OUT THAT BEFORE THE C IT(A), THE ASSESSEE FURNISHED AN AFFIDAVIT OF ONE MR. AMIT GHOLKAR, CHARTERED ACC OUNTANT, WHO WAS APPEARING BEFORE THE ASSESSING OFFICER DURING THE A SSESSMENT PROCEEDINGS FOR CURRENT ASSESSMENT YEAR. BY WAY OF SAID AFFIDAVIT A SSESSEE SOUGHT TO POINT OUT THAT THE AUTHORISED REPRESENTATIVE SIGNED THE ORDER SHEET ENTRY DATED 16.12.2010 UNDER A MISTAKEN BELIEF AND WITHOUT READ ING THE SAME. IT WAS POINTED OUT THAT THE AUTHORISED REPRESENTATIVE PRES UMED THAT AS THE ASSESSING OFFICER WAS SATISFIED WITH THE DETAILS FU RNISHED AND HE MADE A SUBMISSION TO THE ASSESSING OFFICER THAT HE MAY TAK E A DECISION AS DEEMED FIT BUT NEVER ADMITTED THAT ADDITION BE MADE PERTAINING TO SUCH CREDITORS. THAT IN THE PROCEEDING SHEET IT WAS RECORDED IN A DIFFERENT MANNER WHICH THE AURHORISED REPRESENTATIVE SIGNED UNDER A MISTAKEN B ELIEF. THE LEARNED COUNSEL CONTENDED THAT AT NO STAGE THERE WAS ANY JU STIFICATION FOR MAKING SUCH ADMISSION INASMUCH AS ON THE BASIS OF THE MATERIAL ON RECORD IT WAS CLEARLY EVIDENT THAT THE FOUR CREDITORS HAD TRANSACTED WITH THE ASSESSEE IN THE NORMAL COURSE OF BUSINESS AND THEREFORE, THE SO-CALLED ADM ISSION BY THE AUTHORISED REPRESENTATIVE WAS UNDER A MISTAKEN BELIEF. THE LEA RNED COUNSEL SUBMITTED THAT THE CIT(A) OUGHT TO HAVE ALLOWED AN OPPORTUNIT Y TO THE ASSESSEE TO EXPLAIN ITS CASE RATHER THAN DISMISSING THE STAND O F THE ASSESSEE ALTOGETHER. 14. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE APPEARING FOR THE REVENUE CONTENDED THAT WHEN THE ASSESSEE AG REED TO THE ADDITION IN THE COURSE OF ASSESSMENT PROCEEDINGS, THERE DOES NO T REMAIN ANY JUSTIFICATION FOR FILING OF AN APPEAL AND THEREFORE IN THE PRESEN T CASE, THE CIT(A) WAS ITA NO.177/PN/2012 ITA NO.364/PN/2012 SMT. VINAYA VIKRANT PATIL A.Y. 2008-09 JUSTIFIED IN SUSTAINING THE ADDITION MADE BY THE AS SESSING OFFICER UNDER SECTION 68 OF THE ACT. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE FACTS ON RECORD SHOW THAT THE AUTHORISED REPRESENTATIVE OF T HE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER FROM TIME TO TIME. EVE N ON THE ASPECT OF THE VERIFICATION EXERCISE CARRIED OUT WITH REGARD TO TH E FOUR CREDITORS IN QUESTION, ASSESSEE HAD MADE SUBMISSIONS AND FURNISHED CERTAIN DOCUMENTS IN SUPPORT OF THE GENUINENESS OF THE CREDITORS. HOWEVER, BY WA Y OF NOTING ON THE ORDER SHEET DATED 16.12.2010 THE AUTHORISED REPRESENTATIV E OF THE ASSESSEE IS SAID TO HAVE AGREED TO AN ADDITION OF RS.14,97,705/- TO BE MADE UNDER SECTION 68 OF THE ACT ON ACCOUNT OF FOUR CREDITORS REMAINING U NEXPLAINED. THE ASSESSEE OBJECTED TO SUCH AN ADMISSION BY WAY OF AN AFFIDAVI T OF THE CONCERNED PERSON, MADE BEFORE THE CIT(A), A COPY OF WHICH IS FILED IN THE PAPER BOOK BEFORE US. IN OUR CONSIDERED OPINION, THE CASE OF THE ASSESSEE HAS BEEN COMPLETELY SHOT- DOWN BY THE CIT(A) WITHOUT APPRECIATING THE SAME IN ITS PROPER PERSPECTIVE. NO DOUBT WHERE AN ASSESSEE AGREES TO A FACT DURING ASSESSMENT PROCEEDINGS, ASSESSEE CANNOT HAVE A GRIEVANCE IF THE ASSESSING O FFICER HAS PROCEEDED ON THE BASIS OF SUCH FACT AND THEREFORE HE IS NOT COMP ETENT TO FILE AN APPEAL THEREOF. SO, HOWEVER, IN THE PRESENT CASE, ASSESSEE CONTESTED THE ADMISSION OSTENSIBLY MADE BY THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE. IN MATTERS LIKE THIS, OSTENSIBLY THE AUTHORITY CONCERNED BEFOR E WHOM, SUCH AN ADMISSION IS MADE, IS THE RIGHT FORUM TO CONSIDER THE STAND O F THE ASSESSEE. THEREFORE, IT WOULD BE IN FITNESS OF THINGS THAT THE MATTER IS RE MANDED BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL CONSIDER THE PLEA OF TH E ASSESSEE THAT THE ADMISSION MADE BY THE AUTHORISED REPRESENTATIVE WAS UNWARRANTED AND MADE UNDER A MISTAKEN BELIEF. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEIN G HEARD IN SUPPORT OF HIS PLEA AND THEREFORE, ADJUDICATE THE MATTER IN ACCORD ANCE WITH LAW. THUS, ON THIS ASPECT, ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. ITA NO.177/PN/2012 ITA NO.364/PN/2012 SMT. VINAYA VIKRANT PATIL A.Y. 2008-09 16. IN THE RESULT, WHEREAS THE APPEAL OF THE REVENU E IS DISMISSED THAT OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED: 25 TH JUNE, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE