D.C.I.T.,Circle-10(2), Kolkata V. M/s TSG Global Services Pvt. Ltd., Kolkata

ITA 185/KOL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9638 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAUL
• Section: 43B; 143(3); 43; 22; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.185/KOL/2019 ( / ASSESSMENT YEAR: 2013-14) DCIT, CIRCLE-10(2), KOLKATA VS. M/S TSG GLOBAL SERVICES PVT. LTD. AC/93/A, 2 ND FLOOR, PRAFULLA KANAN EAST, VIP ROAD, ABOVE BANK OF BARODA, KESTOPUR, KOLKATA-700101 ./ ./PAN/GIR NO.: AACCT 8375 J (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SUPRIYO PAUL, JCIT RESPONDENT BY :NONE / DATE OF HEARING : 27/02/2020 /DATE OF PRONOUNCEMENT : 08/07/2020 / O R D E R PER DR. A.L. SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTA INING TO ASSESSMENT YEAR 2013-14, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-4, KOLKATA, IN APPEAL NO. 1403/CIT(A)-4/C- 10(2)/15-16, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASS ESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 15/01/2016. 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F ASSESSEE IN SPITE OF ISSUANCE OF NOTICE FOR HEARING MORE THAN ONE OCCASION AND LD . DEPARTMENTAL REPRESENTATIVE(DR), WAS PRESENT FOR THE APPELLANT R EVENUE. IN THE ABSENCE OF ANY APPEARANCE BY THE ASSESSEE, THE APPEAL IS BEING DIS POSED OF EX PARTE QUA THE M/S TSG GLOBAL SERVICES PVT. LTD. ITA NO.185/KOL/2019 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 ASSESSEE, AFTER HEARING LD. DR FOR THE REVENUE ON M ERITS IN TERMS OF RULE 24 OF THE INCOME TAX APPELLATE, TRIBUNAL, RULES, 1963. 3. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCES OF OUTSTA NDING SERVICE TAX LIABILITY OF RS. 1,89,52,413/- WHEN THE ASSESSEE HAD FAILED SQUARELY DURING THE COURSE OF SCRUTINY PROCEEDINGS AS WELL AS THE REMAND STAGE TO FURNISH THE NECESSARY DOCUMENTARY EVIDENCES IN RESPECT OF PAYMENT OF THE SERVICE TAX LIABILITY OF RS. 1,89,52,413/- WITHIN THE DUE DATE OF FILLING OF RETURN ? WHETHER THE LD. CIT(A) WAS CORRECT IN NOT CONSIDERING THE FACT THAT THE STATUTORY LIABILI TIES NEEDS TO BE PAID WITHIN THE DUE DATE OF FILLING OF RETURN , FAILING WHICH NECES SARY DISALLOWANCES IS REQUIRED TO BE MADE AS PER THE PROVISIONS OF THE SECTION 43B OF THE ACT. 2. THAT THE APPELLANT CRAVES TO ADD, DELETE OR MODI FY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 4. BRIEF FACTS QUA THE ISSUE ARE THAT ON PERUSAL OF THE AUDITED ACCOUNTS FOR THE YEAR ENDING ON 31.03.2013 IN THE CASE OF THE ASSESSEE, I T WAS NOTICED BY ASSESSING OFFICER THAT AS ON 31.03.2013 SERVICE TAX OF RS. 2, 02,52,413/- WAS SHOWN AS PAYABLE. IN COURSE OF SCRUTINY PROCEEDINGS, THE DET AILS WERE FILED BY THE ASSESSEE WITH REGARD TO DISCHARGE OF OUTSTANDING LIABILITY O F SERVICE TAX. THE PERUSAL OF THE SAID DETAILS REVEALED THAT THE ASSESSEE HAD PAID ON LY RS. 13,00,000/-BEFORE THE FILING OF RETURN OF INCOME ON 18.10.2013. THEREFORE , THE BALANCE LIABILITY OF RS. 1,89,52,413/- (2,02,52,413 -13,00,000) ON ACCOUNT O F SERVICE TAX WAS REQUIRED TO BE ADDED BACK TO THE TOTAL INCOME AS PER THE PROVIS IONS OF SECTION 43B OF THE ACT. IN COURSE OF ASSESSMENT PROCEEDING, IT WAS EXPLAINE D BY THE ASSESSEE THAT THE LIABILITY OF SERVICE TAX DID NOT COME WITHIN THE AM BIT OF SECTION 43B OF THE ACT SINCE THE SAME WAS NOT ROUTED THROUGH PROFITAND LOS S ACCOUNT AND FOR THIS THE ASSESSEE RELIED ON VARIOUS JUDICIAL PRONOUNCEMENTS. 5. HOWEVER, ASSESSING OFFICER WAS OF THE VIEW THAT AS PER THE PROVISIONS OF CLAUSE (A) OF SECTION 43B READ WITH PROVISO TO SECTION 43B , THERE IS NO AMBIGUITY THAT ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTIES, CESS OR FEE, BY WHATEVER NAME CALLED UNDER ANY LAW SHALL BE ALLOWED AS DEDUCTION ONLY IN THE YEAR IN WHICH SUCH SUM IS PAID BY THE ASSESSEE OR IF IT IS PAID BEFORE THE DUE DATE OF FILLING OF RETURN M/S TSG GLOBAL SERVICES PVT. LTD. ITA NO.185/KOL/2019 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 AND EVIDENCE OF SUCH PAYMENT IS FURNISHED ALONG WIT H THE INCOME TAX RETURN (ITR). IN THIS CONTEXT, THE ASSESSEE WAS THEREFORE, ASKED TO EXPLAIN VIDE A SHOW CAUSE NOTICE DATED 30.12.2015 THAT WHY THE SUM OF R S. 1,89,52,413/- ON ACCOUNT OF SERVICE TAX PAYABLE SHOULD NOT BE ADDED BACK TO ITS TOTAL INCOME AS PER THE PROVISIONS OF SECTION 43B OF THE I. T. ACT, 1961. 6. IN RESPONSE TO THE SAID SHOW CAUSE NOTICE, THE A SSESSEE HAD FILED A REPLY THROUGH ITS AUTHORIZED REPRESENTATIVE ON 06.01.2016. THE AS SESSEE IN ITS REPLY HAS EMPHASIZED ON THE FACT THAT THE EXPENDITURE ON ACCO UNT OF SERVICE TAX WAS NOT ROUTED THROUGH PROFIT & LOSSACCOUNT AND HENCE THE P ROVISIONS OF SEC. 43 B ARE NOT APPLICABLE IN ITS CASE. 7. HOWEVER, ASSESSING OFFICER REJECTED THE CONTENTI ON OF THE ASSESSEE AND HELD THAT THE PROVISIONS OF SEC. 43B, CLEARLY STATE THAT THE LIABILITY INCURRED ON ACCOUNT OF SERVICE TAX DURING THE RELEVANT PREVIOUS YEAR BUT N OT PAID BEFORE THE FILING OF ITR WITHIN THE DUE DATE WILL BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. MOREOVER, IT DOES NOT MAKE ANY DIFFERENCE TO THE NE T PROFIT OF THE ASSESSEE WHETHER THE RECEIPTS OF SERVICE TAX AND ITS PAYMENT TO THE GOVERNMENT AUTHORITIES ARE ROUTED THROUGH THE PROFIT &LOSS ACCOUNT OR NOT SINCE THE A SSESSEE FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING. HENCE THE SUM OF RS. 1,89,52, 413/- ON ACCOUNT OF SERVICE TAX PAYABLE WAS ADDED BACK TO THE TOTAL INCOME OF T HE ASSESSEE. 8. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY ASSESSING OFFICER, OBSERVING THE FOLLOWINGS: GROUND NO. 4 IS REGARDING DISALLOWANCE OF SERVICE TAX LIABILITY OF RS. 1,89,52,413/-. THE A.O. HAS MADE THE ADDITION AS TH E LIABILITY OF SERVICE TAX WAS NOT PAID BEFORE THE DUE DATE OF FILING OF I.T. RETU RN. THE A/R EMPHASIZED THAT THE SERVICE TAX LIABILITY HAS NOT BEEN TAKEN THROUGH TH E P & L A/C. THEREFORE, DISALLOWANCE U/S.43B CANT BE MADE. THIS IS BASED O N PRINCIPLE THAT SINCE SERVICE TAX RECEIPTS HAS NOT BEEN ROUTED THROUGH P & L A/C. THEREFORE, IT DOES NOT FORM PART OF RECEIPT AND SINCE IT DOES NOT PART OF THE T RADING RECEIPT, THEREFORE, DISALLOWANCE U/S.43B COULD NOT HAVE BEEN MADE. IN T HE REMAND REPORT, THE A.O. HAS EMPHASIZED THAT SERVICE TAX LIABILITY HAS BEEN PAID IN SUBSEQUENT YEARS AND ONLY PART OF THE AMOUNT HAS BEEN PAID AND SOME AMOU NT WAS WAIVED BY THE M/S TSG GLOBAL SERVICES PVT. LTD. ITA NO.185/KOL/2019 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 SERVICE TAX DEPARTMENT. THE LAW ON THIS ISSUE IS VE RY CLEAR IN CIT VS. NOBLE AND HEWITT (I) (P) LTD. 305 ITR 324 (DELHI) IN ITA NO.3 848/DEL/2012-AY- 2008-09 IT WAS HELD THAT WHEN THE ASSESSEE HAS NOT DEBITED THE SERVICE TAX IN ITS PROFIT & LOSS ACCOUNT AND IN THIS CASE NO DISALLOWANCE CAN BE MAD E U/S 43B OF THE IT ACT. THEREFORE, THE ADDITION MADE IS NOT SUSTAINABLE AND GROUND NO.4 IS ALSO ALLOWED. IN SUBSEQUENT YEARS WHEN THE SERVICE TAX LIABILITY HAS BEEN SETTLED AT LESSER AMOUNT THE ASSESSEE IS DUTY BOUND TO OFFER THE DIFF ERENCE FOR TAXATION. THE A.O. MAY VERIFY THE SAME AND IF THE ASSESSEE HAS NOT OFF ERED THE DIFFERENCE FOR TAXATION THEN BRING THE SAME TO TAXATION BY INVOKING SECTION 148. THE ASSESSEE IS DIRECTED TO PROVIDE THE RELEVANT INFORMATION TO THE A.O. 9. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD LD. D.R. FOR THE REVENUE AND GONE THROUGH THE ORDER OF LD. CIT(A). WE NOTE THAT LD. CIT(A) HAS RIGHTLY HELD TH AT SINCE THE ASSESSEE HAS NOT DEBITED THE SERVICE TAX IN ITS PROFITS AND LOSS ACC OUNT THEREFORE NO DISALLOWANCE CAN BE MADE U/S 43B OF THE ACT. SINCE THE LD. CIT(A) HA S ALREADY DIRECTED TO THE ASSESSING OFFICER STATING THAT IN SUBSEQUENT YEARS WHEN THE SERVICE TAX LIABILITY HAS BEEN SETTLED AT A LESSER AMOUNT THE ASSESSEE IS DUTY BOUND TO OFFER THE DIFFERENCE FOR TAXATION, AND THE LD. CIT(A) DIRECTE D THE ASSESSING OFFICER TO VERIFY THE SAME AND IF THE ASSESSEE HAD NOT OFFERED THE DI FFERENCE FOR TAXATION THEN BRING THE SAME TO TAXATION BY INVOKING SECTION 148 OF THE ACT. WE NOTE THAT THERE IS NO INFIRMITY IN THE DIRECTION GIVEN BY THE LD. CIT(A) THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY LD. CIT(A), HIS ORDER ON THI S ISSUE, IS HEREBY UPHELD AND GROUNDS OF APPEAL RAISED BY THE REVENUE IS DISMISSE D. 11. BEFORE PARTING, IT IS NOTED THAT THE ORDER IS B EING PRONOUNCED AFTER 90 DAYS OF HEARING. HOWEVER, TAKING NOTE OF THE EXTRAORDINARY SITUATION IN THE LIGHT OF THE COVID-19 PANDEMIC AND LOCKDOWN, THE PERIOD OF LOCKD OWN DAYS NEED TO BE EXCLUDED. FOR COMING TO SUCH A CONCLUSION, WE RELY UPON THE DECISION OF THE CO- ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE O F DCIT VS. JCB LIMITED IN ITA NO. 6264/MUM/2018 AND ITA NO. 6103/MUM/2018 FOR A.Y. 2013-14 ORDER DATED 14.05.2020. M/S TSG GLOBAL SERVICES PVT. LTD. ITA NO.185/KOL/2019 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 08.07.2020 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 08/07/2020 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-10(2), KOLKATA 2. M/S TSG GLOBAL SERVICES PVT. LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATABENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES