Shri Himanshu V.Shah, Ahmedabad V. The ACIT.,Circle-6, Ahmedabad

ITA 2033/AHD/2012

• Counselvise Citation: 203320514 RSA 2012
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 10-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Keywords: Bonafide belief
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI G. C. GUPTA, VP AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.2033/AHD/2012 : AY -2006-07 HIMANSHU V. SHAH, C-1, 1 ST FLOOR, SURYA COMPLEX, GURUKUL ROAD, MEMNAGAR, AHMEDABAD 380 054 P. A. NO. ACZPS 3768 E VS THE A. C. I. T., CIRCLE-6, PRATYAKSH KAR BHAVAN, AMBAWADI, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY MS. URVASHI SHODHAN, AR RESPONDENT BY SHRI D. K. SINGH, SR. DR DATE OF HEARING: 30-10-2012 DATE OF PRONOUNCEMENT:14-12-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A)-XI, AH MEDABAD DATED 07-08-2012 IN APPEAL NO.CIT(A)-XI/367/ACIT. CIR-6/10-11 FOR TH E ASSESSMENT YEAR 2006-07 PASSED U/S 250 READ WITH SECTION 143(3) AND 147OF T HE IT ACT. 2. THE ASSESSEE HAS RAISED TWO ELABORATE GROUNDS I N HIS APPEAL WHEREIN THE GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT SURVI VE FOR ADJUDICATION WHILE AS THE CRUX OF THE ISSUE IN GROUND NO.2 IS THAT BOTH THE LEARNED AO AND LEARNED CIT(A) HAS ERRED BY DISALLOWING THE SERVICE TAX PAI D DURING THE FINANCIAL YEAR 2005-06 FOR RS.6,15,302/- SINCE IT PERTAINED TO THE ASSESSMENT YEAR 2002-03 TO 2004-05 WITHOUT REALIZING THE FACT THAT THE SAME HA S CRYSTALLIZED DURING THE RELEVANT ASSESSMENT YEAR 2006-07. 3. BRIEF FACTS: - THE ASSESSEE IS AN INDIVIDUAL WHO SE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT ON 24-12-2008 WH EREIN AN ADDITION OF RS.6,15,302/- WAS MADE BY THE LEARNED AO SINCE THE ASSESSEE HAD HIMSELF ITA NO.2033/AHD/2012 (AY: 2006-07) HIMANSHU V. SHAH VS ACIT, CIR-6, AHMEDABAD 2 AGREED THAT THE AMOUNT RELATING TO PAYMENT OF SERVI CE TAX MADE DURING THE RELEVANT ASSESSMENT YEAR PERTAINS TO THE ASSESSMENT YEARS 2002-03 TO 2004-05. THE ASSESSEE HAD STATED BEFORE THE LEARNED AO THAT, DURING THE AUDIT CARRIED OUT BY THE SERVICE TAX DEPARTMENT IN THE RELEVANT PREVI OUS YEAR IT WAS FOUND THAT THERE WERE SOME DISCREPANCIES PERTAINING TO FINANCI AL YEARS 2002-03 TO 2004-05. ACCORDINGLY, THE SERVICE TAX DEPARTMENT HAD RAISED THE DEMAND DURING THE RELEVANT ASSESSMENT YEAR AND, THEREFORE, THIS LIABI LITY OF SERVICE TAX CRYSTALLIZED DURING THE RELEVANT PREVIOUS YEAR. IN THESE CIRCUMS TANCES, THE ASSESSEE HAD ARGUED THAT THE AMOUNT OF RS.6,15,302/- PAID ON ACC OUNT OF ADDITIONAL SERVICE TAX PAID PERTAINING TO THE YEAR 2002-03 TO 2004-05 MAY BE ALLOWED AS EXPENDITURE INCURRED DURING THE RELEVANT PREVIOUS YEAR. HOWEVER , THE LEARNED AO DISALLOWED THE EXPENDITURE STATING THAT THE ASSESSEE WAS FOLLO WING MERCANTILE SYSTEM OF ACCOUNTING AND, THEREFORE, THE EXPENDITURE PERTAINI NG TO EARLIER PREVIOUS YEARS CANNOT BE ALLOWED AS EXPENDITURE INCURRED DURING TH E RELEVANT ASSESSMENT YEAR THOUGH PAID DURING THE RELEVANT PREVIOUS YEAR. THE LEARNED CIT(A) ALSO CONFIRMED THE VIEW OF THE LEARNED AO AND FURTHER HELD THAT TH E ASSESSEE WAS NOT ABLE TO SHOW ANY EVIDENCE TO ESTABLISH THAT THE PAYMENT OF SERVICE TAX RELATING TO ASSESSMENT YEAR 2002-03 TO 2004-05 HAD CRYSTALLIZED DURING THE RELEVANT ASSESSMENT YEAR. 4. BEFORE US, THE LEARNED AR REITERATED THE SUBMISS IONS MADE BEFORE THE REVENUE AND ON THE OTHER HAND THE LEARNED DR RELIED ON THE ORDERS OF THE REVENUE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE IT IS EVIDENT THAT THE ASSESSEE WAS UNDER THE BONA FIDE BELIEF THAT NO AMOUNT OF SERVICE TAX WAS DUE FOR THE EARLIER PREVIOUS YEARS UNTIL HE WAS PUT TO NOTICE BY THE SERVICE TAX DEPARTMENT THAT THERE WERE SOME DISCREPANCIES PERTAINING TO FINANCIAL YEARS 20 02-03 TO 2004-05 WHEREIN AN ADDITIONAL PAYMENT OF SERVICE TAX OF RS.6,15,302/- WAS DUE. THUS, AS FAR AS THE ASSESSEE IS CONCERNED, ACCORDING TO THE MERCANTILE SYSTEM OF ACCOUNTING THE AMOUNT OF RS.6,15,302/- BEING THE ADDITIONAL SERVIC E TAX PAYABLE HAD CRYSTALLIZED ITA NO.2033/AHD/2012 (AY: 2006-07) HIMANSHU V. SHAH VS ACIT, CIR-6, AHMEDABAD 3 AT THAT POINT OF TIME WHEN HE WAS PUT NOTICE BY THE SERVICE TAX DEPARTMENT PARTICULARLY WHEN THERE WAS NO DISPUTE WITH REGARD TO SUCH DEMAND RAISED. IT IS PERTINENT TO NOTE HERE THAT THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT THERE WAS NOTHING OUTSTANDING ON ACCOUNT OF SERVICE TAX F OR THE EARLIER PREVIOUS YEARS AT THE BEGINNING OF THE RELEVANT ASSESSMENT YEAR. I T WAS ONLY DUE TO SOME UNINTENTIONAL ERROR IN COMPUTATION THAT SUCH DISCRE PANCY HAD OCCURRED. SUBSEQUENTLY, WHEN THE ERRORS SURFACED ONE CAN SAY THAT THE EXPENDITURE HAS CRYSTALLIZED AT THAT POINT OF TIME. IN MERCANTILE S YSTEM OF ACCOUNTING, INCOME AND EXPENDITURE ARE RECORDED AT THE TIME OF THEIR OCCUR RENCE DURING THE PREVIOUS YEAR. IN THE INSTANT CASE, EXPENDITURE CAN BE SAID TO BE OCCURRED AT THAT MOMENT WHEN THE DISCREPANCIES SURFACED. FURTHER, THIS DISCREPA NCY IS INSIGNIFICANT AND DOES NOT ADVERSELY AFFECT THE TRUE AND FAIR VIEW OF THE FINANCIAL STATEMENTS AND THEREBY WILL NOT SERIOUSLY DISTURB THE MATCHING CONCEPT AND MATERIALITY CONCEPT WHICH ARE ESSENTIAL TO COMPLY WITH IN MERCANTILE SYSTEM OF AC COUNTING. IT SHOULD ALSO BE TAKEN INTO ACCOUNT THAT THE ASSESSEE HAD COMPUTED T HE SERVICE TAX PAYABLE WITH DUE DILIGENCE AND ACCORDINGLY PAID THE SERVICE TAX DURING THE EARLIER PREVIOUS YEARS. THUS, HE WAS UNDER THE BONA FIDE BELIEF THAT THERE WAS NO AMOUNT OF SERVICE TAX OUTSTANDING IN THE BEGINNING OF THE REL EVANT ASSESSMENT YEAR. THEREFORE, IT IS QUITE OBVIOUS AND REASONABLE TO HO LD THAT THE ADDITIONAL DEMAND OF SERVICE TAX HAD ACCRUED WHEN THE DEMAND IS RAISE D BY THE CONCERNED AUTHORITY AND WHICH WAS ACCEPTED BY THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY MERIT IN THE STAND OF THE LEARNED AO OR THE LEARNED CIT(A) A ND ACCORDINGLY WE DIRECT THE LEARNED AO TO DELETE THE ADDITION OF RS.6,15,302/-. 6. IN THE RESULT, THE APPEAL THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14-12-2012 SD/- SD/- (G. C. GUPTA) VICE PRESIDENT (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA DEKA/ DEKA/ DEKA/ DEKA/ ITA NO.2033/AHD/2012 (AY: 2006-07) HIMANSHU V. SHAH VS ACIT, CIR-6, AHMEDABAD 4 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 11-12-12 (DIRECT ON COMPUTER) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 11-12-12 /12-12-12 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR.P.S ./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: