RAJIV AHUJA, MUMBAI V. JCIT 25(2), MUMBAI

ITA 2867/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0026 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.1746/M/2014 ASSESSMENT YEAR: 2009-10 ASSTT. CIT-25(2), ROOM NO.108, 1 ST FLOOR, BLDG. NO.C-11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI - 400051 VS. SHRI RAJIV R. AHUJA, 302, DORA ROSE SOCIETY, IC COLONY, BORIVALI (W), MUMBAI 400 103 PAN: AADPA6445J (APPELLANT) (RESPONDENT) ITA NO.2867/M/2014 ASSESSMENT YEAR: 2009-10 SHRI RAJIV R. AHUJA, 302, DORA ROSE SOCIETY, IC COLONY, BORIVALI (W), MUMBAI 400 103 PAN: AADPA6445J VS. JCIT-25(2), ROOM NO.108, 1 ST FLOOR, BLDG. NO.C-11, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI - 400051 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SANJAY C. SHAH, A.R. REVENUE BY : SHRI PURUSHOTTAM KUMAR, D.R. DATE OF HEARING : 01.05.2017 DATE OF PRONOUNCEMENT : 30.06.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE ABOVE TILTED APPEALS ONE BY THE REVENUE AND TH E OTHER BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER DATE D 23.12.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. ITA NO.1746/M/2014 & ITA NO.2867/M/2014 SHRI RAJIV R. AHUJA 2 ITA NO.1746/M/2014 (REVENUES APPEAL) 2. THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS O F APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.88,92,081/- MADE BY INVOKING THE PROVISIONS OF SECTION 43B OF THE INCOME TAX ACT, 19 61 ON ACCOUNT OF UNPAID SERVICE TAX. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT SECTION 43B OF THE INCOME TAX ACT IS NOT APPLICABLE IN THE CASE OF SERVICE TAX WHEREAS THE ASSESSEE HIMSELF HA S CLAIMED RS.22,66,220/- AS ALLOWABLE SERVICE TAX. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE ADDITION OF RS.29,48,389/- AGAIN ST THE ADDITION MADE BY AO OF RS.1,56,47,978/- WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVIDING THE GENUINENESS OF THE CREDITORS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,73,289/- ON ACCOUNT OF SUNDRY BALANCES WRITTEN OFF EVEN THOUGH THE ASSESSEE FAILED TO GIVE DETAILS OF DEBTORS WHICH HAVE BECOME IRRECOVERABLE. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND. 3. SINCE THE FACTS AND ISSUES INVOLVED IN BOTH THE APPEALS ARE IDENTICAL, THE SAME ARE BEING DISPOSED OF WITH THIS COMMON ORDER. 4. THE SHORT FACTS OF THE CASE ARE THAT ASSESSEE IS A PROPRIETOR OF M/S. ENGINEERS, ENGAGED IN BUSINESS OF CIVIL CONTRACTOR. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DECLARED NET PROFIT OF RS.1,17,88,995/- ON TOTAL TURNOVER OF RS.33,45,93,551/-. IN THE IMMEDIATE PR ECEDING YEAR, THE NET PROFIT WAS RS.1,97,26,230/- ON TOTAL TURNOVER OF RS.43,57, 40,094/-. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) HAS VER IFIED THE BALANCE SHEET OF SUNDRY CREDITORS OUTSTANDING IN HIS BOOKS OF ACCOUN TS. THE ASSESSEE HAS SUBMITTED THE DETAILS OF SUNDRY CREDITORS WHEREIN H E HAS GIVEN ONLY THE NAME OF ITA NO.1746/M/2014 & ITA NO.2867/M/2014 SHRI RAJIV R. AHUJA 3 PARTY AND AMOUNT OUTSTANDING AGAINST THE BILL. THE ASSESSEE WAS ASKED TO SUBMIT THE NAME AND ADDRESS OF SUNDRY CREDITORS ALO NG WITH CREDITS OUTSTANDING AGAINST PARTY FOR MORE THAN THREE YEARS. LETTERS O F ENQUIRY WERE SENT ON THE ADDRESSES PROVIDED BY THE ASSESSEE AND MOST OF THE LETTERS WERE UNSERVED. THERE ARE THREE CATEGORIES IN WHICH THE AO HAS REMA RKED THAT MANY LETTERS SENT TO 117 PARTIES WERE NOT TRACEABLE AT THE GIVEN ADDR ESS; IN 50 CASES, THE LETTERS WERE RETURNED BY POSTAL AUTHORITIES AND REPLIES WER E NOT RECEIVED FROM THE PARTIES AND 42 CASES APPEARING IN ASSESSEES BOOK, BUT HE COULD NOT IDENTIFY THE PARTIES EITHER BY PROVIDING THE ADDRESS OR OTHERWIS E. THEREFORE, AO HAS GIVEN THE NAME OF PARTIES IN THE ASSESSMENT ORDER FROM PA GE 25 TO 33. THE AO HAS TREATED THE AMOUNT OF RS.1,56,47,978/- AS THE CREDI TOR CEASED TO EXIST AND SAME WAS ADDED AS PROFIT OF THE ASSESSEE UNDER SECTION 4 1(1)(A) OF THE ACT. 5. THE MATTER CARRIED TO LD. CIT(A) AND THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL BY OBSERVING AS UNDER: I. HAVE GONE THROUGH THE AO'S CONTENTIONS ON THE I SSUE OF THE CREDITORS AND THE APPELLANTS SUBMISSION IN THIS REGARDS. THE ISSUE IS BEING DEALT IN FOUR PARTS ON THE LINES IN WHICH AO HAS MADE DISALL OWANCE. HOWEVER, THERE ARE GENERAL OBSERVATIONS/CONCLUSIONS THAT CAN BE DRAWN FROM THE FACTS AND CIRCUMSTANCES OF THE SITUATION WHICH ARE RELEVA NT TO ALL 4 SITUATIONS BROUGHT OUT BY ASSESSING OFFICER; AT THE OUTSET IT IS IMPORTANT TO DISTINGUISH THE SITUATION AS BROUGHT IN THE CITATIONS GIVEN BY THE APPELLANT IN THREE CASES MENTIONED SUPRA. IN ALL THESE CASES THE COURTS HAVE HELD PAYMENT OF LIABILITY CANNOT BE CONSTRUED AS NONEXISTENT JUST B ECAUSE THE LIABILITY HAS BEEN OUTSTANDING IN THE BOOKS FOR NUMBER OF YEA RS AND THAT THE APPELLANT DID NOT FURNISH CONFIRMATIONS. HOWEVER, T HAT THE EXISTENCE OF LIABILITY ITSELF IS GENUINE, IS NOT IN DISPUTE. TO THAT EXTENT THESE CITATIONS DO NOT COME TO THE HELP OF THE APPELLANT SINCE IN THIS CAS E THE AO HAS SENT LETTERS TO THE PARTIES AND THE SAME HAVE NOT BEEN F OUND AT THE GIVEN ADDRESS OR THE APPELLANT DOES NOT EVEN HAVE THE ABILITY TO IDE NTIFY THE PARTIES BY PROVIDING ADDRESS OR OTHERWISE. IN THIS BACKGROUND IT CANNOT HE ACCEPTED THAT IF THERE IS LIABILITY EXISTING IN THE BOOKS OF THE ASSESSEE THEN HE WOULD NOT EVEN HAVE BEEN AWARE OF THE PERSO NS TO WHOM SUCH LIABILITY HAS TO BE DISCHARGED; IF THE CONTENTIONS OF THE APPELLANT IS THAT HE IS NOT EVEN AWARE OF THESE CREDITORS IT WOULD BE REASO NABLE TO PRESUME THAT SUCH LIABILITY HAS BECOME REDUNDANT IN TERMS OF THESE, T HE ASSESSEE'S NEED/RESPONSIBILITY TO DISALLOW SUCH LIABILITY. IF THE APPELLANT IS NOT EVEN AWARE OF THE PRESENT ADDRESS OF THE CREDITORS AND N EITHER HIS CREDITORS ARE MAKING ANY EFFORTS TO RECOVER ITS PAYMENTS THEN HOW CAN THE APPELLANT CLAIM THAT THESE ARE LIVE LIABILITIES? OUT OF THE T OTAL LIST OF 322 CASES IN 26 ITA NO.1746/M/2014 & ITA NO.2867/M/2014 SHRI RAJIV R. AHUJA 4 CASES THE AO HAS SENT LETTERS AND SOME HAS BEEN RES PONDED TO. IN THE 26 CASES (CATEGORY 3 OF THE ADDITION) THE AMOUNT INVOL VED IS RS.11,04,728/- AND FOR THIS COMPONENT THE APPELLANT GETS RELIEF ON THE BASIS OF RATIO OF 3 JUDICIAL DECISION REFERRED TO BY THE APPELLANT IN H IS SUBMISSION. IN THE REST OF THE CASE IN 3 DIFFERENT CATEGORIES WHERE THE AO HAS REMARKED THAT: 1.MANY LETTERS SENT BY THE SPEED POST WERE RETURNED BY THE POSTAL DEPARTMENT AS 117 PARTIES WERE NOT TRACEABLE AT THE GIVEN ADDRESS. 2. IN 50 CASES LETTERS HAVE NEITHER BEEN RETURNED B Y THE POSTAL DEPARTMENT NOR ANY REPLY HAS BEEN RECEIVED FROM THE PARTIES SENT BY SPEED POST. 3. IN 42 CASES APPEARING IN ASSESSEE' S BOOK, BUT H E COULD NOT IDENTIFY THE PARTIES EITHER BY PROVIDING THE ADDRES S OR OTHERWISE. 1. THE APPELLANT HAS NOT BEEN ABLE TO SHOW AS TO HO W AND WHY THE LIABILITY SHOULD BE TREATED AS GENUINE AS MENTIONED IN THE PARAGRAPHS ABOVE. REFERENCE IS MADE TO THE DECISION IN THE CAS E OF CIT VS MILLENNIUM AUTOMATION SYSTEM LTD. 2012 23 TAXMAN.COM 325 (DEL) WHEREIN IT WAS HELD THAT ADDITION U/S 41(1)(A) COULD NOT BE MADE WHERE THE ASSESSEE WAS ABLE TO GIVE INFORMATION AS REQUIRED BY THE AO WITH RESP ECT TO THE ADDRESS/IDENTITY OF CREDITORS. IT MAY BE NOTED THAT IN THE SAID CASE THE ASSESSEE HAD EVEN FURNISHED COPY OF INCOME TAX RETU RNS OF THOSE CREDITORS APART FROM THE LEDGER ACCOUNT AND ALSO THE LEDGER A CCOUNT SHOWS SOME PAYMENTS WERE MADE TO THESE CREDITORS BY CHEQUE OR PAY ORDERS. IN THE PRESENT CASE THE FACTS DO NOT SHOW THAT THE ASSESEE HAS BEEN ABLE TO PROVIDE ANY INDEPENDENT EVIDENCE TO CONFIRM THE VER Y EXPENSES OF SUCH CREDITORS AND THEREFORE I AGREE WITH THE DECISION O F THE AO VIS--VIS THE 3 CATEGORIES IN WHICH ADDITION HAS BEEN MADE. REFEREN CE IS ALSO MADE TO THE RATIO OF THE DECISION IN THE CASE OF JR SOLVENT IND USTRIES VS CIT 2012 22 TAXMAN.COM 115 (P&H) WHEREIN IT WAS HELD THAT IF PU RCHASES ARE MADE FROM NONEXISTING SELLER SAME WOULD BE HELD TO BE BO GUS EVEN IF COMPLETE QUANTITATIVE DETAILS OF PURCHASES WERE AVAILABLE IN THE ASSESEE'S BOOKS OF ACCOUNT. IN THE PRESENT CASE ALSO DERIVING LOGIC FR OM THIS CASE IT CAN BE SEEN THAT THE ONLY EVIDENCE THAT THE APPELLANT AS A LL THE EXPENSES OF THESE CREDITORS WHICH DO NOT COMPLETE HIS ONUS IN TERMS O F SATISFYING THAT THE OUTSTANDING EXPENSES/LIABILITY IS STILL OUTSTANDING . IN THE LIGHT OF THE ABOVE ARGUMENTS THE ADDITION MADE ON THIS ACCOUNT OF RS.7 5,35,261 ARE UPHELD. 6. THE DEPARTMENT IS IN APPEAL IN RESPECT OF DELETI NG THE ADDITION OF RS.29,48,389/- AND ASSESSEE IS IN APPEAL AGAINST CO NFIRMING THE REMAINING AMOUNT OF RS.1,26,99,643/-. 7. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) HAS D ELETED THE ADDITION ON ACCOUNT OF PAYMENT OF RS.2,68,551/- TO MR. MANOJ KU MAR CHOUDHAURY 2 ITA NO.1746/M/2014 & ITA NO.2867/M/2014 SHRI RAJIV R. AHUJA 5 HYD, PAYMENT OF RS.1,64,500/- TO M/S. SAINATH ENTERPRISE S. WHEREIN LD. CIT(A) HAS VERIFIED THAT ASSESSEE HAS MADE PAYMENT BY CHEQUE, THEREFORE IT DOES NOT COME UNDER THE PURVIEW OF SECTION 41(1) OF THE ACT. BUT THE ASSESSEE FAILED TO GIVE THE ADDRESS OF THESE PARTIES, THEREF ORE GENUINENESS OF THESE TRANSACTIONS IS IN DOUBT. THE LD. D.R. RELIED UPON THE ORDER OF AO. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. IN RESPECT OF MR. MANOJ KUMAR CHOUDHAURY 2 HYD, THE ASSESSEE HAS RECEIVED THE PAYMENT BY CHEQUE OF RS.2,68,551/- THROUGH BANK ACCOUNT AND PAYMENT OF RS.1,64,500/- TO M/S. SAINATH ENTERPRISES WHICH IS ALSO BY CHEQUE. THEREFORE, LD. CIT(A) IS JUSTIFIED IN HOLDING THAT SECTION 41( 1) OF THE ACT IS NOT APPLICABLE. WE FIND THAT BOTH THE PARTIES HAVE REC EIVED THE PAYMENT OF CHEQUES. THEREFORE, LD. CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. 9. IN THE RESULT, THIS ISSUE OF DEPARTMENTAL APPEAL IS DISMISSED. 10. IN RESPECT OF ASSESSEES APPEAL, THE LD. A.R. S UBMITTED THAT ASSESSEE IS A CONTRACTOR. ALL SUNDRY CREDITORS PERTAIN TO ONLY S UB CONTRACTOR. ALL THE SUB CONTRACTORS ARE IN REGULAR PANEL AND ALL ARE ASSESS ED TO TAX AND BILLS HAVE BEEN CREDITED AFTER COMPLIANCE OF TDS DEDUCTION. THIS I S THE ROUTINE PRACTICE IN CONSTRUCTION BUSINESS WHERE THE DEBTORS AND CREDITO RS ARE OUTSTANDING ALWAYS MORE THAN 2 TO 3 YEARS. THE ASSESSEE HAS SUBMITTED THE COPY OF THE BILLS RAISED TO WHOM PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES . THE SUNDRY CREDITORS STILL HAD NOT COME BEFORE THE AO. THE AS SESSEE FAILED TO PRODUCE THE PARTY AS WELL AS CONFIRMATION AND CREDITWORTHINESS. THE HONBLE GUJARAT HIGH COURT HAS HELD THAT MERELY BECAUSE LIABILITIES ARE OUTSTANDING FOR LAST MANY YEARS IT CANNOT BE INFERRED THAT SAID LIABILITIES H AVE CEASED TO EXIST. THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHEN ASSES SEE HAD CONTINUED TO SHOW THE ADMITTED AMOUNT AS LIABILITY IN HIS BALANC E SHEET, THE SAME CANNOT BE TREATED AS ASSESSMENT OF LIABILITY MERELY BECAUSE T HE LIABILITIES ARE OUTSTANDING ITA NO.1746/M/2014 & ITA NO.2867/M/2014 SHRI RAJIV R. AHUJA 6 FOR LAST MANY YEARS. SIMILARLY, LD. A.R. ALSO RELI ED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUGAUL I SUGAR WORKS (P.) LTD. (1999) 102 TAXMAN 713 WHEREIN HONBLE SUPREME COURT HAS SAID IF THE ASSESSEE HAS MADE AN ENTRY OF TRANSFER IN HIS ACCOU NTS UNILATERALLY, IT WILL NOT ENABLE THE DEPARTMENT TO SAY THAT SECTION 41 WOULD APPLY, THEREFORE, NO ADDITION IS CALLED FOR. DURING THE COURSE OF HEARI NG, LD. A.R. HAS ALSO GIVEN ONE STATEMENT BEFORE US AND SUBMITTED THAT THE ASSE SSEE HAS SUBMITTED THE SUMMARY OF CREDITOR OUTSTANDING AS ON 31.03.09 AND THEY ARE SUBSEQUENT RIGHT BACK PAYMENTS. IF THIS MATTER IS RESTORED TO AO TO VERIFY THE SAME, THEN THE ADDITION WHICH WAS PENDING SINCE ASSESSMENT YEAR 20 06-07, 2007-08 & 2008- 09 WILL COME TO END. 11. ON THE OTHER HAND, THE LD. D.R. OBJECTED TO IT. 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. IN RESPECT OF JUDICIAL DECISIONS BY HONBLE GUJARAT HIGH COURT AN D HONBLE SUPREME COURT, THE JUDICIAL JUDGMENTS ARE THERE, BUT WE ARE OF THE VIEW THAT EACH CASE HAS TO BE SEEN IN RESPECT OF THEIR MERIT OF THE CASE. THE AS SESSEE HAS SUBMITTED THE CHART BEFORE US WHICH SHOWS THAT OUT OF TOTAL OUTSTANDING AMOUNT WHICH WAS ADDED UNDER SECTION 41(1) OF THE ACT HAS BEEN PAID BY THE PARTIES AND SOME OF THE AMOUNTS WAS RETURNED BACK. 13. THE LD. A.R. HAS ALSO SUBMITTED BEFORE US THAT SAME PARTIES ARE THERE IN THE YEAR UNDER CONSIDERATION AND THEIR LIABILITY WA S EXISTING UP TO A.Y.2013-14. THEREFORE, WE RESTORE THIS MATTER BACK TO THE FILE OF THE AO TO VERIFY THE SAME AND DECIDE THE ISSUE AFRESH IN LIGHT OF THE ABOVE C HART. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ITA NO.2867/M/2014 (ASSESSEES APPEAL) 15. THE AO HAS VERIFIED THE COMPUTATION OF INCOME R EGARDING THE INCOME FROM BUSINESS AND PROFESSION. ITA NO.1746/M/2014 & ITA NO.2867/M/2014 SHRI RAJIV R. AHUJA 7 16. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2,88,17,990/- A ND DISALLOWED OUTSTANDING SERVICE TAX LIABILITY UNDER SECTION 43B IN COMPUTAT ION OF INCOME. ON GOING THROUGH THE IT RETURN, THE SERVICE TAX PAYABLE IN T HE BALANCE SHEET ON 31.03.09 FOR THE PRECEDING YEAR WAS NOT DISALLOWED UNDER SEC TION 43B OF THE ACT IN COMPUTATION OF TOTAL INCOME, SINCE THE SERVICE TAX WAS NOT BEING ROUTED THROUGH PROFIT & LOSS ACCOUNT BUT DUE TO THE TAX AU DIT REPORT, IT WAS DISALLOWED IN COMPUTING THE TOTAL INCOME ENDED ON 31.03.09 OF RS.1,17,88,995/-. THE ASSESSEE HAS ROUTED THE SERVICE TAX LIABILITY VIA B ALANCE SHEET AND SAME HAS NOT BEEN DEBITED TO PROFIT & LOSS ACCOUNT. THEREFORE, AO HAS MADE THE ADDITION OF RS.88,92,081/- UNDER SECTION 43B OF THE ACT. 17. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE CONTENTIONS OF THE ASSESSI NG OFFICER AND THE SUBMISSION OF THE APPELLANT ON THE ISSUE OF DISALLO WANCE OF UNPAID SERVICE TAX LIABILITY. IT IS A FACT THAT THE SAID COMPONENT HAS NOT BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT. I FIND THAT UNDISPUTEDLY THE ASSESSEE HAS BEEN FOLL OWING MERCANTILE SYSTEM OF ACCOUNTING AND THE LIABILITY OF SERVICE TAX IS REQU IRED TO BE PAID ONLY ON THE VALUE OF TAXABLE SERVICE AFTER ITS ACTUAL RECEIPT I N A PARTICULAR MONTH OR QUARTER, AS THE CASE MAY BE, AND NOT ON THE AMOU NT BILLED BY THE ASSESSEE ON THE CUSTOMERS. IT IS ALSO UNDISPUT ED FACT THAT SERVICE TAX WAS NOT PASSED THROUGH PROFIT & LOSS AC COUNT NOR WAS TAKEN AS PART OF INCOME. A SIMILAR SITUATION WAS E XAMINED BY THE TRIBUNAL IN THE CASE OF ACIT VS REAL IMAGE MEDIA TE CHNOLOGIES (P) LTD. (SUPRA) AND THE TRIBUNAL CAME TO THE CONCLUSION THA T SINCE THE SERVICE TAX WAS NOT PAYABLE BY THE ASSESSEE, THE RIGOUR OF THE PROVISION OF SECTION 43B COULD NOT BE APPLIED TO THE FACTS OF THE CASE. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDE R: THE RIGOR OF THE PROVISION OF SECTION 43B WOULD BE ATTRACTED ONLY TO A CASE WHERE AN ITEM IS ALLOWABLE AS DEDUCTION BUT BECAUSE OF TH E FAILURE TO MAKE PAYMENT, SUCH DEDUCTION WOULD NOT BE ALLOWED. THE R IGOR OF SECTION 43B MIGHT BE APPLICABLE TO THE CASE OF SALES TAX OR EX CISE DUTY BUT THE SAME COULD NOT BE SAID TO BE THE POSITION IN CASE O F SERVICE-TAX BECAUSE OF TWO REASONS: FIRSTLY, THE ASSESSEE IS NEVER ALLOWED DEDUCTION ON ACCOUNT OF SERVICE TAX WHICH IS COLLECTED ON BEHALF OF THE GOVERNMENT AND IS PAID T O THE GOVERNMENT ACCOUNT, ITA NO.1746/M/2014 & ITA NO.2867/M/2014 SHRI RAJIV R. AHUJA 8 ACCORDINGLY, THEREFORE, A SERVICE PROVIDER IS MEREL Y ACTING AS AN AGENT OF THE GOVERNMENT, AND IS NOT ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF SERVICE TAX. HENCE, ON THIS ACCOUNT ALONE ADDITION UNDER SECTION 43B COULD NOT HAVE BEEN MADE, AND THE SAME HAD BEEN CORRECTLY DELETED BY TH E COMMISSIONER (APPEALS). SECONDLY, SECTION 43B(C) USES THE EXPRESSION 'ANY S UM PAYABLE'. FOR MAKING ANY DISALLOWANCE, FIRST OF ALL IT HAS TO BE ESTABLISHED THAT SUCH SUM IS PAYABLE. THE WORD 'PAYABLE USED IN SECTION 43B MEANS THAT THERE IS A KIND OF OBLIGATION ON THE PART OF PAYEE TO MAKE THE PAYMENT WHICH IS ALREADY DUE. A P LAIN READING OF RULE 6 OF THE SERVICE TAX RULES WOULD SHOW THAT SERVICE PROVIDER BECOMES LIABLE TO MAKE THE PAYMENT OF SERVICE TAX BY THE 5TH OF THE MONTH IMME DIATELY FOLLOWING THE CALENDAR MONTH IN WHICH THE PAYMENTS ARE RECEIVED TOWARDS TH E VALUE OF TAXABLE SERVICE. THE FIRST PROVISO PROVIDES FOR AN EXCEPTION IN CASE OF INDIVIDUALS OR PROPRIETARY /INNS OR PARTNERSHIP FIRMS; AND IN SUCH CASES, SERVICE TA X HAS TO BE PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT BY THE 5TH OF THE MONTH IMME DIATELY FOLLOWING THE QUARTER OF CALENDAR YEAR IN. WHICH THE PAYMENTS ARE RECEIVE D. THE ONLY DIFFERENCE IS THAT IN CASE OF INDIVIDUAL OR PROPRIETARY OR PARTNERSHIP FI RM, PAYMENT HAS TO BE MADE ON 5TH OF THE FOLLOWING MONTH AFTER THE FOLLOWING QUAR TER OF CALENDAR YEAR WHEREAS IN THE CASE OF OTHER ORGANIZATIONS IT HAS TO BE PAID O N THE 5TH OF THE MONTH IMMEDIATELY FOLLOWING THE CALENDAR MONTH. BUT IN BO TH THE CASES, THE LIABILITY ARISES TO MAKE THE PAYMENT ONLY AFTER THE SERVICE PROVIDER HAS RECEIVED THE PAYMENTS. IF THERE IS NO LIABILITY TO MAKE THE PAYMENT TO THE CR EDIT OF THE CENTRAL GOVERNMENT BECAUSE OF NON-RECEIPT OF PAYMENTS FROM THE RECEIVE R OF THE SERVICES, THEN IT CANNOT HE SAID THAT SUCH SERVICE TAX HAS BECOME PAY ABLE IN TERMS OF CLAUSE (I) OF SECTION 43B BECAUSE THAT CLAUSE SPECIFICALLY MENTIO NS 'SUM PAYABLE BY THE ASSESSEE'. IN THE INSTANT CASE, SINCE SERVICE TAX W AS NOT PAYABLE BY THE ASSESSEE; THE RIGOR, OF SECTION 43B COULD NOT BE APPLIED TO ITS C ASE. UNDER THE 'CIRCUMSTANCES, THERE WAS NOTHING WRONG WITH THE ORDER OF THE COMMI SSIONER (APPEALS) ON THE ISSUE AND THE SAME WAS TO BE CONFIRMED.' 18. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE BOTH THE PARTIES. WE FIND THAT THE LD. CIT(A) HAS DELETED THE ADDITION ON THE GROU ND THAT SECTION 43B WOULD ATTRACT ONLY TO A CASE WHERE AN ITEM IS ALLOWABLE A S DEDUCTION BUT BECAUSE OF FAILURE TO MAKE PAYMENT SUCH DEDUCTION WOULD NOT BE ALLOWED. THE SECTION 43B IS APPLICABLE IN THE CASE OF SALES TAX AND EXCI SE DUTY BUT SAME COULD NOT BE IN CASE OF SERVICE TAX. THE LD. CIT(A) HELD THAT A SSESSEE NEVER ALLOWED DEDUCTION ON ACCOUNT OF SERVICE TAX WHICH IS COLLEC TED ON BEHALF OF GOVERNMENT AND PAID TO GOVERNMENT ACCOUNT, THEREFORE SERVICE P ROVIDER IS MERELY ACTING AS THE AGENT OF THE GOVERNMENT AND IS NOT ENTITLED TO DEDUCTION ON ACCOUNT OF SERVICE TAX. WE FIND THAT THE LD. CIT(A) HAS ALSO CONSIDERED THAT AS PER RULE 6 OF SERVICE TAX RULES, THE SERVICE PROVIDER BECOMES LIABLE TO MAKE PAYMENT OF SERVICE TAX BY 5 TH OF THE MONTH IMMEDIATELY FOLLOWING THE CALENDAR MO NTH IN ITA NO.1746/M/2014 & ITA NO.2867/M/2014 SHRI RAJIV R. AHUJA 9 WHICH THE PAYMENTS ARE RECEIVED TOWARDS VALUE OF TA XABLE SERVICE. THEREFORE, LD. CIT(A) HAS DELETED THE ADDITION. THE SIMILAR I SSUE IS COVERED BY THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CA SE OF ACIT VS. REAL IMAGE MEDIA TECHNOLOGIES (P) LTD. - 114 ITD 573. FURTHER , THE ASSESSEES SERVICE PROVIDER IS MERELY ACTING AS AN AGENT OF THE GOVERN MENT, HE IS NOT ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF SERVICE TAX, THEREFOR E, NO DISALLOWANCE CAN BE MADE ON ANALOGY OF SERVICE TAX AND EXCISE DUTY. 19. DURING THE COURSE OF HEARING, THE LD. D.R. COUL D NOT PRODUCE ANY CONTRARY DECISION. THEREFORE, WE CONFIRM THE ACTIO N OF LD. CIT(A). 20. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. 21. IN RESPECT OF GROUND NO.3 OF DEPARTMENTAL APPEA L, IT RELATES TO BAD DEBT. THE AO HAS DISALLOWED THIS AMOUNT ON THE GROUND THA T NO DETAILS WERE SUBMITTED. THE ASSESSEE HAS RETURNED OF THIS AMOUN T IN BOOKS OF ACCOUNT OF THE ASSESSEE. STILL THE AO HAS MADE THE ADDITION. THE LD. CIT(A) HAS ALLOWED THE APPEAL ON THE GROUND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF HONBLE SUPREME HIGH COURT IN THE CASE OF TRF LIMIT ED VS. CIT [323 ITR 397 (SC)]. 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO FOUND THAT ASSESSEE HAS WRITTEN OFF AN AMOUNT OF RS.1,73,289/- AS BAD D EBTS WHICH BECOMES IRRECOVERABLE, HOWEVER, NO DETAILS WERE FILED BY TH E ASSESSEE. THEREFORE, IT WAS ADDED BY THE AO. 23. MATTER TRAVELLED TO THE LD. CIT(A) AND THE LD. CIT(A) HAS DELETED THE SAME BY FOLLOWING THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF TRF LIMITED VS. CIT (SUPRA). 24. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND TH AT THE POSITION OF LAW IS WELL ITA NO.1746/M/2014 & ITA NO.2867/M/2014 SHRI RAJIV R. AHUJA 10 SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA) THAT IT IS NOT NECESSARY FOR ASSESSEE TO ESTABLISH THAT THE DE BT IN FACT HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CR EDITED, THUS, IT LEADS TO CLOSING THE ACCOUNT OF CUSTOMER. THEREFORE, OUR IN TERFERENCE IS NOT REQUIRED. 25. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AND DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.06.2017. SD/- SD/- (RAJESH KUMAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.06.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.