INTEREX ARCH DESIGN, MUMBAI V. DCIT CIR 5(2), MUMBAI

ITA 4789/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0390 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 18-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: AJAY R SINGH
• Section: 43B; 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 4789 / MUM/20 16 & 4790/MUM/2016 ( ASSESSMENT YEAR : 2007 - 08 & 2010 - 11 ) M/S. INTEREX ARCH DESIGN PVT. LTD., OFFICE NO.3, KAILASH NAGAR TARDEO ROAD, TARDEO MUMBAI 400 007 VS. DCIT - CIRCLE - 5 (2) AAYAKAR BHAVAN MUMBAI PAN/GIR NO. AABCI3867K APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI AJAY R SINGH REVENUE BY SHRI CHAITANYA ANJARIA DATE OF HEARING 02/08 /201 8 DATE OF PRONOUNCEMENT 19 / 09 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 10, MUMBAI DATED 29/04/2016 FOR A.Y.2007 - 08 & 2010 - 11 IN THE MATTER OF ORDER PASSED U/S. 154 OF INCOME TAX ACT, 1961. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN A.Y.2007 - 08: - 1.1 THE LD. COMM. OF INCOME TAX (APPEAL) - 10, MUMBAI HAS ERRED IN UPHOLDING THE FINDING OF THE AO THAT THERE IS NO MISTAKE APPARENT FROM RECORD IN THE ORDER P ASSED U/S 143 (3) DATED 20.07.2009 BY THE AO AND CONSEQUENTLY UPHOLDING THE ACTION OF THE AO IN REJECTING THE APPLICATION FILED U/S 154 OF THE ACT. 1.2 THE LD. COMM. OF INCOME TAX (APPEAL) - 10 MUMBAI, HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THE CONTENTION AND SUBMISSION OF ITA NO. 4789/MUM/2016 & 4790/MUM/2016 M/S. INTEREX ARCH DESIGN PVT. LTD., 2 THE ASSESSEE THAT DURING THE RELEVANT PREVIOUS YEAR, SERVICE TAX WAS NOT APPLICABLE ON THE WORK CONTRACT AND AS SUCH THE DISALLOWANCE MADE BY THE ASSESSEE IN THE COMPUTATION IS WRONG AND INCORRECT WHICH NEEDS TO BE RECTIFIED. 1.3 THE LD. COMM. OF INCOME TAX (APPEAL) - 10 MUMBAI IS INCORRECT IN HOLDING THAT THE AMOUNT WHICH REMAINED UNPAID WAS NOT ADDED BACK IN THE COMPUTATION OF INCOME BY THE APPELLANT. 1.4 THE LD. COMM. OF INCOME TAX (APPEAL) - 10 MUMBAI, HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THE CONTENTION AND SUBMISSION OF THE ASSESSEE THAT THE AO OUGHT TO COMPUTE THE CORRECT INCOME OF THE ASSESSEE . 1.5 THE APPELLANT CRAVES LEAD TO ADD, ALTER AND /OR MODIFY THE GROUNDS OF APPEAL. 3. THE FOLLOWING GROUNDS HAVE B EEN TAKEN BY THE ASSESSEE IN A.Y.2010 - 11: - 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT APPEAL HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 43B BY THE ASSESSEE IN RESPECT OF SERVICE TAX AMOUNT REVERSED IN THE BOOKS OF ACCOUNTS DURING THE RELEVANT PREVIOUS YEAR. 1.2 REASONS ASSIGNED BY HIM FOR CONFIRMING THE DISALLOWANCE OF DEDUCTION , CLAIMED BY THE ASSESSEE ARE WRONG AND INSUFFICIENT. 1.3 THE LD. COMM . OF INCOME TAX (APPEAL ) - 10 MU MBAI, HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THE CONTENTION AND SUBMISSION OF THE ASSESSEE THAT ON REVERSAL OF THE SERVICE TAX IN THE BOOKS OF ACCOUNT, NO SERVICE TAX REMAIN PAYABLE AND AS SUCH DISALLOWANCE MADE IN RESPECT OF UNPAID SERVICE TAX LIABILITY U/S 43B IN EARLIER YEAR IS DEDUCTIBLE 2.1 THE LD. COMM . OF INCOME TAX (APPEAL) - 10 MUMBAI, HAS ERRED IN UPHOLDING THE ACTION OF THE AO IN NOT ALLOWING THE DEDUCTION OF DISALLOWANCE WRONGLY MADE BY THE ASSESSEE IN RESPECT OF EMPLOYEES CONTR IBUTION TO PROVIDENT FUND AND ESIC IN THE COMPUTATION OF INCOME. 2.2 REASONS ASSIGNED BY HIM FOR CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE ARE WRONG AND INSUFFICIENT. 2.3 THE LD. COMM . OF INCOME TAX (APPEAL ) - 10 MUMBAI, H AS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THE CONTENTION AND SUBMISSION OF ITA NO. 4789/MUM/2016 & 4790/MUM/2016 M/S. INTEREX ARCH DESIGN PVT. LTD., 3 THE ASSESSEE THAT THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND & ESIC THOUGH DELAYED BUT MADE BEFORE THE DUE DATE OF FILLING OF RETURN IS DEDUCTIBLE IN VIEW OF THE JUDGMENT O F THE APPEX COURT IN THE CASE OF CIT VS ALOM EXTRUSION LIMITED. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. IN THE A.Y.2007 - 08, AO MADE DISALLOWANCE IN RESPECT OF TRAVELLING EXPENSES AND 43B WHILE FRAMING ASSESSMENT U/S.143(3). THEREAFTER, AS SESSEE FILED A PETITION U/S.154 WHEREIN IT WAS STATED THAT THE DISALLOWANCE MADE U/S.43B WAS NOT JUSTIFIED IN SO FAR AS SERVICE TAX WAS NOT APPLICABLE ON THE WORK CONTRACT AND AS SUCH THE DISALLOWANCE MADE BY THE AO WAS NOT JUSTIFIED. HOWEVER, AO DISMISSED ASSESSEES APPLICATION U/S.154 WHICH WAS CONFIRMED BY THE CIT(A) AFTER OBSERVING AS UNDER: - 4. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE ID.AR, AS SEEN FROM THE FACTS OF THE CASE, THE APPELLANT HAS RAISED THE BILLS ON THE W ORKS CONTRACTORS WHICH INCLUDES SERVICE TAXES FOR THE YEAR ENDED 31, 3. 2007 EVEN THOUGH THE SERVICE TAX PROVISIONS ARE APPLICABLE FROM 1 . 6.2007. THE WORKS CONTRACTORS HAVE REFUSED TO ACCEPT THE INVOICES RAISED IN THEIR NAMES WHICH INCLUDES SERVICE TAXES S INCE THE SERVICE TAX IS NOT APPLICABLE IN THEIR CASE FOR THAT PERIOD, AS THE AMOUNT WAS ALREADY SHOWN IN THE BOOKS OF THE APPELLANT COMPANY AS COLLECTED BUT NOT PAID TO THE GUJARAT VAT AUTHORITIES, THE AUDITORS HAVE MADE THIS POINT CLEAR IN THEIR AUDIT REP ORTS, AS THE AMOUNT WAS NOT PAID BEFORE FILING THE RETURN OF INCOME THE AO HAS ALSO ADDED BACK THE AMOUNT WHILE COMPUTING TAXABLE INCOME IN HIS ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT, UNDER THIS SCENARIO, THE DISALLOWANCE MADE BY THE AO IS FOUND TO BE IN ORDER. NO DOUBT THE AMOUNT ALREADY DEDUCTED BY THE APPELLANT BUT NOT REMITTED TO THE GUJARAT VAT AUTHORITIES BEFORE FILING THE RETURN OF INCOME REQUIRES TO BE DISALLOWED. BY SEEING THE ISSUE FROM ANOTHER ANGLE, THERE IS NO MISTAKE APPARENT FROM RECORDS IN THE ORDER PASSED UNDER SECTION 143(3) DATED 28/7/2009 BY THE AO WHICH REQUIRES INTERVENTION UNDER SECTION 154 OF THE ACT BY THE AO. THEREFORE, THE AO HAS CORRECTLY REJECTED THE APPLICATION FILED UNDER SECTION 154 OF THE ACT AS THERE IS NO M ISTAKE APPARENT FROM RECORDS WHICH COULD HAVE BEEN RECTIFIED BY HIM, F THEREFORE, UPHOLD THE ACTION OF THE AO AND DISMISS THE APPEAL. 6. IN THE RESULT, THE APPEAL IS DISMISSED. ITA NO. 4789/MUM/2016 & 4790/MUM/2016 M/S. INTEREX ARCH DESIGN PVT. LTD., 4 5. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BE FORE US. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT CLEAR DISCLOSURE WAS MADE BY THE AUDITORS OF THE COMPANY IN THE TAX AUDIT REPORT THAT COMPANY HAS COLLECTED SERVICE TAX BUT THE SAME HAS NOT BEEN PAID TO GUJARAT VAT AUTHORITIES. ACCORDINGLY, THERE IS NO INFIRMITY IN THE ORDER OF THE AO FOR DISMISSING THE APPLICATION FILED U/S. 154. AFTER GIVING DUE REASONING, THE CIT(A) CONFIRMED THE ACTION OF THE AO IN SO FAR AS THERE WAS NO MISTAKE APPARENT FROM RECORD IN THE ORDER PASSED BY AO U/S.143(3) DA TED 29/07/2009. 7. IN THE RESULT APPEAL FOR THE A.Y.2007 - 08 IS DISMISSED. 8. IN THE A.Y.2010 - 11, ASSESSEE IS AGGRIEVED FOR THE DISALLOWANCE MADE U/S.43B. IN THIS CONNECTION, AO HAS MADE DISALLOWANCE OF RS.18,65,555/ - U/S.43B. WE FOUND THAT THE ASSESSEE HAS DISALLOWED SERVICE TAX DUE TO NON - PAYMENT IN A.Y. 2007 - 08 AMOUNTING TO RS.28,68,584/ - , BUT DURING THE CURRENT YEAR, ACTUAL PAYMENT WAS MADE ONLY RS.14,04,033/ - . REMAINING AMOUNT OF RS.18,65,555/ - HAS BEEN REVERSED BY THE ASSESSEE. IN VIEW OF THE ABOVE, CL AIM MADE BY THE ASSESSEE U/S.4 3B AMOUNTING TO RS.18,65,555/ - WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE . 9. IT WAS CONTENTION OF LEARNED AR THAT ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF INTERIOR DESIGNING AND POST DESIGNING UNDER ONE ROOF. I T UNDERTAKES THE TURNKEY PROJECT CONTRACT FOR ITS CUSTOMERS AND GETS COMPLETED THROUGH SUB CONTRACTORS. PREVIOUS YEAR RELEVANT TO THE A.Y. ITA NO. 4789/MUM/2016 & 4790/MUM/2016 M/S. INTEREX ARCH DESIGN PVT. LTD., 5 2010 - 1 1 ENDED ON 31.03.2010. THE RETURN OF INCOME FILED FOR THE A.Y. 2010 - 11 DECLARING A TOTAL INCOME OF RS. 54.39.40 0/ - WAS PROCESSED U/S 143(1) AND THEREAFTER SELECTED FOR SCRUTINY THROUGH CASS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AUDITED FINANCIAL STATEMENT AND THE TAX AUDIT REPORT U/S 44AB WERE FILED ALONG WITH THE VARIOUS DETAILS CALLED FROM TIME TO TIME . WHILE COMPUTING THE TOTAL INCOME FOR THE A.Y. 2007 - 08, UNPAID SERVICE TAX LIABILITY OF RS. 28,68,584/ - WAS DISALLOWED U/S 43B OF IT ACT, 1961. HOWEVER, DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS REVERSED THE SAID SERVICE TAX PAYABLE OUTSTANDING AT RS. 18,65.555/ - IN THE BOOKS OF ACCOUNTS AND CLAIMED THE SAME U/S 43B. HOWEVER, THE AO HAS DISALLOWED THE CLAIM FOR THE VARIOUS REASONS MENTIONED IN THE ORDER AND ADDED THE SAME TO THE TOTAL INCOME. 10. FROM THE RECORD WE OBSERVE THAT IN VIEW OF DISALLO WANCE MADE BY THE AO WHILE FRAMING THE ASSESSMENT FOR THE A.Y. 2009 - 10, THE ASSESSEE, WHILE COMPUTING THE TOTAL INCOME FOR A.Y. 2010 - 11, HAS DISALLOWED A SUM OF RS. 2,22,788/ - U/S 36(V)(IA) BEING THE EMPLOYEES CONTRIBUTION TOWARDS THE PROVIDENT FUND PAID A FTER THE DUE DATE BUT BEFORE THE DATE OF FURNISHING OF RETURN U/S 139(1). HOWEVER, IN VIEW OF THE LAW LAID DOWN BY THE SUPREME COURT IN THE CASE OF CIT VS. ALON EXTRUSION LIMITED, THE CIT (A) HAS DELETED THE ADDITION MADE IN THE A.Y. 2009 - 10 AND ACCORDING LY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED THAT DURING THE RELEVANT PREVIOUS YEAR TOO, THE EMPLOYEES CONTRIBUTION TOWARDS THE PROVIDENT FUND THOUGH PAID AFTER THE DUE DATE BUT BEFORE ITA NO. 4789/MUM/2016 & 4790/MUM/2016 M/S. INTEREX ARCH DESIGN PVT. LTD., 6 FURNISHING T HE RETURN U/S 139(1) AND AS SUCH SAME MAY NOT BE DISALLOWED. ACCORDINGLY, WE DIRECT THE AO TO VERIFY AND ALLOW ASSESSEES CLAIM OF RS.2,22,728/ - IN SO FAR AS EMPLOYEES CONTRIBUTION WAS DEPOSITED BEFORE LAST DATE OF FILING RETURN. WITH REGARD TO THE BALANCE DISALLOWANCE, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR EXAMINING THE FACT THAT AS TO WHETHER THE SERVICE TAX SO COLLECTED BY THE ASSESSEE IN THE A.Y.2007 - 08 HAS BEEN REFUNDED BACK TO THE RESPECTIVE PARTIES. SINCE WE HAVE ALREADY CONFIRMED THE DISALLOWANCE IN THE A.Y.2007 - 08 IN RE SPECT OF SERVICE TAX WHICH ACTUALLY ALLEGED TO BE REFUNDED , IT REQUIRES VERIFICATION ON THE PART OF TH E AO AS TO WHETHER SERVICE TAX SO COLLECTED BY THE ASSESSEE HAS ACTUALLY BEEN REFUNDED TO THE CUSTOMERS. IF SAID TAX IS FOUND TO BE REFUNDED THEN THE SAME IS ELIGIBLE FOR DEDUCTION FROM THE CURRENT YEAR S INCOME. AO IS TO DECIDE THE MATTER AFRESH AS PER LAW AFTER DUE VERIFICATION . WE DIRECT ACCORDINGLY. 11. IN THE RESULT, APPEAL OF ASSESSEE FOR A.Y.2007 - 08 IS DISMISSED AND FOR A.Y.2010 - 11 APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 / 09 /201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 19 / 09 /201 8 KARUNA SR. PS ITA NO. 4789/MUM/2016 & 4790/MUM/2016 M/S. INTEREX ARCH DESIGN PVT. LTD., 7 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//