M/s. Rainbow Security Service, Ahmedabad V. The Income tax Officer,Ward-11(3), Ahmedabad

ITA 64/AHD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6565 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y C SURTI
• Assessee Lawyers: PF JAIN
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC BEFORE SHRI D. K. TYAGI, JUDICIAL MEMBER I.T.A. NO. 64/ AHD/2011 (ASSESSMENT YEAR 2007-08) M/S. RAIN BOW SECURITY SERVICE, 316, ARUN CHAMBERS, SARDAR PATEL DIAMOND MARKET, BAPUNAGAR, AHMEDABAD VS. ITO, WARD 11(3), AHMEDABAD PAN/GIR NO. :AACFR1682B (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI P F JAIN, AR RESPONDENT BY: SHRI Y C SURTI, DR O R D E R THIS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED AGA INST THE ORDER DATED 27.12.2010 OF CIT(A) XVI, AHMEDABAD FOR THE ASSESSM ENT YEAR 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE LD. C. I .T. (APPEALS) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS.2,27,611 BEING UNPAID SERVICE TAX WITHOUT APPRECIATING THE FACTS : A) THAT THIS AMOUNT HAS NOT BEEN CLAIMED AS AN EXP ENDITURE BY THE APPELLANT. B) THAT SUCH AN ADDITION WAS DELETED BY THE CIT A PPEAL IN A.Y.2006-07 AGAINST WHICH NO APPEAL HAS BEEN FILED BY THE DEPARTMENT. C) THAT AS PER THE DECISION OF DELHI HIGH COURT IN THE CASE OF NOBLE AND HEWITT (I) P.LTD. (305 ITR 324), NO SUCH ADDITION CAN BE MADE WHEN IT HAS NOT BEEN DEBITED T O PROFIT AND LOSS ACCOUNT AS AN EXPENDITURE NOR ANY CLAIM OF DED UCTION HAS BEEN MADE. I I.T.A.NO. 64/AHD/2011 2 D) THAT THE ASSESSEE HAS PAID AN AMOUNT OF RS.2,24,477 AGAINST SERVICE TAX UNDER CONSIDERATION AS AGAINST RS.86,68 7 ALLOWED BY THE ASSESSING OFFICER. 2. THE LD.C.I.T. APPEAL HAS ERRED IN LAW AND ON FAC TS IN UPHOLDING THE LEVY OF INTEREST U/S. 234.A, 234 B AN D 234.C WHICH WAS SUBMITTED TO BE CONSEQUENTIAL. 3. ON THE FACTS NO SUCH ADDITION OUGHT TO HAVE BEEN UPHELD. 2. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE A.O. FOUND THAT AS PER THE DETAILS OF THE CREDI TORS, THERE IS UNPAID STATUTORY LIABILITY OF SERVICE TAX AND THE TRANSACT ION ENTRY DURING THE YEAR AMOUNTING TO RS.3,14,298/-. OUT OF THIS OUTSTANDIN G AMOUNT, THE ASSESSEE HAS PAID RS.86,687/- ON 04.04.2007 BEFORE THE DUE D ATE OF FILING OF RETURN. HE GAVE THE CREDIT OF THIS AMOUNT AND DISALLOWED BA LANCE AMOUNT OF RS.2,27,611/- U/S 43 B OF THE INCOME TAX ACT, 1961. 3. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT THIS AMOUNT HAS NOT BEEN DEBITED TO THE P & L ACCOUNT AS THE ASSESSEE HAS BE EN FOLLOWING THE PRACTICE OF KEEPING SEPARATE LEDGER ACCOUNT FOR HIS SERVICE TAX AND HENCE NO DISALLOWANCE SHOULD BE MADE. ALTERNATIVELY, THE AS SESSEE SUBMITTED THAT AS PER THE ORDER MADE PAYMENT OF RS.58,071/- ON 13.09. 2006 FOR THE MONTHS OF MARCH MAY 2006, RS.79,719/- ON 14.11.2006 FOR THE MONTHS OF JUNE-AUG 2006 AND RS.86,687/- ON 2.04.2007 FOR THE MONTHS OF SEP NOV 2006 AND, THEREFORE, THE ASSESSEE HAS ACTUALLY PAID RS.2,24,4 77/- AND THE ONLY OUTSTANDING AMOUNT REMAINED RS.89,821/- AND NOT RS. 2,27,611/-. 4. TAKING INTO CONSIDERATION THESE SUBMISSIONS OF T HE ASSESSEE, LD. CIT(A) DISMISSED THIS GROUND OF APPEAL OF THE ASSE SSEE BY OBSERVING AS UNDER: I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPEL LANT AND OBSERVATION OF THE AO. AS PER THE SETTLED POSIT ION OF LAW SALES- I.T.A.NO. 64/AHD/2011 3 TAX IS PART OF TURNOVER AND SIMILARLY THE SERVICE T AX IS PART OF TURNOVER IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CHAWRANGEE SALES SUPRA 87 ITR 542, SALES TA X IS ON GOODS& SERVICE TAX IS ON SERVICES & BOTH ARE ON TURNOVER C OLLECTED FROM CUSTOMERS. HENCE CHARACTER IS SAME. THE SAME HAS TO BE ADDED TO THE CREDIT SIDE OF THE P&L ACCOUNT AND CONSEQUENTLY, TH E ASSESSEE WILL GET THE BENEFIT OF DEBITING THE AMOUNT IN THE P&L ACCOU NT. HOWEVER, THE AMOUNT SHOULD BE ALLOWED ONLY UNDER SECTION 43B ON PAYMENT BASIS IF THE SAME IS PAID BEFORE THE DUE DATE OF FILING OF R ETURN. THE APPELLANT HAS CLAIMED TO HAVE PAID RS. 2,24,477/-DURING THE Y EAR AND BALANCE IS ONLY RS.902/-. IF THIS IS SO, THEN THE SUNDRY CRED ITORS WILL NOT HAVE THE AMOUNT OF OUTSTANDING SERVICE TAX PAYABLE OF RS. 31 4298/-. THE ASSESSEE HAS TO SHOW THAT OUT OF THIS OUTSTANDING A MOUNT OF RS. 314298/- THE ASSESSEE HAS MADE THE PAYMENT BEFORE T HE DUE DATE OF FILING OF RETURN, AND THEN ONLY THE CREDIT CAN BE A LLOWED. AS STATED BY THE AO, OUT OF THIS AMOUNT TO THE ASSESSEE HAS ONLY PAID RS. 86687/- AND THEREFORE THE DISALLOWANCE MADE BY THE AO IS CO RRECT AND THIS GROUND OF APPEAL IS DISMISSED. 5. FURTHER AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BE FORE ME. 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED THAT SINCE THE ASSESSEE HAS NOT DEBITED THIS AMOUNT TO T HE P & L ACCOUNT AS AN EXPENDITURE, THE SAME CANNOT BE DISALLOWED U/S 43B OF THE ACT AND FOR MAKING THE SUBMISSION HE PLACED RELIANCE ON THE DEC ISION OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS NOBLE AND HEWI TT (I) P. LTD. 305 ITR 324. 7. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORDERS OF AUTHORITIES BELOW AND FURTHER SUBMITTED THAT IT IS NOT CLEAR FO RM THE ORDERS OF AUTHORITIES BELOW, WHETHER THE ASSESSEE DID NOT DEBIT THE AMOUN T TO THE P & L ACCOUNT AS EXPENDITURE OR HAS NOT CLAIMED ANY DEDUCTION IN RESPECT OF THIS AMOUNT. THEREFORE, THE MATTER MAY KINDLY BE SET ASIDE TO TH E FILE OF THE A.O. FOR SUCH VERIFICATION BEFORE APPLYING THE RATIO AS LAID DOWN BY HON'BLE HIGH COURT OF DELHI IN THE CASE OF NOBLE AND HEWITT (I) P. LTD. I.T.A.NO. 64/AHD/2011 4 8. HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. I FIND THAT THE ASSESSEE HAS COLLECTED SERVICE TAX AMOUNTING TO RS.3,145,298/- DURING THE YEAR UNDER APPEAL. OUT OF THIS AMOUNT A SUM OF RS.86,687/- HAS BEEN PAID BUT AN AMOUNT OF RS. 2,27,611/- WAS NOT DEPOSI TED BY HIM WITH THE CONCERNED AUTHORITIES. THE ASSESSEE SUBMITTED THAT HE HAS NOT CLAIMED ANY DEDUCTION IN THIS REGARD NOR DID IT DEBIT THE SAME AS EXPENDITURE IN THE P & L ACCOUNT. THIS SUBMISSION OF THE ASSESSEE REQUIRE S VERIFICATION AT THE END OF THE A.O. IF THIS SUBMISSION OF THE ASSESSEE IS FOUND CORRECT, NO ADDITION IS TO BE MADE AS PER THE RATIO AS LAID DOWN BY HON' BLE HIGH COURT OF DELHI IN THE CASE OF NOBLE AND HEWITT (I) P. LTD. (SUPRA) WHEREIN FOLLOWING WAS HELD: HELD, DISMISSING THE APPEAL, THAT SINCE THE ASSESS EE DID NOT DEBIT THE AMOUNT TO THE PROFIT AND LOSS ACCOUNT AS EXPENDITUR E NOR CLAIM ANY DEDUCTION IN RESPECT OF THE AMOUNT AND CONSIDERING THAT THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE QUESTION OF DISALLOWING THE DEDUCTION NOT CLAIMED WOULD NOT ARI SE. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF THE A.O. 10. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS AL LOWED FOR STATISTICAL PURPOSE. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JUNE, 2011. SD./- (D.K.TYAGI) JUDICIAL MEMBER AHMEDABAD; DATED : 1 ST JUNE, 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE I.T.A.NO. 64/AHD/2011 5 1. DATE OF DICTATION 2/6/11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 2/6/11 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 3/6/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT ALREADY PRONOUNCED ON 1.6.11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 3/6/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 3/6/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..