Jagannath Tukaram Mragajale, Aurangabad V. Commissioner of Income-tax,

ITA 693/PUN/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1735 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-08-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 12-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Assessee Lawyers: PRAMOD JADHAV
• Keywords: Non compliance; Condonation of delay
• Section: 43B; 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 693 /P U N/201 5 / ASSESSMENT YEAR : 20 09 - 10 SHRI JAGANNATH TUKARAM MRAGAJALE, PLOT NO. 41, NAV - BHARAT HOUSING SOCIETY, N - 1, CIDCO, AURANGABAD 431003 PAN : AGCPM8664L ....... / APPELLANT / V/S. COMMISSIONER OF INCOME TAX, AURANGABAD / RESPONDENT ASSESSEE BY : S HRI PRAMOD JADHAV REVENUE BY : SHRI A.K. MODI / DATE OF HEARING : 07 - 08 - 201 8 / DATE OF PRONOUNCEMENT : 02 - 11 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX , AURANGABAD DATED 21 - 03 - 2014 PASSED U/S. 263 O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR THE ASSESSMENT YEAR 2009 - 10. 2 ITA NO . 693/PUN/2015, A.Y. 2009 - 10 2. THE APPEAL HAS BEEN FILED WITH AN INORDINATE DE LAY OF 351 DAYS. THE ASSESSEE HAS FILED AN APPLICATION SEEKING CONDONATION OF DELAY SUPPORTED BY AN AFFIDAVIT. A PERUSAL OF AFFIDAVIT SHOWS THAT THE DELAY HAS BEEN ATTRIBUTED TO THE WRONG ADVICE GIVEN BY THE TAX CONSULTANT. HOWEVER, IN THE ENTIRE AFFIDA VIT THERE IS NO MENTION OF THE NAME OF CONSULTANT WHO HAS GIVEN WRONG ADVICE. THE LD. DR VEHEMENTLY OPPOSED THE APPLICATION OF ASSESSEE SEEKING CONDONATION OF DELAY. THE LD. DR POINTED THAT THE ASSESSEE HAS BEEN NON COMPLIANT BEFORE THE COMMISSIONER OF IN COME TAX. DESPITE SERVICE OF NOTICE AND REPEATED OPPORTUNITY OF HEARING NEITHER THE ASSESSEE NOR ANY AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE COMMISSIONER OF INCOME TAX. NO WRITTEN SUBMISSIONS OR THE LETTER SEEKING ADJOURNMENT WAS FI LED EITHER. THE LD. DR FURTHER POINTED THAT IN FIRST APPELLATE PROCEEDINGS ARISING FROM ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 263 , THE ASSESSEE NEVER APPEARED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEE HAS BEEN RECALCITRANT. BOTH SIDES HEARD ON THE ISSUE OF DELAY IN FILING OF APPEAL. A PERUSAL OF THE DOCUMENTS ON RECORD REVEAL THAT THE ASSESSEE HAS BEEN NON - COOPERATIVE BEFORE THE COMMISSIONER OF INCOME TAX. HE NEVER BOTHERED TO APPEAR BEFORE THE R EVISIONAL A UTHORITY AND THE APPELLATE AUTHORITY. EVEN IN THE AFFIDAVIT FILED BY THE ASSESSEE SEEKING CONDONATION OF DELAY DETAILS OF CONSULTANT ON WHOM THE ASSESSEE HAS THROWN ENTIRE GUILT FOR DELAY IN FILING OF APPEAL HAS NOT BEEN MENTIONED. THE HONBLE SUPREME COURT OF INDIA IN T HE CASE OF RAM NATH SAO @ RAM NATH SAHU AND OTHERS VS. GOBARDHAN SAO AND OTHERS REPORTED AS 2002 AIR 1201 HAS HELD THAT ACCEPTANCE OF EXPLANATION FURNISHED SEEKING CONDONATION OF DELAY SHOULD BE THE RULE AND REFUSAL AN EXCEPTION, MORE SO WHEN NO NEGLIGENCE OR INACTION OR WANT OF BONAFIDE CAN BE IMPUTED TO THE DEFAULTING PARTIES. TAKING A PEDANTIC AND 3 ITA NO . 693/PUN/2015, A.Y. 2009 - 10 HYPER TECHNICAL VIEW OF THE MATTER, THE EXPLANATION FURNISHED SHOULD NOT BE REJECTED WHEN STAKES ARE HIGH AND/OR ARGUABLE POINTS OF FACTS AND LAW ARE INVOLVED IN THE CASE, CAUSING ENORMOUS LOSS AND IRREPARABLE INJURY TO THE PARTY AGAINST WHOM THE LIS TERMINATES EITHER BY DEFAULT OR INACTION. THE HONBLE APEX COURT IN VARIOUS OTHER DECISIONS HAS TAKEN SIMILAR VIEW IN ACCEPTING THE EXPLANATION FURNISHED BY THE A SSESSEE FOR CONDONING THE DELAY IN FILING OF APPEAL. TAKING INTO CONSIDERATION FACTS OF THE CASE, THE LAW LAID DOWN BY THE HONBLE APEX COURT AND THE REASONS FURNISHED BY THE ASSESSEE/APPELLANT, THE DELAY OF 351 DAYS IN FILING OF APPEAL IS CONDONED SUBJEC T TO PAYMENT OF RS.5,000/ - AS COST . THE ASSESSEE SHALL DEPOSIT THE COST IN ACCORDANCE WITH RULE 32A(2) OF THE INCOME TAX APPELLATE RULE S , 1963 WITHIN A PERIOD OF ONE MONTH FROM THE DATE OF RECEIPT OF THIS ORDER. THE ASSESSEE SHALL FURNISH THE PROOF OF DE POSIT WITH THE REGISTRY OF TRIBUNAL WITHIN A WEEK THEREAFTER AND SHALL ALSO FURNISH THE PROOF OF SAME BEFORE THE ASSESSING OFFICER. SUBJECT TO DEPOSIT OF COST THE APPEAL IS ADMITTED TO BE HEARD AND DISPOSED OF ON MERITS. 3 . THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE : THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FABRICATION AND JOB WORK. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30 - 09 - 2009 DECLARING TOTAL INCOME OF RS.25,41,760/ - . THE INCOME OF THE ASSESS EE WAS ASSESSED AT RS.26,38,790/ - BY THE ASSESSING OFFICER VIDE ORDER DATED 28 - 11 - 2011 PASSED U/S. 143(3) OF THE ACT. THEREAFTER, THE COMMISSIONER OF INCOME TAX INVOKED THE PROVISIONS OF SECTION 263 AND ISSUED SHOW CAUSE NOTICE DATED 29 - 01 - 2014. IN REVIS ION PROCEEDINGS THE COMMISSIONER OF INCOME TAX OBSERVED THAT THE ASSESSEE HAS PAID SERVICE TAX AMOUNTING TO RS.8,22,919/ - AFTER THE DUE DATE OF FILING OF RETURN U/S. 139(1) AND HAS UNPAID SERVICE TAX OF RS.20,58,823/ - . THUS, UNPAID SERVICE TAX/SERVICE TAX PAID AFTER DUE DATE AGGREGATING TO RS.28,71,742/ - IS LIABLE 4 ITA NO . 693/PUN/2015, A.Y. 2009 - 10 TO BE DISALLOWED U/S. 43B OF THE ACT. THE COMMISSIONER OF INCOME TAX FURTHER HELD THAT THERE IS MISMATCH OF THE REVENUE TO THE TUNE OF RS.3,42,22,670/ - . THE TOTAL RECEIPTS AS DISCLOSED BY THE A SSESSEE IN TRADING ACCOUNT IS RS.6,41,09,791/ - , AS AGAINST THE ACTUAL GROSS RECEIPTS OF RS.9,83,32,461/ - . THE COMMISSIONER OF INCOME TAX HELD THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS THE ASSESSING OFFICER HAS FA ILED TO EXAMINE THE ABOVE ISSUES. AGGRIEVED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND HAS RAISED FOLLOWING GROUNDS : GROUND 1 : ON VALIDITY OF REVISION PROCEEDINGS THE LEARNED CIT HAS ERRED IN INITIATING THE REVISION PROCEEDINGS UNDER SECTION 263 OF THE ACT, WITHOUT APPRECIATING THE FACT THAT THE SAID PROCEEDINGS CANNOT BE INITIATED WHEN ANY OF THE TWO CONDITION I.E. ASSESSMENT ORDER MUST BE ERRONEOUS AND PREJUDICE T O THE INTEREST OF REVENUE, HAS NOT BEEN SATISFIED. GROUND 2 : WITHOUT PREJUDICE TO THE ABOVE GROUND, ON MERITS OF THE CASE THE LEARNED CIT HAS ERRED IN DIRECTING THE AO TO MAKE DISALLOWANCE OF RS.28,71,742/ - UNDER SECTION 43B OF THE ACT ON ACCOU NT OF UNPAID SERVICE TAX. 4. SHRI PRAMOD JADHAV APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED AT THE OUTSET THAT IN EX - PARTE PROCEEDINGS THE COMMISSIONER OF INCOME TAX RAISED TWO ISSUES : I . UNPAID SERVICE TAX TO BE DISALLOWED U/S. 43B OF THE ACT. II . MISMATCH OF GROSS RECEIPT. 4.1 IN ASSESSMENT PROCEEDINGS CONSEQUENT TO THE ORDER OF COMMISSIONER OF INCOME TAX U/S. 263 , THE ASSESSING OFFICER MADE NO ADDITION IN RESPECT OF ALLEGED VARIATION IN THE REVENUE AS PER TRADING ACCOUNT AND TOTAL RECEIPTS AS P OINTED BY THE COMMISSIONER OF INCOME TAX. HOWEVER, THE ASSESSING 5 ITA NO . 693/PUN/2015, A.Y. 2009 - 10 OFFICER MADE ADDITION OF RS.28,71,742/ - ON ACCOUNT OF UNPAID SERVICE TAX. THE LD. AR ASSAILING THE FINDINGS OF AUTHORITIES BELOW IN RESPECT OF SAID ADDITION SUBMITTED THAT WHATEVER SERVICE TAX RECEIVED BY THE ASSESSEE WAS DEPOSITED TO THE GOVERNMENT TREASURY. THE ASSESSEE DID NOT COLLECT BALANCE SERVICE TAX IN ASSESSMENT YEAR UNDER APPEAL , T HEREFORE, THERE WAS NO QUESTION OF DEPOSITING THE SAME TO THE GOVERNMENT EXCHEQUER. TO FURTHER BUTTR ESS HIS SUBMISSIONS THE LD. AR FILED WRITTEN SUBMISSIONS . THE SAME ARE AS UNDER : 34. ON THE MERITS OF THE CASE THE APPELLANT MOST RESPECTFULLY SUBMITS THE FOLLOWING FACTUAL BACKDROP THE APPELLANT IS CONSISTENTLY FOLLOWING MERCANTILE ACCOUNTING SYSTEM ; THE APPELLANT FOLLOWING CONSISTENT PRACTICE OF SHOWING SALES/RECEIPTS IN THE BOOKS OF ACCOUNT NET OF SERVICE TAX; SUCH SERVICE TAXES PAID (INPUT) OR RECEIVABLE/RECEIVED (OUTPUT) WERE NEVER ROUTED THROUGH P&L ACCOUNT I.E. TO SAY NO CLAIM OF EXPENDITURE IS TAKEN ON ACCOUNT OF PAYMENT OF SERVICE TAX NEITHER THE SAME IS CREDITED IN P& L ACCOUNT. THE APPELLANT IS HAVING PRACTICE OF ACCOUNTING THIS SERVICE TAX DIRECTLY IN THE BAL ANCE SHEET UNDER THE HEAD 'CURRENT LIABILITIES PAYABLE'. THE APPELLANT IS FOLLOWING PRACTICE OF DISCHARGING SERVICE TAX LIABILITY ON THE RECEIPT BASIS AS ENVISAGED IN THE FINANCE ACT, 1994 GOVERNING SERVICE TAX LIABILITY. THE APPELLANT IS NOT HAVING ANY CLOSING STOCK IN HAND OR ANY VALUE OF STOCK U/S . 145A OF THE ACT AND THEREF ORE THERE IS NO QUESTION OF ADVERSE IMPACT ON THE REVENUE AS CONTEMPLATED BY THE LEARNED CIT. 35. IN VIEW OF THIS FACTUAL BACKDROP, THE APPELLANT MOST RESPECTFULLY SUBMITS THAT THIS UNPAID SERVICE TAX IS NOT CLAIMED AS TAX DEDUCTIBLE EXPENDITURE NOR DUE F OR PAYMENT AND THEREFORE THERE IS NO QUESTION OF 438 DISALLOWANCE IN THE INSTANCE CASE. 36. IN SUPPORT OF THE ABOVE PREPOSITION THE APPELLANT RELIES ON THE FOLLOWING JUDICIAL PRECEDENTS WHEREIN IT HAS BEEN HELD THAT THE UNPAID SERVICE TAX, NOT DEBITED TO P&L ACCOUNT AS AN EXPENSES NOR CLAIMED ANY EXPENDITURE REGARDING THE SAME, THE QUESTION OF DISALLOWANCE U/S . 43 B DOES NOT ARISE CIT VS NOBEL & HEWITT INDIA PRIVATE LIMITED (2008) 305 ITR 254(DELHI HC) (COPY IS ENCLOSED HEREWITH AT PAGE 113 TO 115) ACIT VS REAL IMAGE MEDIA PVT LTD (2008) 116 TT J 964. (COPY IS ENCLOSED HEREWITH AT PAGE 116 TO 123) 6 ITA NO . 693/PUN/2015, A.Y. 2009 - 10 CIT VS OVIRA LOGISTICS PVT LTD (2015) 377 ITR 129 (80M) (COPY IS E NCLOSED HEREWITH AT PAGE 140 TO 143) CIT VS KNIGHT FRANK INDIA PVT LTD (2016) 290 CTR 25 (80M) (COPY IS ENCLOSED HEREWITH AT PAGE 144 TO 148). 37. ON WITHOUT PREJUDICE BASIS THE APPELLANT FURTHER SUBMITS THAT DISALLOWANCE U/S 43 B OF UNPAID SERVICE TAX WILL BE CONSEQUENTLY NEED TO BE ALLOWED ON ACTUAL PAYMENT BASIS. 5. ON THE OTHER HAND SHRI A.K. MODI REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX. THE LD. DR SUBMITTED THAT DURING REGULAR ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER AFTER RECEIVING INFORMATION FROM THE ASSESSEE HAS FAILED TO EXAMINE THE ISSUE AND HAS NOT APPLIED HIS MIND ON THE ISSUES WHILE PASSING THE ASSESSMENT ORDER. 6. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS O F AUTHORITIES BELOW . THE ASSESSEE IN APPEAL HAS ASSAILED THE ACTION OF COMMISSIONER OF INCOME TAX IN INVOKING THE REVISIONAL JURISDICTION AS WELL AS CHALLENGED DISALLOWANCE OF UNPAID SERVICE TAX U/S. 4 3 B OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING THE PRACTICE OF SHOWING SALES/RECEIPTS IN THE BOOKS OF ACCOUNT NET OF SERVICE TAX. THE SERVICE TAX PAID OR RECEIVABLE/RECEIVED WAS NOT ROUTED THROUGH THE P & L ACCOUNT. ONCE, THE SERVICE TAX PAID HAS NOT BEEN CLAIM ED AS EXPENDITURE THERE IS NO QUESTION OF DISALLOWING THE SAME U/S. 4 3 B OF THE ACT. THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. NOBEL & HEWITT INDIA PRIVATE LIMITED (SUPRA) HAS HELD THAT WHERE THE ASSESSEE IS FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTING , NO R PAY MENT TO GOVERNMENT PART OF SERVICE TAX COLLECTED BY IT , NEITHER DEBITING THE SAME TO P & L ACCOUNT AS AN EXPENDITURE NOR CLAIMING ANY DEDUCTION IN RESPECT OF THE SAID AMOUNT, THE 7 ITA NO . 693/PUN/2015, A.Y. 2009 - 10 QUESTION OF DISALLOWING THE SAME U/S. 43B DOES NOT ARISE. THE RELEVANT EXTRACT OF THE FINDINGS OF HONBLE HIGH COURT ARE AS UNDER : 6. IN OUR OPINION SINCE THE ASSESSEE DID NOT DEBIT THE AMOUNT TO THE P&L A/C AS AN EXPENDITURE NOR DID THE ASSESSEE CLAIM ANY DEDUCTION IN RESPECT OF THE AMOUNT AND CONSIDERING THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE QUESTION OF DISALLOWING THE DEDUCTION NOT CLAIMED WOULD NOT ARISE. 7. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. OVIRA LOGISTICS PVT. LTD. (SUPRA) AFTER CONSIDERING THE RATIO LAID DOWN IN THE CASE OF COMMISSIONER OF INCOME TAX VS. NOBEL & HEWITT INDIA PRIVATE LIMITED (SUPRA) REITERATED THAT WHEN SERVICES ARE RENDERED, THE LIABILITY TO PAY SERVICE TAX IN RESPECT OF CONSIDERATION PAYABLE WILL ARISE ONLY UPON RECEIPT OF SUCH CONSIDERATION AND NOT OTHERWISE. THE HONBLE HIGH COURT HELD : 9] HAVING PERUSED THE AFORESAID DECISIONS, WE ARE CLEARLY OF THE VIEW THAT SECTION 43B DOES NOT CONTEMPLATE LIABILITY TO PAY THE SERVICE TAX BEFORE ACTUAL RECEIPT OF THE FUNDS IN THE ACCOUNT OF THE ASSESEE. IN OUR VIEW, LIABILITY TO PAY SERVICE TAX INTO THE TREASURY WILL ARISE ONLY UPON THE ASSESSEE RECEIVING THE FUNDS AND NOT OTHERWISE. ACCORDINGLY, WHEN SERVICES ARE RENDERED, THE LIABILITY TO PAY THE SERV ICE TAX IN RESPECT OF THE CONSIDERATION PAYABLE WILL ARISE ONLY UPON THE RECEIPT OF SUCH CONSIDERATION AND NOT OTHERWISE. 8. THUS, IN VIEW OF UN - REBUTTED FACTS AND THE DECISIONS DISCUSSED ABOVE WE FIND MERIT IN THE SUBMISSIONS OF ASSESSEE. ACCORDINGLY, GROUND NO. 2 RAISED IN APPEAL IS ALLOWED. 9. IN SO FAR AS THE VALIDITY OF REVISION PROCEEDINGS IS CONCERNED , WE ARE OF CONSI DERED VIEW THAT THE COMMISSIONER OF INCOME TAX HAS ERRED IN SUBSTITUTING HIS OWN VIEW IN RESPECT OF BOTH THE ISSUES RAISED IN REVISIONAL JURISDICTION. PRIMA - FACIE THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO T HE INTEREST OF REVENUE. THUS, THE COMMISSIONER OF INCOME TAX HAS WRONGLY INVOKED THE PROVISIONS OF 8 ITA NO . 693/PUN/2015, A.Y. 2009 - 10 SECTION 263 IN THE INSTANT CASE. ACCORDINGLY, WE ALLOW GROUND NO. 1 OF THE APPEAL AS WELL. 10. IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND THE AP PEAL OF ASSESSEE IS ALLOWED. 11. BEFORE PARTING WE WOULD LIKE TO REITERATE THAT THIS APPEAL OF ASSESSEE IS ALLOWED SUBJECT TO PAYMENT OF COST RS.5,000/ - AS MENTIONED IN EARLIER PART OF THE ORDER. IN THE EVENT OF NON - COMPLIANCE OF THE DIRECTION S OF THE T RIBUNAL , THE APPEAL SHALL BE CONSIDERED AS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 02 ND DAY OF NOVEMBER, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 02 ND NOVEMBER, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE COMMISSIONER OF INCOME TAX, AURANGABAD 4 . , , , / DR, ITAT, B BENCH, PUNE. 5 . / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE