ITO, Ward-6(4), New Delhi V. Coronation Infrastructure Pvt. Ltd., New Delhi

ITA 757/DEL/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7785 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 10-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Question of law
• Section: 28; 43B; 92E; 139(1); 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘B’: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR US, JUDICIAL MEMBER ITA No.660/DEL/2020 [Assessment Year: 2016-17] M/s Coronation Infrastructure Pvt. Ltd. Plot No.1 and 2, Block No.E-0, Old Ishwar Nagar, Mathura Road, South Delhi-110065 Vs ITO, Ward-6(4), Room No.376A, C.R. Building, New Delhi PAN-AAACC7171K Assessee Revenue ITA No.757/DEL/2020 [Assessment Year: 2014-15] ITO, Ward-6(4), Room No.376A, C.R. Building, New Delhi Vs M/s Coronation Infrastructure Pvt. Ltd. Plot No.1 and 2, Block No.E-0, Old Ishwar Nagar, Mathura Road, South Delhi-110065 PAN- AAACC7171K Revenue Assessee Revenue by Sh. S.L. Anuragi, Sr. DR Assessee by Ms. Jyoti Sharma, Adv. Date of Hearing 13.07.2022 Date of Pronouncement 13.07.2022 ORDER PER SHAMIM YAHYA, AM, These are cross appeals by the assessee and Revenue arising out of the order of the Ld. CIT(A)-16, New Delhi, dated 02.12.2019, pertaining to Assessment Year 2016-17. 2 ITA No.660 & 757/Del/2020 2. Brief facts of the case are that the Assessing Officer observed that from the perusal of the tax audit report it is seen that the assessee had not paid tax of Rs.18,02,49,059/- on or before due date of filing of income tax return. Upon Assessing Officer’s enquiry, the assessee submitted copies of challan of service tax showing payment of Rs.50,00,000/- made before the filing of Income Tax Return under section 139(1) of the Act i.e. 17.10.2016 in the case of the assessee company who is required to furnish a report referred to in section 92E of the Act. From the same, the Assessing Officer observed that this shows that the assessee company has not paid Service tax payable of Rs.17,52,49,059/-. Out of this addition, he noted that Rs.7,96,80,264/- was added in Assessment Year 2015-16. The remaining amount of Rs.9,55,68,795/-, he added during Assessment Year. 2016-17. The Assessing Officer referred to the provision of section 43B of the Act in this regard. The Assessing Officer further referred to the assessee’s reliance upon the decision of the Hon’ble Delhi High Court in the case of CIT vs Noble and Hewitt (I) Pvt. Ltd. in appeal No. 839 of 2007 dated 10.09.2007. and also he noted that the assessee has given several decisions of ITAT Delhi Benches and ITAT Mumbai Benches and he found that facts in all those cases are different. The Assessing Officer also relied upon the decision of the Hon’ble Kolkata High Court in the case of Chowringhee Sales Bureau Pvt. Ltd. vs CIT [1977] 110 ITR 385(Kol.) Accordingly, he disallowed a sum of Rs.9,55,68,795/-. 3. Against the above order, the assessee appealed before the Ld. CIT(A). 3 ITA No.660 & 757/Del/2020 4. Upon assessee’s appeal, Ld. CIT(A) referred to the CIT(A)’s order for Assessment Year 2015-16. In that order, the ld. CIT(A) referred to the various submissions of the assessee and found that Hon’ble Bombay High Court in the case of Ovira Logistics (P) Ltd. has considered the issue decided by Hon’ble Delhi High Court in the case of CIT vs Noble And Hewitt (I) P. Ltd. He referred to the finding of the Hon’ble Bombay High Court therein, thereafter he referred to some other case laws and concluded as under:- “In view of the above factual and legal position, thus I hold that the Service Tax collected, whether debited in the Profit & Loss Account or not, has to be treated as trading receipt and hence to be included in the total income unless it is actually paid to the Government account before the due date of filing of return. The Ld. AR has furnished the details regarding service tax collected but not paid to the extent of Rs.3,24,69,989/- before the due date of filing of return vide submission dated 06.06.2019 and hence the addition made by the Assessing Officer u/s 43B to the extent of Rs.3,24,69,989/- is certainly justified. However, with the abundant precaution, the Assessing Officer is directed to verify the factual position and quantify the service tax actually collected but not paid before the due date of filing of return u/s 139(1) and then restrict the disallowance accordingly.” 5. Referring to the above, the Ld. CIT(A) held as under:- In the light of the clear, unequivocal provisions of the Act, the fact that service tax remained unpaid even till the due date of filing of return u/s 139(1) of the Income Tax Act and also the speaking finding of the CIT(A)-31, New Delhi in appeal No 240/18-19 dated 12.06.2019 reproduced supra, I uphold the disallowance made by the AO in this regard. However, the appellant has also submitted that out of the total service tax remaining unpaid amounting to Rs. 9,55,68,795/-, the amount of service tax remaining unpaid from the debtors was Rs. 3,21,85,583/-. In other words, from the total unpaid amount of Rs. 9,55,68,795/- only an 4 ITA No.660 & 757/Del/2020 amount of Rs. 6,33,83,212/- (Rs. 9,55,68,795/- minus 3,21,85,583/-) was received from the debtors and hence disallowance of service tax not received should not be made the subject of a disallowance. In this regard the appellant relied on the case of Commissioner of Income-tax-8, Mumbai v. Ovira Logistics (P.) Ltd [2015] 58 taxmann.com 206 (Bombay), wherein it was held that the provisions of section 43B cannot be invoked for an amount which is not received by the Appellant. 6. The Assessing Officer was of the view that by virtue of Section 43B of the Income Tax Act, 1961, service tax can be allowed only when paid and therefore the amount is not liable as deduction. Further, certain details of the clients were also not provided. Hence, the same was added as income. 7. Being aggrieved by this order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals) and he held in favour of the assessee. 8. Then, the matter was carried in appeal to the Tribunal and the Tribunal, relying upon its finding in the earlier assessment years, came to the conclusion that though the service tax was included in the bill raised on the customers but it was not actually collected from them. The First Appellate Authority held that, tax becomes payable only when it is collected from the customer. It is in these circumstances that following its earlier view, the Tribunal agreed with the First Appellate Authority and dismissed the Revenue's appeal. 9. When these appeals were argued before us, our attention was invited by Mr. Jasani to a Division Bench Judgment of this Court reported in [2015] 377 ITR 129 (Bom.) {Commissioner of Income-Tax v. Ovira Logistics P. Ltd.}. Mr. Jasani submits that earlier this very controversy was dealt with and the Revenue's appeal was dismissed. 10. With the assistance of both sides, we have perused this Judgment and we find that it dealt with an identical issue. This Court held that Section 43B does not contemplate liability to pay service tax before actual receipt of the funds in the account of the assessee. Hence the liability to pay service tax into the Treasury will arise only upon the assessee receiving the funds and not otherwise. Thus the consideration has to be actually received and thereupon the liability will arise. 5 ITA No.660 & 757/Del/2020 I find weight in the argument of the appellant. It is also pertinent to point out that on identical facts, this amount was allowed by the CIT(A)-31, New Delhi. The relevant finding of the CIT(A) is extracted as under: 4.3.1 I find that in the case of CIT Vs Ovira Logistics Pvt Ltd (2015) 377 ITR 129 (Bom), after considering the decision of Hon'ble Delhi High Court in the case of CIT Vs Noble & Hewitt (I) Pvt. Ltd (2008) 166 Taxman 48 (Del), the issue of taxability of service tax collected has been examined. In this case, Hon'ble Bombay High Court has held that since the Service Tax was not collected by the assessee, the same was not payable and hence provisions of Section 43B would not apply. As has been already discussed, the Ld.AR has sought the relief only on the ground that Service Tax collected was not debited in the Profit & Loss Account and hence the same cannot be disallowed u/s 43B. This issue has been considered by the Hon'ble ITAT in the case of Madhya Gujarat Vij Co. Ltd Vs ITO, IT A No. 2583/Ahd/2010 and CO No. 145/Ahd/2013 (A.Y. 2006-07), vide order dated 09.11.2016 and it has been very clearly held that Section 43B does not have a direct link of the amount of tax to be passed through Profit & Loss Account. Rather it is in the nature of "check" by the statute to ensure that the assessee makes payment of tax collected to the concerned department' and if he is unable to do so, the amount is added to its income. Since Service Tax collected, although was not debited to the Profit & Loss Account, but was not paid before the due date of filing of return, the disallowance made u/s 43B had been confirmed. In the light of the above discussion, the disallowance to the extent of unpaid amount of service tax of Rs 6,33,83,212/- (received but unpaid) is upheld. However, the AO is directed to verify the factual position and quantify the service tax actually collected but not paid before the due date of filing of return u/s 139(1) and then restrict the disallowance accordingly.” 6. Against the above order, the Revenue and the assessee are in appeal before us. 7. The ground raised in assessee’s appeal read as under:- “1. The Ld. CIT(A) has erred in law in confirming the addition made by the Assessing Officer of Rs.6,33,83,212/- 6 ITA No.660 & 757/Del/2020 pertaining to service tax U/s 43B of the Income Tax Act, 1961. 2. The Ld. CIT(A) has erred in law in not appreciating that the provisions of section 43B are not applicable to the facts of the case.” 8. Revenue’s ground is with regard to the relief granted by Ld. CIT(A). 9. We have heard both the parties and perused the records. We note that on the same issue for Assessment Year 2015-16, Revenue had filed appeal before ITAT. In ITA No.7386/Del/2019, vide order dated 11.07.2022 ITAT had adjudicated the issue as under:- “7. We have heard both the parties and perused the records. We find that grievance raised by the Revenue is whether the Ld. CIT(A) is right in not disallowing the service tax liability of Rs.4,72,10,275/- which was received from the debtors before the due date of filing of return but not paid to the Government account as per the provisions of section 43B of the Act. We find the ground raised by the Revenue is not clearly emanating from the orders of authorities below. Be as it may, it is also not clear from the orders of the authorities below as to whether they have correctly followed the decision of the jurisdictional High Court in the case of CIT vs Noble And Hewitt (I) P. Ltd. in appeal No. 839 of 2007 dated 10.09.2007 . The Assessing Officer is claiming that the facts are different while the Ld. CIT(A) in his finding is stating the same decision is considered by Hon’ble Bombay High Court in the case of Ovira Logistics (P) Ltd. and he has referred to the decision of the Hon’ble Bombay High Court. We find that in the case of CIT vs Noble And Hewitt (I) P. Ltd. (supra), Hon’ble Delhi High Court has held as under:- “The revenue is aggrieved by an order dated 17-11-2006 passed by the Income Tax Appellate Tribunal ('Tribunal'), Delhi Bench "D", New Delhi in ITA No. 2910/Delhi/2004 relevant for the assessment year 1999-2000. 2. The assessed maintains a mercantile system of accounting. It had collected service tax during the previous year relevant to the assessment year in question. Out of the service tax so collected the assessed had deposited part of the amount but an amount of Rs. 14.40 lakhs was not deposited by the assessed with the concerned authorities. The assessed did not claim any deduction in this regard nor did it debit the amount as an expenditure in the Profit & Loss Account. The assessing officer as well as the Commissioner (Appeals) ('Commissioner 7 ITA No.660 & 757/Del/2020 (Appeals)') nevertheless disallowed the amount and added it back to the income of the assessed. 3. The Commissioner (Appeals) was of the view that the assessed had not followed the correct accounting procedure. If it had done so, the amount would have had to be debited to Profit & Loss Account and thereafter the assessed could claim a deduction thereon. The Commissioner relied upon decision of the Calcutta High Court in Chowringhee Sales Bureau (P) Ltd. v. CIT . 4. In appeal, the Tribunal was of the opinion that in view of the provisions of Section 43B of the Income Tax Act, 1961 ('Act'), since the assessed had not claimed a deduction there was no question of disallowing the deduction which was not even claimed. The relevant extract of Section 43B of the Act reads as follows: Certain deductions to be only on actual payment. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of (a) any sum payable by the assessed by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, (b) to (f) ** ** ** shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessed according to the method of accounting regularly employed by him) only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him. 5. Learned Counsel for the revenue urges that the decision of the Calcutta High court in Chowringhee Sales Bureau (P.) Ltd. 's case (supra) covers the point in its favor. We are unable to agree. In that case it was held that the liability to pay sales tax arose the moment a sale or purchase was effected and if an assessed was maintaining accounts on the mercantile system it would be entitled to deduction of the estimated liability of sales tax, even though such sales tax had not been paid to the sales tax authorities. The question there concerned was the entitlement of the assessed to deduction under Sections 10(1)and 10(2)(xv) of the Indian Income Tax Act, 1922.The decision is clearly distinguishable in its application to the present case. Here we are concerned with an assessed who has not even claimed any deduction on the ground of service tax and has not debited the amount to its Profit & Loss Account. Moreover the provisions of Section 43B of the Act are 8 ITA No.660 & 757/Del/2020 quite clear in this regard. The decision of the Calcutta High Court in Chowringhee Sales Bureau (P) Ltd. s case (supra) was not in the context of the applicability of Section 43B of the Act. 6. In our opinion since the assessed did not debit the amount to the Profit& Loss Account as an expenditure nor did the assessed claim any deduction in respect of the amount and considering that the assessed is following the mercantile system of accounting, the question of disallowing the deduction not claimed would not arise. 7. Learned Counsel for the revenue submits that the assessed has sought to evade tax under the mercantile system of accounting. We are of the view that it is not for the revenue authorities to tell the assessed how to maintain its accounts. 8. We cannot find any fault in the view taken by the Tribunal and find no merit in this appeal 9. No substantial question of law arises. 10.The appeal is dismissed.” 7. We find, it is a settled law that the issue on which there is a decision of the jurisdictional High Court, the same has to be followed. In the interest of justice, we direct the Assessing Officer to examine the issue in this appeal and on the touchstone of the aforesaid jurisdictional High Court decision accordingly. Needless to add, assessee should be granted adequate opportunity of being heard. 8. In the result, the appeal of the Revenue stands allowed for statistical purposes.” 10. We find that the issue arsing in present appeals are same as in the above appeal and order of authorities below are consequential and on same issue. Since, we have remitted the issue to the file of the Assessing Officer with certain directions, we deem it appropriate to remit the issues raised in these appeals also to the file of the Assessing Officer with same direction. 11. Accordingly, the Assessing Officer shall consider the issue as per our directions as above after giving effect to our order for Assessment Year 2015-16. We order accordingly. 9 ITA No.660 & 757/Del/2020 12. In the result, these appeals are allowed for statistical purposes. Order pronounced in the open court on 13/07/2022. Sd/- Sd/- [YOGESH KUMAR US] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; 13.07.2022. f{x~{tÜ? f{x~{tÜ?f{x~{tÜ? f{x~{tÜ? Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi