ACIT, NEW DELHI vs. M/S. TETRA TECH INDIA LTD., DELHI

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ITA 542/DEL/2017Status: DisposedITAT Delhi31 May 2022AY 2010-114 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found merit in the assessee's contention that the unpaid service tax was not claimed as an expenditure. Therefore, the matter was remitted back to the AO to verify the assessee's claim of suo-moto disallowance in the subsequent year.

What were the facts?

The Assessing Officer (AO) added Rs. 1,85,92,765/- to the assessee's income for non-payment of service tax, based on an audit report. The assessee contended that this amount was not debited to the Profit & Loss Account and was subsequently disallowed in the following assessment year.

What were the issues?

Whether unpaid service tax, not claimed as an expenditure in the current year, can be added back to income. Whether a suo-moto disallowance in a subsequent year validates the non-addition in the current year.

Which sections of the Income-tax Act were involved?

Section 43B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI

Before: SHRI G.S. PANNU, HON’BLE & MS. ASTHA CHANDRA

For Respondent: Shri Umesh Takyar, Sr. DR
Hearing: 07.04.2022Pronounced: 31.05.2022

The appeal by the Revenue is directed against the order dated 19.10.2016 of the Ld. Commissioner of Income Tax (Appeals) - 33, New Delhi (“CIT(A)”) pertaining to the Assessment Year (“AY”) 2010-11.

2.

The Revenue has taken following solitary ground:- 1. “On the facts and in the circumstances of the case and law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,85,92,765/- on account of non-payment service tax to the Government ignoring the facts that as

per the audit report the assessee company has not paid service tax, hence the same must be added back to the income of the assessee.”

3.

The facts in brief are that based on the observation made by the auditors, the Ld. Assessing Officer (“AO”) added Rs. 1,85,92,765/- to the income of the assessee company by holding that the company has not paid the said amount of service tax.

4.

The assessee challenged the said addition in appeal before the Ld. CIT(A) on the ground that the service tax payable by the assessee was not debited to Profit & Loss Account and was not claimed as an expenditure in the return of income.

1.

4.1 The Ld. CIT(A) discussed this issue in para 9 of his order. Before the Ld. CIT(A), the assessee submitted that it has suo-moto disallowed the cumulative amount of unpaid service tax amounting to Rs. 2,48,63,317/- standing in the books of account in AY 2011-12. Thus, disallowance of the same in current year (AY 2010-11) leads to double disallowance. A chart was submitted to demonstrate that miscellaneous amount of unpaid service tax amounting to Rs. 2,48,63,317/- was disallowed suo-moto by the assessee under section 43B of the Income Tax Act, 1961 (“Act”) in its computation of income for AY 2011-12 which is reproduced below:

Remarks S. Balance Financial Service tax Reversal of Service Cumulative Amount Year payable service tax paid service Service tax disallowed No. tax during the tax/Cenvat during payable at in tax payable year Credit the year end of the computation during availed year the year during the year - 1 2005-06 17,87,825 3,71,385 14,16,440 14,16,440 - 2 2006-07 93,85,218 37,47,133 9,19,962 47,18,123 61,34,563 - - 3 2007-08 1,11,64,376 48,30,919 50,90,049 12,43,408 73,77,971 - 4 2008-09 1,17,21,287 21,71,089 30,00,000 65,50,198 1,39,28,169 5 2009-10 1,12,81.120 36,66,131 _ 76,14,989 2,15,43,158 1,85,92,765 Amount disallowed order passed u/s 143(3) 6 2010-11 2,11,65,037 80,08,920 98,35,958 33,20,159 2,48,63,317 2,48,63,317 Amount disallowed u/s 43B suo-moto by TTIL 7 2011-12 2,59,89,459 56,58,375 - 2,03,31,084 4,51,94,401 2,03,31,084 Amount disallowed 43B suo- moto by TTIL 4,51,94,401 6,37,87,166 Total 4.2 The Ld. CIT(A) deleted the impugned addition by observing that the assessee has taken corrective action in the subsequent year. There is no loss to the Revenue, even though the addition has been made on merit and is sustainable in law and on facts, confirming the addition will result in multiplicity of litigation. The Ld. CIT(A) also noted that the assesee has not claimed the said unpaid service tax as an expenditure during the year.

5.

Aggrieved, the Revenue is in appeal before us.

6.

Despite issue of several notice of hearing by the Tribunal, none attended for the assessee. We, therefore, proceeded to decide the appeal after hearing the Ld. DR.

7.

We have given careful thought to the issue of impugned disallowance. The case of the assessee is that it has not claimed the amount of unpaid service tax as deduction in AY 2010-11 presently under consideration. Therefore, it cannot be the subject matter of disallowance under section 43B of the Act. We find force in this contention of the assessee. Before the Ld. CIT(A), assessee has submitted a chart showing that the impugned amount of service tax has been suo-moto disallowed by it during the previous year relevant to the AY 2011-12. This needs verification. Therefore, we consider it proper to remit the matter back to the file of the Ld. AO to verify the contention of the assessee and if on verification he finds that the contention of the assessee is correct, then the impugned addition be not made in AY 2010-11 presently under consideration. We direct and order accordingly.

8.

In the result, the appeal of the Revenue is treated as allowed for statistical purposes.

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