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Facts
The assessee, engaged in supplying CNG, filed its return of income. The Assessing Officer (AO) made additions for unaccounted sales of CNG and disallowed service tax expenses. The assessee's appeal to the Ld. CIT(A) was dismissed.
Held
The Tribunal held that the conversion rate used by the AO for converting SCM to KGs was incorrect, and the standard rate of 0.75 Kg per SCM should be applied. Regarding service tax, the Tribunal remanded the issue to the AO for necessary verification.
Key Issues
Whether the conversion rate from SCM to KG for CNG sales was correctly applied by the AO, and whether service tax credit claimed as expenditure is allowable.
Sections Cited
143(3), 143(2), 142(1), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “B” BENCH: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
The present appeal is filed by assessee against the order dated 17.05.2024 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No.CIT(A), Delhi-4/10448/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 16.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.
Brief facts of the case are that assessee company is engaged in the business of supplying CNG in Gurugram city through pipeline/pump to industrial, domestic and commercial customers and filed its return of income on 19.02.2018, declaring total income of INR 9,32,43,680/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 27.08.2018 and duly served upon the assessee. Thereafter, notice u/s 142(1) alongwith questionnaire were issued on various dates which were duly replied by the assessee company and furnished the requisite details. After considering the submission, the assessment order was completed by making additions of INR 8,16,80,587/- on account of unaccounted sales of CNG and further disallowance of INR 48,36,409/- on account of service tax was made.
3. Against this order, assessee filed an appeal before Ld. CIT(A) vide impugned order dated 17.05.2024, dismissed the appeal of the assessee.
Aggrieved against the order of Ld. CIT(A), the assessee filed an appeal before Tribunal by taking following grounds of appeal:-
1. “That Ld. CIT (A) has not given proper opportunity to represent the facts in the appeal matter to the appellant.
2. That under the facts and circumstances, the Ld. AO erred in law as well on merits added CNG transit loss 3053614 SCM and considered unaccounted income of Rs. 8,16,80,587/- to the value of CNG Transit Loss considering it as unaccounted Sales with hypothetical assumptions without considering the full submission of the assessee submitted during the course of assessment proceedings and the Ld. CIT appeal has dismissed the appeal on the grounds that the appellant has not replied to the notice issued by the Ld. AO. This matter has already been considered in earlier assessments in A.Y 2013-14 to 2016-17 (i.e. Preceding 4 years) and the same has been fully allowed.
That under the facts and circumstances, the Ld. AO erred in law as well on merits added back service tax credit claimed as expenses in profit & loss account of Rs. 48,36,409/-, which was not claimed as Input in service tax returns without considering the full submission of the assessee submitted during the course of assessment proceedings. This matter has already been considered in earlier assessments in A.Y 2013-14 to 2016-17 (i.e Preceding 4 years) and the same has been fully allowed.
4. That the appellant request to kindly remand back the said case to the Ld. AO for fresh consideration of the case.
That The Appellant craves leave to add, alter, vary, omit, substitute or amend the above stated grounds of appeal, at any time before or at the time of hearing of the appeal, so as to enable your Honour to decide this reference according to law and the facts of the case.”
Ground of appeal No.1 raised by the assessee is with respect 5. to the action of Ld.CIT(A) in not providing proper opportunity of being heard and Ground of appeal No.2 is with respect to the addition of INR 8,16,80,587/- made on account of undisclosed sales of CNG.
6. Before us, Ld.AR for the assessee submits that the addition of similar nature by making identical observations was made in immediately preceding assessment years where this issue was decided by the Co-ordinate Bench of Tribunal in 6377/Del/2018 & Others vide order dated 07.11.2023 for Assessment Years 2013-14 & Others wherein the Co-ordinate Bench had confirmed the order of Ld.CIT(A) deleting the addition so made by observing that calculation done by AO for conversion of Standard Cubic Meter (“SCM”) to per kilogram of gas was incorrect. The assessee submits that AO in the year under appeal had taken same analogy and converted SCM into KG by taking conversion at 0.76338 Kgs per SCM as against the standard conversion rate 0.75 KG per SCM. He submits that the Co-ordinate Bench has upheld the conversion rate of 0.75 Kg per SCM therefore, the same should be applied for conversion of SCM to KGs and if the same is taken, there would be no difference remained of undisclosed sale.
7. On the other hand, Ld.CIT DR for the Revenue supports the orders of lower authorities and requested for the confirmation of the same.
8. Heard the arguments of both the parties and perused the material available on record. From the perusal of order of Co- ordinate Bench in assessee’s own case in preceding AYrs, we find that Co-ordinate Bench has upheld the action of Ld.CIT(A) who hold the conversion rate of 0.75 Kg per SCM as proper. The relevant findings of Co-ordinate Bench as contained in para 10 & 11 of the order are reproduced as under:-
10. “The Id. CIT(A) held that the AO placed his reliance on the website of GAIL without examining as to whether the density of gas is fixed @ 0.76338 kg/SCM for all purposes and for good. In view of the invoices/details/documents available on record, the Id. CIT(A) held that the conversion rate for converting the purchases from SCM to Kgs should be taken at 0.75 Kg per SCM. After making the re-computation on the basis the conversion rate of 0.75 still a difference of 95,605 Kgs between in the Purchases 44007309 SCM x 0.75 33005482 kgs and Sales and Sales Purchases 32909877 kgs).
11. In view of this factual background, reliance placed by the AO on the website of GAIL without considering the details/information mentioned on the actual invoices was held to be unjustifiable by the Id. CIT(A). We find that the Id. CIT(A) has rightly computed the conversion of SCM into kgs and the transmission loss of 0.29% was held to be at par with industry standards. Rather, the transmission loss of 0.29% is much less than IGL, a major concern engaged in supply of compressed natural gas." 9. As there is no change in the facts and circumstances of the case, as could be evident from the perusal of the assessment order itself where the AO has taken the conversion factor @ 0.75338 Kg per SCM thus, by respectfully following the observations of the Co-ordinate Bench in the case of the assessee for AYrs 2013-14 to 2016-17, we direct the AO to delete the addition made on this account. Ground of appeal No. 1 raised by the assessee is accordingly allowed.
Ground of appeal No.3 raised by the assessee is with respect to the disallowance of INR 48,36,409/- made on account of service tax credit claimed as expenditure in the Profit & Loss Account.
After considering the submission of both the parities, it is seen that AO has disallowed service tax expenses claimed by the assessee where the credit was not allowed to the assessee of input credit therefore, the assessee has claimed the return in Profit & Loss Account. AO has disallowed the claim by observing that service tax is part of the purchase cost and already included in the consolidated figure of purchase against which the claim of the assessee is that it is separately accounted for and since now credit of service tax is not allowed which was claimed by the assessee and therefore, same was debited in the P&L A/c. We find that this issue has been examined and decided by the Co-ordinate Bench in earlier AYs wherein the Co-ordinate Bench has remanded this issue to the file of AO for making necessary verification. Thus, by following the same, we direct the AO to make necessary verification whether credit of service tax as claimed was not allowed by the Department, if the same is found correct, in such circumstances, the claim of the assessee be allowed. With these directions, Ground of appeal No.3 raised by the assessee is partly allowed for statistical purposes.
The other grounds of appeal raised by the assessee are not adjudicated as we have already decided the appeal of the assessee on merits.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open Court on 05.06.2025.