HARYANA CITY GAS DUSTRIBUTION LIMITED,GURGAON vs. ACIT, CENTRAL CIRCLE-18, DELHI

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:-

“That Ld. CIT (A) has not given proper opportunity to represent the facts in the appeal matter to the appellant.

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.

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 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.

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 ITA Nos. 2301& 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.

On the other hand, Ld.CIT DR for the Revenue supports the orders of lower authorities and requested for the confirmation of the same.

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:-

“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).

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."

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.