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Income Tax Appellate Tribunal, DELHI “SMC-1” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
This appeal filed by the assessee for the assessment year 2015-16 is directed against the order of learned CIT(A)-1, Gurgaon dated 30.11.2018.
The assessee has raised following grounds of appeal:-
1. “On the facts and in the circumstances of the case and in law, the CIT(A) erred in sustaining addition in respect of Service Tax paid in a sum of Rs.11,97,876/-, wherein CENVAT credit could not be availed.
2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in sustaining addition in respect of various expenses incurred under the head “Other Minor Miscellaneous Advances Written Off Rs.294025.”
Facts giving rise to the present appeal are that case of the assessee was picked up for scrutiny assessment for limited scrutiny under CASS. The Assessing Officer while framing the assessment, called upon the assessee to explain regarding provision of doubtful receivables of Rs.11,67,087/-; bad debts of Rs.29,55,869/- and Advances written off of Rs.29,55,189/- Thereby, the Assessing Officer assessed the income at Rs.29,55,189/- against the returned income at NIL. The Assessing Officer further directed that the assessee had paid taxes under MAT credit and given after addition of the returned income sale paid taxes under MAT only. After adjustment of Rs.9,13,154/-, MAT credit was allowed to be carried forward to Rs.9,66,149/-.
Aggrieved against this, the assessee preferred appeal before the Ld.CIT(A) who after considering the submissions, partly allowed the appeal of the assessee. Thereby, Ld.CIT(A) deleted the addition made on account of discount written off to Rs.14,63,288/- and confirmed the service tax which could not be claimed as CENVAT of Rs.11,97,876/-. Ld.CIT(A) also confirmed the addition of Rs.2,94,025/- in respect of “Other Minor Miscellaneous Advances Written Off”.
Aggrieved against this, the assessee preferred the present appeal before the Tribunal.
Ld. Counsel for the assessee submitted that the matter may be restored to the Assessing Officer for verification of the claim of the assessee in respect of both the additions which have been sustained and decided the issue as per law. Ld. Counsel for the assessee further reiterated the submission as made in the written synopsis which reproduced hereunder for ready-reference:-
“Two grounds are raised in the present appeal, and in respect of both, the assessee's prayer is for directions to be issued to the AO for examination of issues after considering the material on record giving the assessee an opportunity of being heard. A paper book comprising of 88 pages is filed in the matter.
Ground No.1 :- This relates to a disallowance stated to be for service tax paid, amounting to Rs. 11,97,876/-. At page 1 of the paper book, the break-up of the said amount is given. Your Honour would be pleased to notice on a perusal thereof that a sum of Rs.10,44,134/- in fact relates to an excess payment made to service provider which was subsequently written off. The said party's ledger account is at page 2 of the paper book, and evidences that the assessee receives services from M/s Converse New Media Pvt. Ltd. As of 31.03.2015 (page 4 of paper book), a sum of Rs. 10,44,134/- as paid to the said party in excess against services rendered has been written off. A sample invoice of the said party is enclosed at page 5 of the paper book.
With regard to the residual amount of Rs. 1,53,742/-, the ledger account of service tax input is at page 6 of the paper book. Your Honour would find that on 31.07.2014, an amount of Rs. 1,53,742/- was wrongly booked against M/s Convonix Systems Pvt. Ltd. When the error was noticed the debit was written off on 31.09.2014. The said party's ledger account is at page 37 of the paper book. The issue arose because of doubt as to whether services provided by the said party (Convonix Systems Pvt. Ltd.) were part of the 'Negative List' for service tax purposes at the relevant time. The party's invoice is at page 40 of the paper book, and the service tax liability as defrayed is 12.36% of the invoice amount (Rs.12,43,866/-). The ledger account for service tax input is at page 43 of the paper book.
Submissions on this point are noticed at CIT(A) at page 2 and 3 of the impugned order, while the finding is at page 9. The CIT(A) has held that merely because supplier bills were not available the amount does not become allowable. Directions from the Hon'ble Tribunal are sought for examination of the issue in the light of the evidence as aforestated. The factum of payment, the factum of these entities being regular suppliers of the assessee, as well as the factum of their rendering services on a regular basis in the assessee's humble suggestion, make compelling case for allowance of the expenditure u/s 37 of the Act. So it is pledged.
2. Ground No. 2:- This relates to confirmation of disallowance in respect of advances to suppliers/ purchases as written off. The tabulation of the said party is at page 75 of the paper book. In respect of each party, the relevant ledger accounts are provided as under:-
Ledger S.No. Particulars Reason Amount 1. Internet & Mobile 3,000 PB76 @ 76 Non Receipt of Bills Association of India 2. Getjar Networks Limited 2,19,957 PB77 Written off considered bad 3. Ibibo Group Pvt.Ltd. 31,568 PB79@80 Written off considered bad 4. ISO Bar A Division of 60,625 PB81@ 86 Balance outstanding Agies Pvt.Ltd. written off 5. Interest on Professional (19,250) PB87 Excess Interest written Tax payable off 6. Short & Excess (1,820) PB88 294,080
The amount stands disallowed vide finding at page 10 of the impugned order. The CIT(A) has noticed that all amounts have been duly paid and / or paid in excess. For this reason, the CIT(A) holds that the payments are not in the nature of business expenditure. The assessee's case is that payments are often made in advance to vendors as part of running accounts. In many cases, payments would be made in excess of service subsequently received, and the differential in such cases would certainly be said to be incurred wholly and exclusively for business.
It is most respectfully prayed that the AO be directed to examine the said details and allow the same as per law after giving the assessee an opportunity of being heard.
Placed for the most favourable consideration.”
Ld. Sr. DR opposed these submissions. However, he submitted that the Revenue has no objection if the matter is restored to the Assessing Officer for verifying the claim of the assessee.
I have heard the rival contentions and gone through the material available on record. After considering the totality of facts and material placed before me, I deem it proper in the interest of justice to restore the issue related to impugned additions in respect of service tax paid and other minor miscellaneous advances written off to the file of the Assessing Officer to decide it in accordance with law after verifying the claim of the assessee as stated in the written submissions. Thus, grounds raised by the assessee in this appeal are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Above decision was pronounced on conclusion of Virtual Hearing in the presence of both the parties on 30th June, 2021.