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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Per Shri A.T.Varkey, JM
This is an appeal filed by the revenue against the order of Ld. CIT(A)-7, Kolkata dated 30.08.2018 for AY 2012-13 on the following revised grounds of appeal: “
1. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in deleting the disallowances made u/s. 40A(3) after accepting fresh evidence in contravention of rule 46A of the I. T. Rules, 1962.
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in deleting the disallowance of expenses claimed towards Service Tax Payment of Rs.1,01,10,969/- by accepting fresh evidence in contravention of Rule 46A of the I. T. Rules, 1962.
3. That without prejudice to the above, the matter may be remanded back to the file of the AO for verification of the genuineness of claim
4. The appellant craves leave to add, alter and/or modify any one or all of the grounds of appeal mentioned above.”
2. Briefly stated facts as observed by the AO are that the assessee debited Rs.1,01,10,969/- as service tax in his P&L Account. On questioning the assessee, he gave reasons that this amount was added in the turnover and then debited from the P&L Account. The assessee was asked to provide the evidence in this regard. The assessee requested for time to produce the same. But subsequently failed to appear and file the same. Resultantly, this amount of Rs.1,01,10,969/- was disallowed as bogus expenses and added back to the total income of the assessee. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who deleted the addition by observing as under: “The assessee had debited an amount of Rs.1.,01,10,969/-, which has been claimd as service tax paid. I find that the AO here also has not at all looked into the details, which the assessee had submitted. From the photocopies of the details filed, I find that during the year the assessee had undertaken total job work for financial year 2011-12 to the tune of Rs.20,62,55,743/-, which are inclusive of service tax amounting to Rs.1,01,10,969/-. Since the total job proceeds include this amount, as per general accepted accounting principle when the said service tax finally paid to the Government it has been rightly debited to the P&L A/c. All the service tax challans along with bank statement have been tallied and I find it to be in order. Therefore, I find that the assessee had rightly discharged its onus and has accordingly paid ll the service tax, which was due to the Government. Therefore, the addition of Rs.1,01,10,969/- is hereby deleted and this ground of appeal is treated as allowed. ”
Aggrieved by the aforesaid action of Ld. CIT(A) giving relief to the assessee, the revenue is in appeal before us.
We have heard rival submissions and gone through the facts and circumstances of the case. Main grievance of revenue is against the action of Ld. CIT(A) in allowing the relief without calling for Remand Report of AO, when according to Ld DR the assessee produced before the Ld. CIT(A) for the first time, individual party ledger, photocopy of details etc. which the Ld. CIT(A) tallied and found to be correct, so he gave relief to the assessee. In such a scenario, according to Revenue, there is a violation of Rule 46A of the Income Tax Rules, 1962 (hereinafter referred to as the “Rules”). We note that the AO has disallowed the amount on the ground that the assessee failed to appear before him and furnish the details. However, on appeal the Ld. CIT(A) has given relief to the assessee and has found that under the total job work for financial year 2011-12 to the tune of Rs.20,62,55,743/- which figure was inclusive of service tax amounting to Rs.1,01,10,969/- and when the service tax was finally paid to the Government it has been rightly debited to the P&L A/c. And also that the Ld. CIT(A) has observed that all the service tax challans along with bank statement have been tallied and he found that to be in order, which action is assailed for violation of Rule 46A. In this context we note that since the assessee failed to produce or appear before the AO, he made the addition. However at the appellate stage when Ld. CIT(A) has rendered a finding of fact as discussed supra, it can be safely presumed that service tax challans, bank statements etc. were produced for the first time before the Ld. CIT(A). So, there is per-se violation of Rule 46A of the Rules. So, for the interest of justice, this issue is set aside back to AO for the purpose of verification as prayed for by the department, and as raised by ground no. 3, and we make it clear that the issue is only remanded back to the file of AO for the limited verification after affording reasonable opportunity of being heard to the assessee, as per law. Therefore, the appeal of the revenue is allowed for statistical purpose.
In the result, the appeal of the revenue is allowed for statistical purpose.