SIRCAR SECURITES & ALLIED SERVICES PVT LTD,KOLKATA vs. ACIT,CIRCLE 23(2), DELHI

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ITA 1682/DEL/2022Status: DisposedITAT Delhi30 August 2024AY 2017-18Bench: SHRI C. N. PRASAD (Judicial Member), SHRI M. BALAGANESH (Accountant Member)5 pages

AI SummaryPartly Allowed

Facts

The assessee filed appeals for Assessment Years 2017-18 and 2019-20 against orders of the National Faceless Appeal Centre (NFAC), Delhi. The appeals concerned additions made by the Central Processing Centre (CPC) under section 143(1) and upheld by NFAC, particularly an addition of Rs. 79,95,528/- for service tax under section 43B and a disallowance of Rs. 52,13,488/- for employees' contribution to Provident Fund/ESI. The assessee also sought to transfer the appeals to the Kolkata Tribunal, citing a change in PAN jurisdiction.

Held

The Tribunal rejected the request to transfer appeals to Kolkata, affirming Delhi's jurisdiction. It allowed the assessee's appeal regarding the service tax addition under section 43B, finding it erroneous because the assessee had not claimed it as a deduction in the profit and loss account. However, the Tribunal dismissed the assessee's ground concerning the disallowance of employees' contribution to PF/ESI, citing the Supreme Court's decision in Checkmate Services Pvt. Ltd. The ground for late filing fees u/s 234F was dismissed as not pressed.

Key Issues

1. Jurisdiction of the Income Tax Appellate Tribunal (ITAT) when the assessee's PAN jurisdiction has changed. 2. Applicability of Section 43B of the Income-tax Act to unpaid service tax not claimed as a deduction. 3. Disallowance of employees' contribution to Provident Fund and Employees' State Insurance (ESI). 4. Levy of fees for late filing of return under Section 234F.

Sections Cited

Section 143(3) of the Income-tax Act, 1961, Section 143(1) of the Income-tax Act, 1961, Section 43B of the Income-tax Act, 1961, Section 139(1) of the Income-tax Act, 1961, Section 234F of the Income-tax Act, 1961

AI-generated summary — verify with the full judgment below

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

Before: SHRI C. N. PRASAD & SHRI M. BALAGANESH

For Appellant: Shri Deep Agarwal, Adv

For Respondent: Shri Anuj Garg, Sr. DR

Hearing: 09/07/2024Pronounced: 30/08/2024

PER M. BALAGANESH, A. M.: The appeal in & 1683/Del/2022 for AY 2017-18 & 2019- 1. 20, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2022-23/1043150736(1) dated 24.05.2022 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 10.01.2020 and 10.09.2020 by the Assessing Officer, CPC, Delhi (hereinafter referred to as ‘ld. AO’).

Identical issues are involved in both these appeals and hence they are 2. taken up together and disposed of by this common order for the sake of convenience.

& 1683/Del/2022 Sircar Securities & Allies Services Pvt. Ltd At the outset, we find that the assessee seeks to transfer these 3. appeals from Delhi to Kolkata Tribunal in view of the fact that the PAN was transferred to Kolkata jurisdiction. But we find from the intimation passed u/s 143(1) of the Act for the Asst Year 2017-18, the jurisdiction of the assessee during Asst Year 2017-18 was Circle 23(2), Delhi and even the first appellate order was passed by NFAC Delhi. The law is now very well settled that the jurisdiction of the AO would decide the jurisdiction of the Tribunal and accordingly, the request of the assessee vide its letter dated 31.5.2023 to transfer these appeals to Kolkata Tribunal is hereby rejected.

The Ground Nos. 1 & 5 raised by the assessee are general in nature 4. and does not require any specific adjudication.

The Ground No.2 raised by the assessee is challenging the 5. confirmation of addition made on account of service tax u/s 43B of the Act in the sum of Rs 79,95,528/-.

We have heard the rival submissions and perused the materials 6. available on record. The return of income for the Asst Year 2017-18 was filed by the assessee on 27.8.2018 declaring total income of Rs 56,59,143/-. This return was duly processed u/s 143(1) of the Act by the ld. CPC on 10.01.2020 wherein a sum of Rs 79,95,528/- was added by the CPC by applying the provisions of section 43B of the Act on account of service tax not remitted to the Central Government within time. This action of the CPC was upheld by the ld. NFAC, Delhi. But it is pertinent to note that the service tax portion was not even claimed as deduction by the assessee. The same was not even routed through the profit and loss account. This sum of Rs. 79,95,528/- represent service tax payable by the assessee which stood & 1683/Del/2022 Sircar Securities & Allies Services Pvt. Ltd unpaid before the due date of filing of return u/s 139(1) of the Act for the Asst Year 2017-18 . This fact was duly mentioned by the Tax Auditor in the Tax Audit Report in Form 3CD vide Column No. 26(i)(B)(b) thereon. Accordingly, it was pleaded by the assessee that unpaid service tax of Rs 79,95,528/- cannot be subject matter of addition u/s 43B of the Act. The assessee in support of its contentions placed reliance on the decision of Hon’ble Jurisdictional High Court in the case of CIT Vs Noble and Hewitt (I) (P) Ltd dated 10.9.2007 and decision of Hon’ble Bombay High Court in the case of PCIT vs Tops Security Ltd were relied upon, in addition to certain tribunal decisions also on the same issue. The ld. NFAC, Delhi observed that the assessee having collected service tax portion from its customers was supposed to deposit the same with the Central Government and not doing so had resulted in unjust enrichment to the assessee which requires to be taxed u/s 43B of the Act. In our considered opinion, the assessee had routed the entire receipt of service tax and payment of service tax as a balance sheet item and had not routed the same in the profit and loss account. We find that the assessee had not claimed any deduction towards service tax at all in the computation of income. While this is so, there is no question of applicability of provisions of section 43B of the Act in the instant case. Hence we hold that the lower authorities grossly erred in framing the addition u/s 43B of the Act. Accordingly, the Ground No. 2 raised by the assessee is allowed.