CHANDRAKANT RANGANATH GAIKWAD,,SATARA vs. INCOME TAX OFFICER,, SATARA

This bunch of appeals relating to same assessee for different assessment years on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience.

The appeals were fixed for hearing on 08.05.2018 and also on 09.05.2018. However, none appeared on behalf of the assessee nor any application was moved for adjournment and the appeals are being disposed of after hearing the learned Departmental Representative for the Revenue.

All the appeals were filed after delay of 77 days. The assessee has filed an affidavit explaining the reasons for the delay. There were unfortunate sad events of losing family members by the assessee. Further, because of huge liability of service tax payable to the Central Excise Department, the proprietary business of the assessee suffered losses. The assessee temporarily discontinued the business and went back to his agricultural activity and hence, the orders could not be served upon the assessee. Even the notices of hearing remained un-attended by the assessee before the CIT(A) and the order of CIT(A) was passed ex-parte. Hence, the delay of 77 days in filing the appeals late before the Tribunal. In view of the above facts and circumstances, there is reasonable cause for not filing the appeals in time and hence, the delay is condoned.

First, we shall take up the appeal of assessee in ITA No.610/PUN/2017, relating to assessment year 2006-07 to adjudicate the issue raised in all the appeals, which is identical. The assessee is aggrieved by the orders of authorities below in passing re-assessment order under section 143(3) r.w.s. 147 of the Act on the basis of statement of Central Excise Department. The

Briefly, in the facts of the case, the assessee for the year under consideration was engaged in supply of labour and job work. The assessee for the year under consideration had furnished the return of income declaring total income of ₹ 4,96,943/-. The case of assessee was reopened under section 147/148 of the Act after recording reasons for reopening the assessment. In response thereto, the assessee submitted that return of income already filed may be treated as filed in response to notice under section 148 of the Act. The case was manually selected for scrutiny. In response to notices, the learned Authorized Representative for the assessee attended from time to time and submitted the details / information. The assessee was asked to produce the requisite details in respect of service tax. The Assessing Officer noted that the Central Excise and Service Tax Department had raised unpaid service tax liability for the period 01.10.2005 to 31.12.2010 at ₹ 1,53,14,160/-, against which the assessee had considered an amount of ₹ 1,33,58,430/- as unpaid liability and had disallowed under section 43B of the Act. The case of assessee was that it had not included PF, ESIC and Bonus while working out the service tax liability. The Assessing Officer thus, show caused the assessee as to why liability of ₹ 9,28,709/- in assessment year 2006-07 was not considered by the assessee for disallowance under section 43B of the Act. The assessee explained that it had collected service tax of ₹ 9,73,371/- and shown the same in Balance Sheet. Out of the same, the assessee had paid ₹ 9,28,709/- upto the date of filing the return of income and balance service tax of ₹ 44,662/- was

Before the CIT(A), the assessee failed to appear on three dates of hearing nor any submissions were filed before the CIT(A). It was noted by the CIT(A) that the Central Excise Department had worked out the service tax liability at ₹ 10,38,645/- as against which the assessee had only considered total service tax of ₹ 9,73,371/-, thus difference of ₹ 65,274/- remained unpaid which was not allowable under section 43B of the Act. Hence, the same was disallowed by the Assessing Officer and added to the total income of assessee. As the assessee had failed to furnish any submissions controverting the findings of Assessing Officer, the CIT(A) found no reason to interfere with the order of Assessing Officer and the appeal of assessee was dismissed.

The assessee is aggrieved by the said order passed by the CIT(A). The first issue which is raised by the assessee is against re-assessment order passed under section 143(3) r.w.s. 147 of the Act. The case of assessee in this regard is that in the absence of any application of independent mind by the Assessing Officer to form and compute working of income and simply relying on the statement of Central Excise Department, the case of assessee cannot be reopened under section 147 / 148 of the Act. The second plea raised by the assessee is against merits that the disallowance under section 43B of the Act for non-payment of alleged service tax liability was not correct as service tax did not fall under the scope of section 43B of the Act.

The learned Departmental Representative for the Revenue on the other hand, stressed that any form of tax was covered under the phrase ‘tax, duty, cess’ used in section 43B of the Act.

The assessee has failed to put appearance before the Tribunal. The two issues which need to be adjudicated in the present appeal is whether the proceedings initiated under section 147 / 148 of the Act were valid or not. The second issue is against merits of addition, wherein the assessee has challenged the applicability of section 43B of the Act itself. It may be noted that two grounds are independent of each other and even if one is decided in favour of assessee, addition would not be sustained. So, following the principles of natural justice, I deem it fit to restore the issue back to the file of CIT(A), who shall afford reasonable opportunity of hearing to the assessee and decide both the issues independently. The assessee is also directed to appear before the CIT(A) and furnish the necessary information. The CIT(A) shall first decide the issue of reopening of assessment under section 147 of the Act and thereafter, decide as to whether payment of service tax, if not paid, does it attract the provisions of section 43B of the Act. The CIT(A) shall consider the settled principles with regard to applicability of provisions of section 43B of the Act on service tax and decide the issue in accordance with law. The grounds of appeal raised by the assessee are thus, allowed for statistical purposes.

The facts and issues in ITA Nos.611/PUN/2017 to 614/PUN/2017 are identical to the facts and issues in ITA No.610/PUN/2017 and the decision in ITA No.610/PUN/2017 shall apply mutatis mutandis to ITA Nos.611/PUN/2017 to 614/PUN/2017.

In the result, all the appeals of assessee are allowed for statistical purpose.