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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: S/SHRI N.S SAINI & PAVAN KUMAR GADALE
IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK
BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER
ITA No.413/CTK/2015 Assessment Year :2011-12
DCIT, Circle-1(1), Cuttack Vs. Sri Dipendra Bahadur Singh, Hidisahi, Joda, Keonjhar PAN/GIR No.ADJPS 5869 D (Appellant) .. ( Respondent)
ITA No.419/CTK/2015 C.O.No.52/CTK/2015 (in ITA No.413/CTK/2015) Assessment Year :2011-12
Sri Dipendra Bahadur Singh, Vs. DCIT, Circle-1(1), Cuttack Hidisahi, Joda, Keonjhar PAN/GIR No.ADJPS 5869 D (Appellant)/cross objector .. ( Respondent)
Assessee by : Shri S.K.Agarwal, AR Revenue by : Shri D.K.Pradhan, DR
Date of Hearing : 12/07/ 2017 Date of Pronouncement : 13 /07/ 2017
O R D E R Per N.S.Saini, AM These are cross appeals filed by the revenue and the assessee and
cross objection filed by the assessee against the order of CIT(A)-Cuttack,
dated 20.7.2015, for the assessment year 2010-2011 .
In revenue’s appeal, the sole issue involved is that the CIT(A) is not
justified in deleting the addition of Rs.1,20,30,933/- made under section
43B in respect of unpaid service tax liability.
Brief facts of the case are that the Assessing Officer found that the
assessee has shown service tax payable in the balance sheet amounting to
Rs.1,20,30,933/-. The assessee filed details of payment challans of service
tax amounting to Rs.78,26,412/- on different dates in the month of January
and February, 2013. The Assessing Officer observed that the assessee
raised his bills for the financial year 2010-2011 in which service tax
amounts were included. It was contingent on the part of the assessee to
pay service tax on or before the due date of filing of return i.e. 30.9.2011,
whereas the assessee has paid the same in the beginning of 2013.
Therefore, he disallowed deduction for Rs.1,20,30,933/- under section 43B
of the Act.
The assessee in appeal before the CIT(A) submitted that on the date
of balance sheet, the assessee has shown a sum of Rs.1,20,30,933/-as
liability to be discharged towards service tax which was disallowed by the
Assessing Officer as the same was not paid before the due date of filing of
return of income. It was submitted that section 43B of the Act specifies
that certain deductions to be allowed only on actual payment. That means
if an assessee claims any expenditure in his profit and loss account and
that expenditure has not been paid as per the provisions of the Act, then,
that expenditure will be disallowed. But where a person does not claim any
expenditure/deduction in his profit and loss account, then no such addition
or disallowance can be made. In the instant case, the assessee has not
claimed any expenditure or deduction towards service tax in his profit and
loss account, therefore no such expenditure could be disallowed.
The CIT(A) after considering the submission of the assessee held that
from a perusal of the Profit and loss account and the balance sheet of the
assessee, it is evident that the assessee has not claimed any deduction
regarding payment of service tax. Since no deduction has been claimed by
the assessee on this account and the assessee had only shown the amount
as liabilities in its balance sheet, there is no requirement of disallowing of
the same u/s.43B of the Act.
Being aggrieved by the said order of the CIT(A), the revenue is in
appeal before us.
Ld D.R. supported the order of the Assessing Officer whereas ld A.R.
of the assessee supported the order of the CIT(A) and relied on the decision
of Hon’ble Delhi High Court in the case of Jet Lite (India) Ltd vs CIT, 128
DTR (Del) 91, wherein, it was held that section 43B is only attracted when
the assessee claims deduction of any sum payable by way of tax or duty
under any law for the time being in force and, where, as in the case of the
assessee, no charge is claimed or made to the profit and loss account, there
was no question of disallowing the amount taken to the balance sheet on
the liability side.
After considering the rival submissions and perusing the materials on
record, we find that the undisputed facts of the case are that the Assessing
Officer from the balance sheet of the assessee found that the assessee has
shown outstanding liability for service tax at Rs.1,20,30,933/-. According
to the Assessing Officer, since this amount was not paid by the assessee
before the due date of filing of return of income u/s.139(1) of the Act, which
was 30.9.2011, he disallowed the same u/s.43B of the Act and added to
the income of the assessee.
On appeal before the CIT(A), the assessee contended that service tax
amount of Rs.1,20,30,933/- was not claimed as deduction in the profit and
loss account by the assessee and, therefore, no disallowance u/s.43B of
the Act of the said amount can be made by the Assessing Officer. The
CIT(A) after verifying the P&L account and balance sheet of the assessee
arrived at the conclusion that the assessee has not claimed any deduction
on account of service tax for Rs.1,20,30,933/- in its profit and loss account
and, accordingly, held that there was no question of disallowing
Rs.1,20,30,933/- and making addition of the said amount under section
43B of the Act.
Ld D.R. relied on the order of the Assessing Officer.
Ld A.R. supported the order of the CIT(A) and relied on the decision
of Hon’ble Delhi High Court in the case of Jet Lite (India) Ltd(supra).
It is not dispute that no deduction of service tax of Rs.1,20,30,933/-
was claimed in the profit and loss account by the assessee, therefore, the
question of disallowance of the same u/s.43B of the Act does not arise. The
order of the CIT(A) is in consonance with the order of the Hon’ble Delhi
High Court in the case of Jet Lite (India) ltd (supra). Hence, we confirm
the order of the CIT(A) and dismiss the ground of appeal of the revenue.
In assessee’s appeal, in Ground Nos.1 & 2 of the appeal, the
grievance of the assessee is that the CIT(A) was not justified in confirming
the disallowance of interest expenditure of Rs.15,47,511/- u/s.14A of the
Act.
Brief facts of the case are that the assessee invested a sum of Rs.4.50
crores in the equity share capital of a company, in which, he is Managing
Director. The Assessing Officer found that the assessee has incurred
finance charges of Rs.79,10,139/-, which are mostly interest expenditure.
Therefore, the Assessing officer by invoking the provisions of section 14A
of the Act made disallowance of Rs.15,47,511/-.
On appeal, the CIT(A) confirmed the action of the Assessing Officer.
Before us, ld A.R. has relied on the decision of Hon’ble Delhi High
Court in the case of Cheminvest Limited vs CIT (2015) 378 ITR 33 (Del),
wherein, it has been held that the expression 'does not form part of the
total income' in Section 14A of the Act envisages that there should be an
actual receipt of income, which was not includible in the total income,
during the relevant previous year for the purpose of disallowing any
expenditure incurred in relation to the said income. In other words, Section
14A will not apply if no exempt income is received or receivable during the
relevant previous year. He also relied on the decision of Hon’ble Gujarat
High Court in the case of CIT vs. Corrtech Energy Pvt Ltd., (2014) 272 CTR
0252 (Guj), wherein, it was held that sub-section (1) of section 14A
provides that for the purpose of computing total income under Chapter IV
of the Act, no deduction shall be allowed in respect of expenditure incurred
by the assessee in relation to income which does not form part of the total
income under the Act. In the present case, admittedly, the assessee did
not make any claim for exemption. In such a situation section 14A could
have no application. Further, he relied on the decision of Hon’ble Allahabad
High Court in the case of CIT vs. Shivam Motors (P) Ltd., (2014) 89 CCH
0059 (All), wherein, it was held that in absence of any tax free income,
corresponding expenditure could not be worked out for disallowance
u/s.14A.
After considering the rival submissions and perusing the materials
available on record, we find that the undisputed facts in the present appeal
of the assessee are that the assessee has not claimed any tax free income
during the year. Therefore, no disallowance of corresponding expenditure
could be worked out for disallowance u/s.14A of the Act in view of the
decision of Hon’ble High Court of Delhi, Gujarat and Allahabad quoted
above. Hence, respectfully following the same, we set aside the orders of
lower authorities and delete the addition of Rs.15,47,511/- made by the
Assessing Officer and allow the ground of appeal of the assessee.
In Ground No.3 of the appeal, the grievance of the assessee is that
the CIT(A) was not justified in treating Rs.2,07,861/- as unexplained
investment.
Brief facts of the case are that the Assessing Officer observed that
during the year, the assessee has purchased one apartment from one
Vasudha Homes in Ranchi. The assessee, as per audit report, has shown
an advance of Rs.14,66,000/- to Vasudha Homes as on 31.3.2010. The
land transaction document was obtained from the Sub-Registrar, Ranchi
from which it is revealed that the assessee has purchased the flat on
31.3.2010 as a price of Rs.16,73,861/-. Therefore, the Assessing Officer
treated the difference of Rs.2,07,861/- as unexplained investment and
added the same to the income of the assessee.
On appeal before the CIT(A), the assessee submitted that On
24.12.2010 the assessee paid an amount of Rs. 1,75,000/- to the company
from its current account maintained in State Bank of India. Such amount
was wrongly debited to the drawings account of the assessee. The total
amount of Rs. 1,75,000/- paid from the account of M/s. Braj Mining
Corporation Pvt. Ltd as an advance to the company. He filed copy of the
balance sheet in support of the same. It was submitted that such entry
was rectified in the books of account by transferring such advance account
to the assessee in the financial year 2012-13. In this manner, the assessee
had paid Rs.18,16,000/- in total to the said company.
The CIT(A) did not accept the explanation of the assessee as
convincing since the amount paid by the assessee himself was to be
Rs.14,66,000/- and the value of the asset as per the Sub-Registrar was
Rs.16,73,861/-. Hence, he confirmed the addition of Rs.2,07,861/- made
by the assessee as unexplained investment.
Before us, ld A.R. reiterated the submissions made before the lower
authorities and ld D.R. supported the orders of lower authorities.
We have heard the rival submissions, perused the orders of lower
authorities and materials available on record. The undisputed facts of the
case are that the Assessing Officer found that the assessee has purchased
a flat from Vasudha Homes, Ranchi and has shown the amount paid as
advance to Vasudha Homes as on 31.3.2010 at Rs.14,66,000/-. The
Assessing Officer from the documents obtained from the Sub-Registrar,
Ranchi observed that the assessee has purchased the flat for
Rs.16,73,861/-. Therefore, he made addition of differential amount of
Rs.2,07,861/- as unexplained investment in flat by the assessee.
On appeal before the CIT(A), the assessee explained that on
24.12.2010, an amount of Rs.1,75,000/- was paid for the purchase of flat
from the current account maintained with SBI, which was wrongly debited
to the drawing account of the assessee. It was submitted that this amount
of Rs.1,75,000/- was paid from the account of M/s. Braj Mining Corporation
Pvt Ltd., as advance to the company and such entry was rectified in the
books of account in the financial year 2012-13. The CIT(A) found the
explanation of the assessee as not convincing and hence, confirmed the
addition made by the Assessing Officer.
When questioned by the Bench that the addition was made of
Rs.2,07,861/- and the assessee’s explanation is for Rs.1,75,000/- only,
how the balance amount of Rs.32,861/- was paid, ld A.R. of the assessee
could not give any explanation for the same. Hence, we find that the CIT(A)
has rightly confirmed the addition as unexplained investment in flat of
Rs.2,07,861/-. Accordingly, we confirm the addition and dismiss this
ground of appeal of the assessee.
The cross objection filed by assessee is in support of the order of the
CIT(A) in deleting the addition of Rs.1,20,30,933/- u/s.43B of the Act.
Since, we have confirmed the action of the CIT(A) in deleting the
addition of Rs.1,20,30,933/- u/s.43B, the cross objection filed by the
assessee has become infructuous and hence dismissed.
In the result, appeal filed by the revenue is dismissed, the appeal
filed by the assessee is partly allowed and cross objection filed by the
assessee is dismissed as infructuous.
Order pronounced in the open court on 13 /07/2017 in the presence of parties. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 13 /07/2017 B.K.Parida, SPS
Copy of the Order forwarded to : 1. The Appellant : DCIT, Circle 1(1), Cuttack 2. The Respondent/Assessee: Dipendra Bahadur Singh, Joda, Keonjhar. 3. The CIT(A) Cuttack 4. Pr.CIT, Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,
SR.PRIVATE SECRETARY ITAT, Cuttack