Income Tax Appellate Tribunal - Jaipur
Svg Express Services, Jaipur vs Dcit, Jaipur on 17 November, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI A.D.JAIN, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No.987/JP/15
fu/kZkj.k o"kZ@Assessment Year : 2012-13
SVG Express Services, D-76, cuke The Dy. CIT, Circle-1, Jaipur
Ghiya Marg, Bani Park, Jaipur Vs.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. ABLFS 6714 M
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by : Shri S.L. Poddar (Adv)
jktLo dh vksj ls@Revenue by : Shri R.A. Verma (Addl.CIT)
lquokbZ dh rkjh[k@Date of Hearing : 08. 09.2016
?kks"k.kk dh rkjh[k@Date of Pronouncement: 17/11/2016.
vkns'k@ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of Ld. CIT(A), I Jaipur dated 06.11.2015 wherein the assessee has taken following grounds of appeal:
(1). That under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the action of the ld. AO in invoking the provisions of section 145(3) of the Income Tax Act, 1961 and sustaining the addition of Rs. 7,78,308/- by applying the GP rate of 7.50% as against 6.60% declared by the assessee.
(2) That under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the addition of Rs. 88,79,713/- u/s 43B of the Income Tax Act, 1961.ITA No. 987/JP/15
SVG Express Services vs. DCIT, Circle-1, Jaipur
2. In respect of ground no. 1, the facts of the case as summarised by the ld. CIT(A) along with his finding are as under:
(I) I have carefully perused the submissions of the assessee and the material placed on record. In the assessment order the AO observed as under:
• All the vouchers produced were unsigned • No bills were produced • No details of work done on the vouchers • Vouchers accompanied by similar computer printouts and some handmade written pages with names of persons to whom payments claimed to be made • No identity mark or proof of authenticity of such similar printouts. • No details or identity proof of persons to whom payments were claimed to be made.
(II) The AO issued show cause notice u/s 145(3) of the Act and made an addition of Rs. 12 lac though the AO did not specifically rejected the books of accounts u/s 145(30 of the Act.
(III) During the appellate proceedings the appellant was required to file copies of accounts of its two main customers i.e. Aircel Ltd. and Bharti Hexacon Ltd. as appearing in its books of accounts and one bill each raised by the appellant to these companies in relation to the claim or service tax as discussed earlier in this order. From these details, it has been observed that:
The Appellant raised invoice No. 20110330 on 23.05.2011 for Rs. 17,50,481/- in the name of Bharti Hexacon Ltd. whereas the same is appearing in the account of Bharti Hexacon Ltd. on 20.04.2011. Similarly, the appellant raised invoice No. 20111059 on 02.11.2011 in the name of M/s Aircel Ltd. on 15.07.2011 nd een ther invoice No. shown as 20110460.
(IV) During the appellate proceedings, the AR was required to explain the same but no reply was furnished by him. It is difficult to understand how it is possible to make entries in advance in the books of accounts before raising the invoice. The above instances revealed that the books of accounts of the appellant are manipulated one and they do not reflect the true state of affairs of the appellant.
(V) In view of these facts coupled with the discrepancies observed by the AO as stated earlier, it is held that the books of accounts of assessee are liable to be rejected u/s 145(3) of the Act.2 ITA No. 987/JP/15
SVG Express Services vs. DCIT, Circle-1, Jaipur (VI) It was the contention of the appellant that its net profit rate is better in comparison to the earlier years and thus the AO was not right in making addition of Rs. 12 lacs I have examined the said contention of the appellant and found to be not convincing at all. It was not the case of the appellant that its earlier cases were completed under scrutiny proceedings and its books of accounts were accepted in these assessments. For the year under consideration as per its P&L account, the appellant has shown NP rate of 6.60% on total turnover of Rs. 87,60,84,239/-. Looking to the totality of the facts and circumstances of the case, I think it would be appropriate to take the NP rate at 7.50% which gives net profit of Rs.64,56,317/- against Rs.56,78,009/- declared the appellant. Therefore, addition of Rs.7,78,308/- is sustained out of addition of Rs. 12 lacs made by the AO.
2.1 The ld AR submitted that the appellant has maintained regular books of accounts namely, cash book, ledger, bank book, journal and other supporting. The books of the appellant stand audited u/s 44AB of the Act. Also no discrepancies have been pointed out by the tax auditors.
No case for rejection of books by the Assessing Officer:
The appellant humbly submits that, the nature of business of the appellant is such that, bills are not given by the persons through whom the services like verification of addresses, delivering of couriers, collection of KYC forms etc are undertaken by the appellant. These are mostly persons doing the job at individual level, and hence no proper bills are given by them. Instead these persons submit either a handwritten slip or a computer printout for the work done by them may be on a monthly basis or once in two months, depending upon the volume of work done.
This is a common practice looking into the nature of business of the appellant. Further, the appellant had submitted before the Assessing Officer that, such payments are made by it only by issuing cheques, and thus, the identity of the payees is established. Also, the Assessing Officer did not make an attempt to confirm the contention of the appellant by issuing summons to a few of such payees and verifying the claim of the appellant, before out rightly rejecting the books of the appellant, on pure assumptions and surmises, without appreciating the nature of business of the appellant.3 ITA No. 987/JP/15
SVG Express Services vs. DCIT, Circle-1, Jaipur It is not the case of the Assessing Officer that, the expenses claimed by the appellant are excessive or bogus. Thus, rejecting books only on the ground that the vouchers were unsigned, or the bills were hand written is unwarranted and bad in law, especially when the books are audited and no discrepancies have been pointed.
Results declared are better than earlier years The Assessing Officer on flimsy defects pointed by him, proceeded to make addition on adhoc basis at Rs. 12 lacs, which was further re-calculated by the Learned CIT(A), by estimating the NP Rate at 7.5% as against 6.6% declared by the appellant.
The Appellant humbly submits that, it is a settled position of law, that, wherein a case the provisions of sec 145(3) are invoked the Assessing Officer has to first consider the past history of the assessee, as it the best guide for estimating the profits. In case of the appellant results of the earlier three years is as under:-
PARTICULARS Assessment Assessment Assessment
Year Year Year
2010-11 2011-12 2012-13
Turnover 29327924 73564911 86084239
Net Profit as per P/L a/c 1144109 4503085 5678009
NP (%) 3.9% 6.12% 6.6%
Depreciation 793519 19670627 2779306
NP before depreciation 1937628 6473712 9249851
NP Rate before depreciation 6.61% 8.8% 10.75%
The above chart clearly establishes the following:-
1. NP disclosed during the year is at an all time high as compared to the last three years.
2. NP after depreciation is also better.
3. The increase in NP is along with an increase in turnover.
Thus in view of the above findings, the appellant humbly submits that, there was no need to invoke provisions of sec 145(3), merely on flimsy ground. And even when the books are rejected, there was no need to disturb the declared results, in view of its comparison with earlier years. Also, the NP rate estimated 4 ITA No. 987/JP/15 SVG Express Services vs. DCIT, Circle-1, Jaipur by the Learned CIT(A) has no basis, and thus the entire addition made, by invoking the provisions of sec 145(3) needs to be fully deleted and the appellant prays accordingly.
2.2 We have heard the rival contentions and perused the material available on record. The ld CIT(A) has closely examined the assessee's books of accounts and has come to a well-reasoned order that the same are not reliable and rightly held to be rejected under section 145(3) of the Act. As far as estimation of profits is concerned, it is noted that no basis has been given by the AO while estimating the N.P rate and making an addition of Rs 12,00,000 and thereafter by the ld CIT(A) while reducing the N.P rate at 7.5% as against 6.60% declared by the assessee. Further, given the past history of the assessee, it is noted that it has disclosed N.P before depreciation at 10.75 % which is higher as compared to past two years. In light of above, we see no reason to interfere with the N.P rate declared by the assessee. Hence, the trading addition made on this account is deleted.
3. Now coming to ground no. 2, briefly the facts of the case are that during the assessment proceedings, it was observed by the AO that there was a difference of Rs. 80,79,713/- in the total receipts as per Form 26AS and as per P&L account filed by the assessee. It was submitted by the appellant before the AO that the difference was on a/c of service tax receipts by the assessee and the same has not been passed through P&L account. It was further submitted that the assessee has claimed Cenvat Credit of Rs., 78,84,332/- on account of service tax collected by the vendors from him and as such the difference of Rs.9,95,381/- was reflected as service tax by the appellant in its balance sheet as on 31.03.2012.
The appellant submitted before the AO that its claim of input Cenvat Credit of Rs.78,84,332/- for the service tax charged by vendors from the assessee stands rejected by the service tax Department and thus the appellant paid service tax of Rs. 88,79,713/- for the year under consideration on 18.12.2013 and 20.12.2013 whereas due date of filing of return of income for the assessment year under consideration was 30.09.2012. After deliberating the issue in detail, it was held by the AO that the assessee made false claim of Rs. 78, 84,332/- on account of Cenvat Credit and this expenditure was never incurred by the assessee. It was also observed by the AO that though the 5 ITA No. 987/JP/15 SVG Express Services vs. DCIT, Circle-1, Jaipur assessee claims that no deduction was claimed on account of service tax and hence no disallowance is warranted but the assessee deliberately failed to point out that the service tax receipts have also not been credited to the P&L account at the same time. It was further noted by the AO that the assessee has already declared Rs. 9,95,381/- as service tax payable in its balance sheet as its statutory liability. The AO concluded that the claim of the assessee that no amount has been claimed as deduction on account of service tax payable is incorrect, false and misleading and in fact the assessee has disclosed only a part of service tax receipts as payable and not the whole amount as the intention was to claim set off of Rs. 78,84,332/- as service tax paid to the vendors, which was actually never paid. The AO relied on decision of Hon'ble Supreme Court in the case of M/s Chowringhee Sales Bureau (P) Ltd vs. CIT West Bengal (87 ITR 542) and held that service tax is also a part of professional fee or turnover and invoking the provisions of section 43B of the Act, the AO made addition of Rs. 88,79,713/-.
3.1 We now refer to the findings of the ld. CIT(A) as under:
"I have duly considered the submissions of the assessee very carefully. It is relevant to mention here that the appellant raised invoices wherein it had charged service tax, education cess and secondary education cess and included these amount in the total amount of the invoices raised by it. Further, the copy of account of one of its customer namely Bharti Hexacon Ltd. revealed that the invoice wise payments were made by the customers of the appellant i.e. service tax, education cess and secondary education cess were paid with the value of services provided by the appellant. It is evident that the assessee did not routed the serviced tax collected by it through its Profit and loss account as it had not paid the same within the stipulated time to the govt. account. It would be relevant to reproduce here the provisions of section 43B of the Act as under:
Certain deduction to be only on actual payment.
43B Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or) 6 ITA No. 987/JP/15 SVG Express Services vs. DCIT, Circle-1, Jaipur Thus it is very clear that any tax by whatever name called is covered u/s 43B of the Act. It may be mentioned that in the case of Chowranghee Sales Bureau, the Hon'ble Supreme Court held that the Sales tax collected and not deposited with the treasury would form part of the assessee's trading receipt. In the instant case under consideration, the appellant had collected service tax from its clients but did not pay the same before the due date of filing of return of income. Therefore , the ratio in the case of Chowringhee Sales Bureau is clearly applicable to the facts of the instant case under consideration.
It may be mentioned that the Hon'ble ITAT, Bangalore Bench in the case of Jain Christopher (2013) 36 CCH 0011 held that "the assssee's plea that sales tax was different from service tax cannot be accepted in the present circumstances as what the assessee was a firm or Chartered Accountants is selling is services and not goods, so the tax applicable is service tax which stands on the same bracket as sales tax in terms of services rendered as sales tax holds for goods sold. We have also observed that the AO had pointed out that the said amount has been included as business receipts in its TDS certificate and as such the same should have been included in its receipts. This has not been precisely done by the assessee.
In the instant case, it is an admitted that that during the course of asessee's profession a sum of Rs. 29,60,000/- was realised/ collected as service tax payable and the same is not capital receipt. The moment the service tax is realised, it becomes payable to the Govt. account and if it is not paid, it partakes the character of income of the assessee, since the assessee could utilise this amount in any matter whatsoever, there is no restriction placed on its utilization. This is amply clear from the TDS Certificate furnished by the assessee and also the credit appearing in the assessee's bank account. Therefore to arrive at the professional income, the service tax realized should have been included in the gross receipts unless paid to Government exchequer within the due date of filing of return. Since service tax realized is included in the total income, the same is to be allowed as a deduction in the year it is paid to the government account. In the instant case this is what has been done by the ld. CIT(A). The CIT(A) had allowed the alternative plea of the assessee and had directed the AO to deduct the service tax when the payment is made to the Govt. account in the subsequent year. Therefore, we find there is no merit in the contention raised in behalf of the 7 ITA No. 987/JP/15 SVG Express Services vs. DCIT, Circle-1, Jaipur assessee and this issue is decided against the assessee. It is ordered accordingly."
In view of the above discussion, it is held that the AO was justified in making addition Rs. 88,790,713/- u/s 43B of the Act and hence the same is sustained as the unpaid service tax collected from its clients form part ofthe trading receipts of the appellant."
3.2 The ld AR of the assessee submitted that he places reliance on its submissions made before the Learned CIT (A) and further humbly submits that no deduction is claimed in the P/L a/c both as regards to Service Tax provided on services availed by the appellant as well as service tax charged by the appellant, hence the provisions of Sec 43B are not attracted:
The appellant has not shown the receipts inclusive of service tax charged by it. Also no deduction on this account is claimed in the computation of income filed by it. The provision for service tax made by the appellant, on services availed by it has also not been debited to the P/L a/c. Thus, the P/L a/c is totally free off the burden of service tax.
Sec 43B reads as under:
"Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this act in respect of -
[(a) any sum payable by the assessee by way of tax, duty, cess, or fee, by whatever name called, under any law for the time being in force, or] ................................................."
It is submitted that sec 43B starts with a non-obstante clause, and specifies that a deduction "otherwise allowable" under the Act, shall not be allowed unless it is actually paid. This means that the claim has to be firstly preferred by the assessee, and the same could be disallowed only for the reason of failure to make the actual payment, before the filing of return.
In the case of the appellant, as there was no claim of service tax, in the P/L a/c or the computation of income, there was no question of disallowing the same u/s 43B. The Appellant places reliance on the following decision:
• Srikaollu Subarao & Co Vs. Union of India [ 173 ITR 708] 8 ITA No. 987/JP/15 SVG Express Services vs. DCIT, Circle-1, Jaipur • CIT vs. Noble And Hewitt (I) P. Ltd. [2008] 305 ITR 324 (Delhi) • Shri Ravi Kant Chadda Vs. Deputy Commissioner of Income Tax [ITA No. 516/Lkw/2011 dated 25.04.2013 • Real Image Media Technologies (P) Ltd. ( 114 ITD 573 Chennai) • Nafe Singh Gahlawat vs. ACIT, I.T.A. No.1028/Del/2011 dated 29/04/2011.
• Raj Pal Katyal, New Delhi vs Department Of Income Tax [I.T.A. No. 2665/Del/2012] • Indian Carbon Ltd Vs. Inspecting Assisstant Commissioner & Anr [200 ITR 759 (Gau)] • Pharma Search vs. Assistant Commissioner of Income Tax [82 DTR 303 ITAT Mumbai 2013] Thus based on the facts of the appellant and the judicial pronouncements, where service tax was never routed through P/L A/c, and also no deduction was claimed by it in the computation, the appellant submits that, the provisions of sec 43B does not apply, and the addition so made deserves to be deleted and the appellant prays accordingly.
3.3 The ld DR is heard who has relied heavily on the order of the Hon'ble Supreme Court decision in case of Chowringhee Sales Bureau 87 ITR 542 and submitted that the ld CIT(A) has rightly held the service tax collected as part of the professional receipts and given that the same has not been deposited by the due date of filing of return of income, the same is not allowable under section 43B of the Act.
3.4 We have heard the rival contentions and perused the material available on record. The Assessing officer has made the impunged addition on account of service tax firstly holding the same as part of professional receipts in the hands of the appellant and thereafter, he has invoked the provisions of section 43B of the Act given that the service tax has not been deposited before the due date of filing of return of income. Undisputedly, the service tax has been collected by the assessee from its customers during the year and the same has not been paid before the due date of filing of return of income.
In the case of Chowringhee Sales Bureau (Supra), the Hon'ble Supreme Court 9 ITA No. 987/JP/15 SVG Express Services vs. DCIT, Circle-1, Jaipur has laid down the following proposition of law and the relevant observation are as under:
8. It is apparent from the order of the AAC and has not been disputed before us in the present case that in the cash memos issued by the appellant to the purchasers in the auction sale it was appellant who was shownas the seller. The amount realised by the appellant from the purchasers included sales tax. The appellant, however, did not pay the amount of sales tax to the actual owner of the goods auctioned because the statutory liability for the payment of that sales tax was that of the appellant. The appellant company did not also deposit the amount realised by it s sales tax in the State exchequer because it took the position that the statutory provision creating that liability upon it was not valid. As the amount of sales-tax was received by the appellant in its character as an auctioneer, the amount, in our view, should be held to form part of its trading or business receipt. The appellant would, of course, be entitled to claim deduction of the amount as and when it pays it to the State Government.
9. The fact that the appellant credited the amount received as sales tax under the head " sales tax collection amount", would not, in our opinion, make any material difference. It is the true nature and the quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt.
Therefore, the ratio of the Hon'ble Supreme Court decision in the case of Chowringhee Sales Bureau that the Sales tax collected and not deposited with the treasury would form part of the assessee's trading receipt is clearly applicable to the facts of the case. In the instant case, the assessee has contended that it has followed the exclusive method of accounting where the service tax has not been routed through the profit/loss account. In our view, in light of decision in case of Chowringhee Sales Bureau, such contention will not hold good and irrespective of method of accounting followed by the assessee, service tax collected and not deposited will be considered as part of professional receipts. Unlike the situation prevailing at the time when the Hon'ble Supreme Court delivered its judgement in case of Chowringhee Sales 10 ITA No. 987/JP/15 SVG Express Services vs. DCIT, Circle-1, Jaipur Bureau when there were no clear provisions pari-materia to section 43B of the Act, now given that there are specific provisions in terms of section 43B of the Act, to our mind principle and ratio laid down in case of Chowringhee Sales Bureau continues to hold good except that its rigour has been slightly modified to the extent that the taxes collected can be deposited before the due date of filing of return of income and in case there is a delay, it will be added to the professional receipts of the assessee and will be allowed to claim deduction of the amount in the year of payment.
Further, we have gone through the decision of the Coordinate Bench in the case of Jain Christopher (2013) 36 CCH 0011 which has distinguished the decision of the Hon'ble Delhi High Court in case of CIT vs. Noble And Hewitt (I) P. Ltd. [2008] 305 ITR 324 (Delhi) and the same clearly supports the case of the Revenue. We have also gone through the other decisions relied upon by the ld AR and find that the same have been rendered solely in the context of claim of deduction under the profit/loss account and disallowance under section 43B of the Act and has not considered the issue of whether the service tax collected and remaining unpaid will form part of total income of the assessee and equally not considered the decision of Hon'ble Supreme Court in case of Chowringhee Sales Bureau (supra) and hence, doesn't support the case of the appellant.
In light of above discussions, we confirm the order of the ld CIT(A) who has rightly confirmed the disallowance of service tax collected by the appellant from its customers and didn't deposit the same before the due date of filing of return of income. The appellant shall be at liberty to claim the same in the subsequent year of payment as per provisions of section 43B of the Act.
In the result the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 17/11/2016.
Sd/- Sd/-
(A.D. JAIN) (VIKRAM SINGH YADAV)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Jaipur
Dated:- 17/11/2016
11
ITA No. 987/JP/15
SVG Express Services vs. DCIT, Circle-1, Jaipur
Pillai
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- SVG Express Services, Jaipur
2. izR;FkhZ@ The Respondent- The DCIT, Circle-1, Jaipur
3. vk;dj vk;qDr@ CIT-I, Jaipur
4. vk;dj vk;qDr¼vihy½@The CIT(A)-I, Jaipur
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.987/JP/2015) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 12