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2022 (2) TMI 71 - AT - Income TaxSuppression of income - unpaid service tax liability u/s 43B - information received from Central Excise and Service Tax Dept - HELD THAT - CIT(A) noted that the notice issued in the name of the assessee company by the Central Excise and Customs and Service Tax Department dt.20/11/2009 , which was the basis of reopening the case and making the impugned additions was also issued to Mr. Keshav Alwa, director of the assessee company and proprietor of the concern going by the same name as the assessee. He also noted from the same that the amount of service tax stated to be paid therein by the assessee company, was actually paid in the proprietorship concern. Copies of Form No.36, reflecting the said payment in the proprietorship concern, were filed before and perused by the Ld.CIT(A). Also the proprietor, Sh Keshav Alwa, had confirmed on oath to the CIT(A) the fact that the turnover of ₹ 5.55 crores, mentioned in the notice issued to the assessee company, pertained to his concern and stood reflected in the books also. On the basis of the aforestated facts, the Ld. CIT(A) concluded that there was no suppression of sale on the part of the assessee Company and that it actually related to the proprietorship concern and accordingly directed that the issue of addition on account of suppressed sales alongwith that of unpaid service tax liability be examined in the case of the proprietorship concern. None of the findings of fact by the CIT(A) have been controverted by the Ld. Departmental Representative before us. In view of the same, we see no reason to interfere in the order of the Ld. CIT(A) deleting the addition made of profits from suppressed of sales and that on account of unpaid service tax liability u/s 43B. Levy of penalty u/s 271(1)(c) - It is a fact on record the both the unpaid liabilities had been reflected in the respective columns of the tax audit report. In fact the AO had picked them up from the tax audit report itself for making addition in quantum proceedings, which fact finds mention in the assessment order. We find that the assessee had stated that the outstanding demand related to a contested liability the appeal against which was pending at higher level. The assessee had stated that the liability had been fixed on the assessee by the Service tax department holding that it was not entitled to 50% abatement on tea and snacks, which the assessee was contesting in appeal. The assessee clearly had a bonafide explanation for not adding the unpaid tax liabilities to its income since it was contesting the very levy of the same before the concerned department. It may be a fit case of making addition of the unpaid liabilities to the income of the assessee. But as far as the levy of penalty is concerned the explanation for not adding back the unpaid liabilities to its income cannot be outrightly rejected as not being bonafide. What emerges therefore is that all particulars relating to income were disclosed by the assessee, as is evident, in the tax audit report itself reflecting the impugned unpaid tax liabilities. Further Explanation 1 to section 271(1)(c) of the Act deems concealment of income when ,with respect to a fact material to the computation of income, the explanation of the assessee is either false or not bonafide and unsubstantiated. In the present case, we find, the explanation of the assessee for not adding back the unpaid liabilities to its income as bonafide, since they were stated to be contested with the concerned departments. - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition on account of suppression of income. 2. Deletion of disallowance under Section 43-B of the Income Tax Act. 3. Levy of penalty under Section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Suppression of Income: The Revenue appealed against the deletion of an addition of ?1,38,07,344/- made by the Assessing Officer (A.O.) on account of suppression of income. The A.O. based this addition on information from the Central Excise and Service Tax Department, which indicated that the assessee had received ?5,52,29,376/- in service charges. The A.O. applied a profit rate of 25% to this amount, resulting in the addition. The assessee contended that it did not receive such an amount as it only came into existence in December 2005 and had not commenced any business activities in the assessment year 2006-07. The CIT(A) accepted the assessee's contention, noting that the income actually related to a proprietorship concern of the director, Mr. Keshav Alwa, which operated under the same name as the assessee company. The CIT(A) found that the assessee company was incorporated on 19/12/2005 and obtained service tax registration only on 15/05/2006, thereby ruling out the possibility of any business activities in the impugned year. Consequently, the addition was deleted, and the A.O. was directed to reopen the assessment of Mr. Keshav Alwa to examine the turnover and service tax liability. 2. Deletion of Disallowance under Section 43-B of the Income Tax Act: The A.O. also made an addition of ?30,29,240/- on account of unpaid service tax liability under Section 43-B. The CIT(A) deleted this addition, noting that the unpaid service tax liability pertained to the proprietorship concern of Mr. Keshav Alwa and not the assessee company. The CIT(A) directed the A.O. to examine the unpaid service tax liability in the hands of Mr. Keshav Alwa as per the provisions of Section 43-B. 3. Levy of Penalty under Section 271(1)(c) of the Income Tax Act: The assessee appealed against the confirmation of penalty under Section 271(1)(c) for concealing/furnishing inaccurate particulars of income. The penalty was levied on account of additions made under Section 43-B for unpaid service tax and VAT liabilities. The CIT(A) upheld the penalty, stating that the assessee had deliberately not added the unpaid liabilities to its income despite disclosing them in the tax audit report. The assessee argued that it had no malafide intention and had disclosed the unpaid liabilities in the tax audit report. The Tribunal found that the unpaid liabilities were indeed disclosed in the tax audit report and that the assessee had a bonafide explanation for not adding them back to its income, as the liabilities were contested with the concerned departments. The Tribunal concluded that the assessee had not concealed or furnished inaccurate particulars of income and deleted the penalty amounting to ?32,82,000/-. Conclusion: The appeal of the Revenue regarding the deletion of addition on account of suppression of income and disallowance under Section 43-B was dismissed. The appeal of the assessee against the levy of penalty under Section 271(1)(c) was allowed, resulting in the deletion of the penalty.
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