2023 (11) TMI 929 - AT - Income Tax

Addition u/s 43B - liability of service tax not discharged before due date of filing return of income - assessee is a Chartered Accountant Firm, follows exclusive method of accounting with regard to service tax - Adjustment on the basis of column 26 of audit report wherein amount of such expenses was disallowed, not reflected in the return for this year - alternative submissions vehemently submitted that the assessee applied for the benefit of SVLDRS and only 40% was payable, which stand paid - HELD THAT - Assessee has filed copy of relevant challan in respect of 40% of liability on record. AR of the assessee during her submission also prayed for giving suitable direction that in case remaining addition is sustained, the assessee may be allowed deduction in A.Y. 2020-21. Considering the submission of assessee and considering the fact that the assessee availed/went for SVLDRS and was liable to pay 40% of service tax, therefore, AO is directed to verify the contention of ld. AR of assessee and allow relief to that extent in accordance with law. So far as remaining 60% of the liability is concerned, assessee claimed that they have already offered 60% of the amount as per scheme of SVLDRS in audited account for A.Y. 2020-21, which is reflected in the audited accounts and allegedly includes this amount. Hence, the assessing officer is also directed to verify facts for AR 2020-21 and grant relief to the assessee in accordance with law. Grounds of appeal raised by the assessee are allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance of unpaid Service Tax Liability under Section 43B of the Income Tax Act.
2. Taxing the same amount twice and unjust enrichment.
3. Application of Sabka Vishwas Legacy Dispute Resolution Scheme.

Summary:
1. The appeal was against the order disallowing Rs. 6,17,424/- being unpaid Service Tax Liability for the Assessment Year 2017-18. The assessee, a Chartered Accountant Firm, filed its return of income showing NIL income after set off of brought forward losses. The Central Processing Centre (CPC) made an adjustment disallowing service tax payable, resulting in a tax demand. The assessee contended that they follow an exclusive method of accounting for service tax and should not be disallowed under Section 43B of the Act.
2. The ld. CIT(A) upheld the disallowance, stating that the service tax had not been paid by the date of filing the return of income. The assessee appealed to the Tribunal, arguing that the exclusive method of accounting should prevent disallowance under Section 43B.
3. The Tribunal considered the submissions and directed the Assessing Officer to verify that the assessee had paid 40% of the service tax liability under the Sabka Vishwas Legacy Dispute Resolution Scheme. The remaining 60% was claimed to be offered in the audited accounts for the following year. Relief was allowed to the assessee for the 40% paid and directions were given to grant relief for the remaining 60% in the subsequent assessment year.

The appeal was allowed for statistical purposes only.