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2022 (12) TMI 691 - AT - Income TaxAddition u/s 43B - non depositing of Service Tax as before the due date of filing of its return of income, as per Annexure-IV of the 3CD Report - The Service Tax collected from the clients but not paid to the Service Tax Deptt. is an income of the assessee irrespective of the fact whether or not the Service Tax is routed through P L Account of not - HELD THAT - The amount of service tax has not been routed through P L account. Hence, ratio of the decision Planet Advertising Pvt. Ltd. 2013 (7) TMI 1205 - ITAT DELHI that the provisions of section 43B are not applicable to the service tax liability, is applicable. Accordingly, we uphold the order of the ld. CIT (A) - Appeal filed by the Revenue stands dismissed.
Issues Involved:
1. Whether the addition of Rs.1,79,91,058/- made by the AO under section 43B of the Income-tax Act, 1961 on account of non-depositing of Service Tax was justified. 2. Whether service tax collected but not paid to the Service Tax Department is considered as income of the assessee. 3. Whether penalty proceedings under section 271(1)(c) are warranted for concealing income by furnishing inaccurate particulars. Detailed Analysis: 1. The Revenue appealed against the order of the ld. CIT (Appeals)-14, New Delhi dated 09.12.2016 for the assessment year 2012-13, challenging the deletion of the addition of Rs.1,79,91,058/- made by the AO under section 43B of the Income-tax Act, 1961. The AO disallowed the unpaid service tax amount as per Annexure-IV of the 3CD Report, concluding that the assessee concealed income by not paying the service tax before the due date of filing the return of income. The CIT (A) held that service tax is a liability collected on behalf of the Government and not treated as income or a charge against profit, directing the addition to be deleted. The Tribunal upheld the CIT (A) order, citing various case laws where it was held that section 43B does not apply to service tax liabilities. 2. The key issue was whether service tax collected but not paid to the Service Tax Department should be considered as income of the assessee. The AO added the unpaid service tax amount to the income of the assessee under section 43B, alleging concealment of income. However, the assessee contended that service tax is a liability collected on behalf of the Government, not treated as income or a charge against profit. The CIT (A) accepted this argument, stating that service tax is not routed through the Profit & Loss account and directed the addition to be deleted. The Tribunal agreed with this interpretation, emphasizing that service tax liability is not subject to section 43B as established in various case laws. 3. The AO initiated penalty proceedings under section 271(1)(c) on the grounds of concealing income by furnishing inaccurate particulars. However, the assessee argued that the service tax collected was not an income or an expense in the Profit & Loss account, as it was a liability to be paid to the Government. The assessee also availed the Voluntary Compliance Encouragement Scheme, 2013, and submitted proof of payment in compliance with the scheme. The Tribunal, following the precedent set by previous judgments, upheld the CIT (A) order and dismissed the appeal, concluding that the provisions of section 43B do not apply to service tax liabilities. In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the deletion of the addition of Rs.1,79,91,058/- made by the AO under section 43B, as the service tax collected but not paid was not considered as income of the assessee. The Tribunal emphasized that service tax liabilities are not subject to section 43B based on established case laws and held that penalty proceedings under section 271(1)(c) were not warranted in this case.
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