2023 (4) TMI 618 - AT - Income Tax

Revision u/s 263 by CIT - amount of service tax reported in Balance Sheet CIT observed that this has not been paid and, therefore, according to the provisions of section 43B it is not allowable, which the Ld. AO failed to add back - HELD THAT - On referring to section 43B of the Act, we note that certain deductions are allowed only on actual payment. In this section, a deduction which otherwise is allowable under this Act is subjected to the condition of actual payment for its allowability for the purpose of computing the income under the head, profit and gains of business and profession - assessee is following the exclusive method of accounting in respect of service tax as noted in its tax audit report. Assessee has not claimed any expense towards service tax liability but has reported it in its Balance Sheet. The same amount is shown from the balance Sheet on 31.03.2008 to the Balance Sheet for the year under consideration - we find force in the submission of the Ld. Counsel and disregard the observation and consideration arrived at by the Ld. CIT for invoking the revisionary proceeding on this issue. Difference between receipt disclosed in the P L Account and the amount appearing in Form 26AS - Assessee has demonstrated that the difference is on account of inclusion of service tax by the payer of this receipt after subjecting it to TDS. Considering this verifiable fact duly explained by the assessee, we do not find any reason that revisionary proceeding is justified to hold the order being erroneous and prejudicial to the interest of revenue on this issue also. Various expenses claimed by the assessee and no TDS deposited thereon despite reporting of TDS liability in the balance sheet as at 31.03.2010 - There is nothing on record to appreciate the fact about the deposit of this TDS liability and also the extent to which TDS has been done on these expenses claimed by the assessee. The mere assertion by the assessee which also is general in nature that almost 50% of this amount is reimbursed expenses does not justify its claim made before the ld. CIT as well as before us. Accordingly, this being an issue purely on facts which can be verified from the records of the assessee, we find it proper to sustain the order of Ld. CIT(A) on this specific issue for the purpose of examination and verification of the details and documents which may be placed by the assessee to substantiate its claim. Accordingly, on the first issue raised by the Ld. CIT in the revisionary proceeding as noted above, we hold the order of Ld. CIT u/s. 263 as justifiable. Appeal of the assessee is partly allowed.

Issues Involved:
1. Delay in filing the appeal.
2. Validity of revisionary proceedings under Section 263 of the Income-tax Act, 1961.
3. Disallowance of expenses under Section 40(a)(ia) for non-deduction of TDS.
4. Difference in receipts as per Form 26AS and P&L Account.
5. Disallowance under Section 43B for unpaid service tax liability.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was delayed by 1914 days, primarily due to the Covid-19 pandemic and the failure of the assessee's counsel to file the appeal on time. The assessee also suffered from a serious accident, further contributing to the delay. The Tribunal condoned the delay, citing the Supreme Court's decision in Suo Moto Writ Petition (C) No. 3 of 2020 and other relevant case laws, emphasizing that the delay was neither willful nor attributable to any extraneous motives.

2. Validity of Revisionary Proceedings under Section 263:
The assessee challenged the revisionary proceedings initiated by the Principal Commissioner of Income Tax (Pr. CIT) on the grounds that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal examined the grounds of appeal and additional grounds filed by the assessee, dismissing the additional grounds as repetitive.

3. Disallowance of Expenses under Section 40(a)(ia):
The Pr. CIT found that expenses amounting to Rs. 1,80,53,232/- were paid without deduction of tax at source, which should have been disallowed under Section 40(a)(ia). The assessee argued that almost 50% of the expenses were reimbursed and thus not subject to TDS. However, the Tribunal noted that no evidence was provided to substantiate this claim. Consequently, the Tribunal upheld the Pr. CIT's order for this specific issue, directing further verification of the details and documents.

4. Difference in Receipts as per Form 26AS and P&L Account:
The Pr. CIT observed a discrepancy of Rs. 25,14,302/- between the receipts reported in Form 26AS and the P&L Account. The assessee explained that the difference was due to the inclusion of service tax in the receipts reported by the payer. The Tribunal found this explanation verifiable and justified, ruling that the revisionary proceedings on this issue were not warranted.

5. Disallowance under Section 43B for Unpaid Service Tax Liability:
The Pr. CIT noted that a service tax liability of Rs. 35,00,000/- was reported in the balance sheet but not paid, warranting disallowance under Section 43B. The assessee contended that this liability was carried forward from previous years and not claimed as an expenditure. The Tribunal agreed with the assessee, noting that the service tax liability was reported in the balance sheet and not claimed as an expense, thus not justifying the revisionary proceedings on this issue.

Conclusion:
The Tribunal partly allowed the appeal, condoning the delay in filing and dismissing the revisionary proceedings on the issues of receipt discrepancy and service tax liability. However, it upheld the Pr. CIT's order regarding the disallowance of expenses under Section 40(a)(ia) for further verification. The appeal was thus partly allowed in favor of the assessee.

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