Debiting Service Tax in Profit and Loss Account cannot be reason for treating that Assessee has not Credited receipts in its Books: ITAT [Read Order]

Debiting service tax in profit and loss account cannot be reason for treating that assessee has not credited receipts in its books, so was Income Tax Appellate Tribunal (ITAT), Ahmedabad.

The solitary issue involved in the appeal related to addition made of service tax paid by the assessee, M/s. Samrat Builders Plot during the year amounting to Rs. 1,27,31,534/-. The addition being made for the reason that though the assessee had separately claimed the payment of service tax as expenses it had not credited service tax receipts from the customer in the profit and loss account for the year.  

The Counsel for the assessee, S N Davatia submitted that copies of service tax return for the said year along with ledger account of all the buyers from whom the collection had been received was furnished as evidence of his explanation. Further it was also contended that there was no concrete evidence with the department that the assessee had collected service tax not but accounted for same in its books and it was merely based on surmises and conjectures.

The Counsel also pointed out that after considering the submissions made by the assessee, the Commissioner of Income Tax (CIT) gave finding to the effect of being satisfied with the explanation of the assessee from the evidences furnished before him that the service tax component was included in the sale price and therefore was not reflected separately in its accounts.

The bench consisting of Annapurna Gupta, Accountant Member and Mahavir Prasad, Judicial Member held that “On going through the facts of the case, we are also of the view that the mere fact that the assessee had separately debited service tax in it profit and loss account and not credited the same in its profit and loss account cannot be the reason or basis for stating that the assessee has not credited these receipts in its books. As per the valuation Rules also relating to Service tax, if Service Tax is not separately collected in the bills it is to be presumed as included in the sales price. There being no other material with the Revenue for arriving at a finding that the assessee has not disclosed this component of service tax, we find that the basis of addition made by the Revenue to be very far-fetched and illogical.”

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