Mere Mistake in Service Tax Return does not Mean Income of Assessee has been Suppressed: ITAT Quashes Income Tax Addition [Read Order]

Quashing the Income Tax addition,the Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the difference of service tax return and the revenue that occured due to the wrong exchange rates applied to export income transaction while filing the service tax return is a 'mere mistake' and not ‘suppression of income’ by the assessee.

The assessee Analysys Mason India Pvt. Ltd,  filed the return of income and during scrutiny assessment under Section 143(3) of Income Tax Act 1961, the Assessing officer (AO) passed an order by making an addition of Rs.10, 52,645 by adding back the same under Section 28 of the Income Tax Act.

Aggrieved by the assessment order, the assessee filed an Appeal before the Commissioner of Income Tax (Appeal) [CIT (A)], which was dismissed by the first appeal authority.Then the assessee filed an appeal before Income Tax Appellate Tribunal (ITAT).

The Counsel representing the assessee submitted that the Commissioner of Income Tax (Appeal) has not considered the fact that the difference in revenue as per service tax return and financial statement is due to human error only and no mens rea on the part of the assessee to suppress the income. The counsel further went on to argue that the assessee had made every effort to correct the errors made in the service tax return but was unable to do so.

The Departmental Representative relied on the order of the Commissioner of Income Tax (Appeal) and submitted that the appeal filed by the assessee is liable to be dismissed.

The Bench comprising of Shri Anil Chaturvedi, Accountant Member and Shri Yogesh Kumar U.S., Judicial Member observed that since the audit was initiated at the end of 2014, the service tax return could not be revised online as 90 days period was over.

  “  It was evident by going through the paper book produced by the assessee that he had tried to file revised return manually to the service tax department which has not been accepted as there is no system of manual return filing/revised return by online due to expiry of limitation period” the Bench noted.

The Tribunal held that the difference between service tax return and the revenue was occurred due to the wrong exchange rate applied to export income transaction while filing the service tax return, which being a genuine mistake and that the Department has not alleged or proved any mens- rea on the part of the assessee who has also tried to revise the service tax return.

 “Mere mistake in the service tax return does not mean that the income of the assessee has been suppressed” the bench concluded and thus allowed the grounds of appeal by setting aside the impugned order.

To Read the full text of the Order CLICK HERE

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