Section 43B of Income Tax Act Not applicable to Service Tax Liability: ITAT [Read Order]

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The Income Tax Appellate Tribunal (ITAT),Delhi Bench, has recently, in an appeal filed before it, held that Section 43 B of the Income Tax Act , is not applicable to service tax liability.

The aforesaid observation was made by the Delhi ITAT when an appeal was filed before it by the Revenue , as directed against the order of the  CIT (Appeals), New Delhi, dated 09.12.2016, for the assessment year 2012-13.

The brief facts of the case were that , in the order passed under section 143 (3) of the Income-tax Act, 1961 , the AO had noted that there were unpaid service tax amounting to Rs.1,79,91,057.80., based on which he opined that provisions of section 43B were applicable, thereby making the impugned addition , concluding that the assessee had not furnished any evidence in respect of the payment of Service tax which was not paid till 29.09.2012 as per Annexure-IV of the 3CD Report, before the due date of filing of its return of income.

The A.O hence disallowed the unpaid Service Tax amounting to Rs.1,79,91,058/- , as per the provisions of the section 438 of the lncome Tax Act, 1961 and added  it to the income of the assessee, for the year under consideration, and for the reasons mentioned above , thus recorded his satisfaction that the assessee had concealed its income by furnishing inaccurate particulars of its income.

 Thereafter, penalty proceedings u/s 271(1)(c) were initiated separately on this account upon the assessee, aggrieved by which the  assessee had filed an appeal before the CIT(A). And on the assessee’s appeal, the CIT (A)  had noted that assessee had ,during the course of appellate proceedings ,vide his letter dated 23.11.2016 , made satisfactory submissions to prove his side.

Thus, he held that the  assessee had not failed in the disclosure of all the relevant facts and hence that the assessee is not liable for any concealment or initiation of the penalty proceedings ,thereby deleting the addition of Rs.1,79, 91,058 imposed upon the assessee. And it is against this order,  that the Revenue is presently in appeal before the ITAT Bench.

Hearing the opposing contentions of either sides as submitted by  Shri Rakesh Gupta and Shri Somil Agarwal, the Advocates for the assessee  and by  Shri Abhishek Kumar, Sr. DR,  on the Revenue’s behalf, the ITAT Bench comprising of  Shamim  Yahya, the Accountant Member, along with  Chandra Mohan Garg  ,the Judicial Member observed:

“we find that the above said issue is squarely covered. The amount of service tax has not been routed through P&L account.”

Thus, dismissing the Revenue’s appeal, the  Delhi ITAT held:

“Hence, ratio of the above said decision 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).”

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