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2016 (12) TMI 452 - ITAT JAIPUR

2016 (12) TMI 452 - ITAT JAIPUR - TMI - NP determination - rejection of books of accounts - Held that:- It is not the case of the Assessing Officer that, the expenses claimed by the appellant are excessive or bogus. Thus, rejecting books only on the ground that the vouchers were unsigned, or the bills were hand written is unwarranted and bad in law, especially when the books are audited and no discrepancies have been pointed. - CIT(A) has closely examined the assessee’s books of accounts and .....

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before depreciation at 10.75 % which is higher as compared to past two years. In light of above, we see no reason to interfere with the N.P rate declared by the assessee. Hence, the trading addition made on this account is deleted. - Addition on account of service tax - AO made the addition invoked the provisions of section 43B given that the service tax has not been deposited before the due date of filing of return of income - Held that:- Undisputedly, the service tax has been collected by .....

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sive method of accounting where the service tax has not been routed through the profit/loss account. In our view, in light of decision in case of Chowringhee Sales Bureau, such contention will not hold good and irrespective of method of accounting followed by the assessee, service tax collected and not deposited will be considered as part of professional receipts. Thus we confirm the order of the ld CIT(A) who has rightly confirmed the disallowance of service tax collected by the appellant from .....

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of Ld. CIT(A), I Jaipur dated 06.11.2015 wherein the assessee has taken following grounds of appeal: (1). That under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the action of the ld. AO in invoking the provisions of section 145(3) of the Income Tax Act, 1961 and sustaining the addition of ₹ 7,78,308/- by applying the GP rate of 7.50% as against 6.60% declared by the assessee. (2) That under the facts and circumstances of the case the ld. CIT(A) has erred .....

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mpanied by similar computer printouts and some handmade written pages with names of persons to whom payments claimed to be made • No identity mark or proof of authenticity of such similar printouts. • No details or identity proof of persons to whom payments were claimed to be made. (II) The AO issued show cause notice u/s 145(3) of the Act and made an addition of ₹ 12 lac though the AO did not specifically rejected the books of accounts u/s 145(30 of the Act. (III) During the app .....

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earing in the account of Bharti Hexacon Ltd. on 20.04.2011. Similarly, the appellant raised invoice No. 20111059 on 02.11.2011 in the name of M/s Aircel Ltd. on 15.07.2011 nd een ther invoice No. shown as 20110460. (IV) During the appellate proceedings, the AR was required to explain the same but no reply was furnished by him. It is difficult to understand how it is possible to make entries in advance in the books of accounts before raising the invoice. The above instances revealed that the book .....

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ve examined the said contention of the appellant and found to be not convincing at all. It was not the case of the appellant that its earlier cases were completed under scrutiny proceedings and its books of accounts were accepted in these assessments. For the year under consideration as per its P&L account, the appellant has shown NP rate of 6.60% on total turnover of ₹ 87,60,84,239/-. Looking to the totality of the facts and circumstances of the case, I think it would be appropriate t .....

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auditors. No case for rejection of books by the Assessing Officer: The appellant humbly submits that, the nature of business of the appellant is such that, bills are not given by the persons through whom the services like verification of addresses, delivering of couriers, collection of KYC forms etc are undertaken by the appellant. These are mostly persons doing the job at individual level, and hence no proper bills are given by them. Instead these persons submit either a handwritten slip or a .....

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mmons to a few of such payees and verifying the claim of the appellant, before out rightly rejecting the books of the appellant, on pure assumptions and surmises, without appreciating the nature of business of the appellant. It is not the case of the Assessing Officer that, the expenses claimed by the appellant are excessive or bogus. Thus, rejecting books only on the ground that the vouchers were unsigned, or the bills were hand written is unwarranted and bad in law, especially when the books a .....

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has to first consider the past history of the assessee, as it the best guide for estimating the profits. In case of the appellant results of the earlier three years is as under:- PARTICULARS Assessment Year 2010-11 Assessment Year 2011-12 Assessment Year 2012-13 Turnover 29327924 73564911 86084239 Net Profit as per P/L a/c 1144109 4503085 5678009 NP (%) 3.9% 6.12% 6.6% Depreciation 793519 19670627 2779306 NP before depreciation 1937628 6473712 9249851 NP Rate before depreciation 6.61% 8.8% 10.75 .....

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s comparison with earlier years. Also, the NP rate estimated by the Learned CIT(A) has no basis, and thus the entire addition made, by invoking the provisions of sec 145(3) needs to be fully deleted and the appellant prays accordingly. 2.2 We have heard the rival contentions and perused the material available on record. The ld CIT(A) has closely examined the assessee s books of accounts and has come to a well-reasoned order that the same are not reliable and rightly held to be rejected under sec .....

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reason to interfere with the N.P rate declared by the assessee. Hence, the trading addition made on this account is deleted. 3. Now coming to ground no. 2, briefly the facts of the case are that during the assessment proceedings, it was observed by the AO that there was a difference of ₹ 80,79,713/- in the total receipts as per Form 26AS and as per P&L account filed by the assessee. It was submitted by the appellant before the AO that the difference was on a/c of service tax receipts b .....

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he assessee stands rejected by the service tax Department and thus the appellant paid service tax of ₹ 88,79,713/- for the year under consideration on 18.12.2013 and 20.12.2013 whereas due date of filing of return of income for the assessment year under consideration was 30.09.2012. After deliberating the issue in detail, it was held by the AO that the assessee made false claim of ₹ 78, 84,332/- on account of Cenvat Credit and this expenditure was never incurred by the assessee. It w .....

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he assessee that no amount has been claimed as deduction on account of service tax payable is incorrect, false and misleading and in fact the assessee has disclosed only a part of service tax receipts as payable and not the whole amount as the intention was to claim set off of ₹ 78,84,332/- as service tax paid to the vendors, which was actually never paid. The AO relied on decision of Hon ble Supreme Court in the case of M/s Chowringhee Sales Bureau (P) Ltd vs. CIT West Bengal (87 ITR 542) .....

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the invoices raised by it. Further, the copy of account of one of its customer namely Bharti Hexacon Ltd. revealed that the invoice wise payments were made by the customers of the appellant i.e. service tax, education cess and secondary education cess were paid with the value of services provided by the appellant. It is evident that the assessee did not routed the serviced tax collected by it through its Profit and loss account as it had not paid the same within the stipulated time to the govt. .....

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43B of the Act. It may be mentioned that in the case of Chowranghee Sales Bureau, the Hon ble Supreme Court held that the Sales tax collected and not deposited with the treasury would form part of the assessee s trading receipt. In the instant case under consideration, the appellant had collected service tax from its clients but did not pay the same before the due date of filing of return of income. Therefore , the ratio in the case of Chowringhee Sales Bureau is clearly applicable to the facts .....

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for goods sold. We have also observed that the AO had pointed out that the said amount has been included as business receipts in its TDS certificate and as such the same should have been included in its receipts. This has not been precisely done by the assessee. In the instant case, it is an admitted that that during the course of asessee s profession a sum of ₹ 29,60,000/- was realised/ collected as service tax payable and the same is not capital receipt. The moment the service tax is re .....

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unless paid to Government exchequer within the due date of filing of return. Since service tax realized is included in the total income, the same is to be allowed as a deduction in the year it is paid to the government account. In the instant case this is what has been done by the ld. CIT(A). The CIT(A) had allowed the alternative plea of the assessee and had directed the AO to deduct the service tax when the payment is made to the Govt. account in the subsequent year. Therefore, we find there i .....

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Learned CIT (A) and further humbly submits that no deduction is claimed in the P/L a/c both as regards to Service Tax provided on services availed by the appellant as well as service tax charged by the appellant, hence the provisions of Sec 43B are not attracted: The appellant has not shown the receipts inclusive of service tax charged by it. Also no deduction on this account is claimed in the computation of income filed by it. The provision for service tax made by the appellant, on services av .....

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hellip;………………." It is submitted that sec 43B starts with a non-obstante clause, and specifies that a deduction "otherwise allowable" under the Act, shall not be allowed unless it is actually paid. This means that the claim has to be firstly preferred by the assessee, and the same could be disallowed only for the reason of failure to make the actual payment, before the filing of return. In the case of the appellant, as there was no claim of .....

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gh Gahlawat vs. ACIT, I.T.A. No.1028/Del/2011 dated 29/04/2011. • Raj Pal Katyal, New Delhi vs Department Of Income Tax [I.T.A. No. 2665/Del/2012] • Indian Carbon Ltd Vs. Inspecting Assisstant Commissioner & Anr [200 ITR 759 (Gau)] • Pharma Search vs. Assistant Commissioner of Income Tax [82 DTR 303 ITAT Mumbai 2013] Thus based on the facts of the appellant and the judicial pronouncements, where service tax was never routed through P/L A/c, and also no deduction was claimed by .....

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f filing of return of income, the same is not allowable under section 43B of the Act. 3.4 We have heard the rival contentions and perused the material available on record. The Assessing officer has made the impunged addition on account of service tax firstly holding the same as part of professional receipts in the hands of the appellant and thereafter, he has invoked the provisions of section 43B of the Act given that the service tax has not been deposited before the due date of filing of return .....

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llant to the purchasers in the auction sale it was appellant who was shownas the seller. The amount realised by the appellant from the purchasers included sales tax. The appellant, however, did not pay the amount of sales tax to the actual owner of the goods auctioned because the statutory liability for the payment of that sales tax was that of the appellant. The appellant company did not also deposit the amount realised by it s sales tax in the State exchequer because it took the position that .....

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not, in our opinion, make any material difference. It is the true nature and the quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. Therefore, the ratio of the Hon ble Supreme Court decision in the case of Chowringhee Sales Bureau that the Sales tax coll .....

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tax collected and not deposited will be considered as part of professional receipts. Unlike the situation prevailing at the time when the Hon ble Supreme Court delivered its judgement in case of Chowringhee Sales Bureau when there were no clear provisions pari-materia to section 43B of the Act, now given that there are specific provisions in terms of section 43B of the Act, to our mind principle and ratio laid down in case of Chowringhee Sales Bureau continues to hold good except that its rigour .....

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