Tribunal decision on notice service and tax disallowance; appeal partially allowed under Section 43B

The Tribunal upheld the CIT(A)'s decision regarding the disputed service of notice u/s 143(2), advising the assessee to file a revision before the Commissioner of Income Tax. However, the Tribunal allowed the appeal in part for the disallowance u/s 43B of the Act, setting aside the CIT(A)'s order and remanding the matter to the Assessing Officer for verification. The Tribunal emphasized that since the assessee did not claim the deduction for service tax in their Profit and Loss Account, the disallowance under Section 43B did not apply.

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Issues involved:
1. Disputed service of notice u/s 143(2) on assumed ground of non-filing of objection before Assessing Officer.
2. Disallowance u/s 43B of the Act amounting to Rs. 11,72,233 based on admission before Assessing Officer.

Analysis:

Issue 1: Disputed service of notice u/s 143(2)
The assessee challenged the service of notice u/s 143(2) by the Assessing Officer, claiming non-receipt and lack of jurisdiction. However, the CIT(A) dismissed this ground citing Section 292BB of the Act, which states that any defect in the notice shall not invalidate the assessment. The CIT(A) advised the assessee to file a revision before the Commissioner of Income Tax u/s 264 of the Act. The Tribunal upheld the CIT(A)'s decision, stating that the ground cannot be entertained at the appellate level after participating in the assessment proceedings.

Issue 2: Disallowance u/s 43B of the Act
The Assessing Officer added Rs. 11,72,233 to the assessee's income under Section 43B of the Act for outstanding service tax not remitted before the due date. The assessee contended that since they did not claim any deduction for service tax in their Profit and Loss Account, the addition was unwarranted. Citing the case of CIT Vs. Noble & Hewitt India (P) Ltd, the Tribunal agreed with the assessee's argument. The Tribunal emphasized that the assessee not claiming the deduction and following the mercantile system of accounting meant disallowance under Section 43B did not apply. The Tribunal set aside the CIT(A)'s order and remanded the matter to the Assessing Officer to verify the claim that the service tax expenditure was not debited in the Profit and Loss Account. If found correct, the addition under Section 43B was to be deleted, and a fresh assessment order was to be passed accordingly.

In conclusion, the appeal by the assessee was partly allowed for statistical purposes, emphasizing the need for proper verification and adherence to accounting principles in tax assessments.

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