TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 71
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.... penalty under Section 271(1)(c) of the Act. 2. None appeared on behalf of the assessee nor any application seeking adjournment was filed before us. We have noted that despite several opportunities granted to the assessee, the assessee has either remained unrepresented on several occasions or sought adjournments. Considering the same, it was considered fit to proceed with adjudicating the appeals ex-parte. 3. We shall first be dealing with the appeal of the Revenue in ITA No.579/Ahd/2015 relating to Assessment Year 2006-07. The grounds raised by the Revenue are as under:- "1. On the facts and in the circumstances of the case the learned CIT(A) has erred in facts and in law in deleting the addition of Rs. 1,38,07,344/- on account of suppression of income without appreciating that A.O. after discussing the issues related to information received from Central Excise and Service Tax Dept., and evidences gathered, during the course of assessment proceedings, correctly worked out the profit element of Rs. 1,38,07,344/- being 25% of the service charges of Rs. 5,52,29,376/-. 2. On the facts and in the circumstances of the case, learned CIT(A) has erred in facts and in law in deleting ....
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.... of unpaid Service Tax liability. Accordingly the total income of the assessee was assessed at Rs. 1,68,36,584/- as against Nil returned by the assessee. 5. Before the Ld. CIT(A) the assessee reiterated its contentions and furnished additional evidences in support. The assessee pleaded that the said income did not relate to it since it had come into existence in the impugned year only and had not commenced any business. That in fact it related to the proprietary concern of the Director of the assessee Company, Shri Keshav Alwa, which went by the same name as the assessee Company. Additional evidences in support of the contention was filed before the Ld. CIT(A). The Ld CIT(A), after perusing the same, found merit in the contention of the assessee and deleted both the additions so made holding as under :- "4.5 I have considered the appellant's submission and AO's observations, remand report and documents submitted during the course of the appellate proceedings. From the copy of Memorandum of Association and Article of Association of the appellant company, it is seen that the company was formed on 19/12/2005 on which date the certificate of incorporation was issued by the A....
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....fact belonging to M/s. Super Hospitality Services, which is the proprietorship concern of Mr. Keshav Alwa. Accordingly, the service tax liability determined by the service tax department was also of Mr. Keshav Aiwa only. Hence, it is held that the income of Rs. 1,38,07,344/- determined by the AO in the current assessment order is in fact the income of Mr. Keshav Aiwa. Similarly, the unpaid service tax liability of Rs. 30,29,240/- determined by the AO in the current assessment order is to be taxed as the income of Mr. Keshav Alwa as per the provisions of section 43B. Hence, as per the provisions of explanation 3 to Section 153 these amounts are to be taxed as the income of the Keshav Alwa for the A.Y. 2005-06. 4.5.3 Accordingly a letter dated 18.12.2014 was written to Mr. Keshav Alwa as follows:- "During the course of the appellate proceedings for AY 2006-07 in the case of M/s. Super Hospitality Services Pvt. Ltd., you have accepted in the capacity of Director of this company that the turnover determined by the AO in the assessment order as well as the service tax liability determined for this AY, belong to your proprietorship concerned namely M/s. Super Hospitality Services. ....
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....Rs. 5.76 Crore is reflected in the balance sheet of Super Hospitality Services after verification of all supporting documents." So, it is requested to your that kindly consider the above facts and delete the said additions in case of Super Hospitality Services Pvt. Ltd. Further, on the basis of all the documents, submitted herewith and before, please delete the demand in case of Super Hospitality Services (Prop. Keshav Aiwa) also." 4.5.5 The AO is directed to reopen the assessment of Mr. Keshav Alwa for this purpose as per the provisions of Explanation 3 to section 153 of the IT Act, 1961 in order to assess the unpaid service tax liability of Rs. 29,15,155/- as on 31.03.2005 and profit on account of turnover determined by the Service Tax Department in his hands. The AO shall also examine the claim of Mr. Keshav Alwa that the turnover determined in the showcause notice issued by the Service Tax Department has been shown in the books of accounts of his proprietorship concern, M/s. Super Hospitality Services. Accordingly, the additions made in the hands of the appellant company are directed to be deleted." 6. We have gone through the order of the Ld. CIT(A) and do not find any infi....
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....any, pertained to his concern and stood reflected in the books also. 10. On the basis of the aforestated facts, the Ld. CIT(A) concluded that there was no suppression of sale on the part of the assessee Company and that it actually related to the proprietorship concern and accordingly directed that the issue of addition on account of suppressed sales alongwith that of unpaid service tax liability be examined in the case of the proprietorship concern. 11. None of the findings of fact by the Ld. CIT(A) have been controverted by the Ld. Departmental Representative before us. In view of the same, we see no reason to interfere in the order of the Ld. CIT(A) deleting the addition made of profits from suppressed of sales ,amounting to Rs. 1,38,07,344/- and that on account of unpaid service tax liability u/s 43B of the Act of Rs. 30,29,240/- 12. Grounds raised by the Revenue are therefore dismissed. 13. In effect appeal of the Revenue is dismissed. 14. We now take up appeal of the assessee in ITA No.526/Ahd/2015, pertaining to A.Y 2010-11 against the order of the Ld. CIT(A) confirming levy of penalty u/s 271(1)(c) of the Act. 15. The grounds raised by the assessee are as under :- "....
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....e facts of the case, the AO's observations and submissions made by the AR of the appellant. The appellant's claim before the AO as well as during the course of the appellate proceedings is that there was no concealment of facts as the amount of service tax and VAT payable as on the last day of the financial year was disclosed. In the Tax Audit Report; based upon which the AO has made the disallowance. It has been further submitted that the disallowance made in the current year will be allowed in the subsequent year as per the provisions of section 43B and therefore, there was no evasion of tax. In this regard, the appellant has placed reliance upon the decisions of Hon'bIe Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. (supra and decision of ITAT, Ahmedabad Bench in the case of Volga Airtechnic Ltd. (supra). But, on analysis of these decisions, it is seen that the facts of the present appeal are not identical to these cases. In the case of Price Waterhouse Coopers Pvt. Ltd., the Hon'ble Supreme Court had enquired into the reasons leading to non disallowance of amounts disallowable as per section 43B of the Act in the return of income filed by the assess....
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....icable to the present appeal. Rather the ratios laid down in the decisions in the cases of Gujarat State Financial Services Ltd. 039 SOT 570 (AHD) and Zoom Communication (P) Ltd., 191 Taxman 179 (Del), involving imposition of penalty u/s 271(1)(c) on account of claim made of legally unjustifiable deduction regarding which no debate or controversy was involved, are applicable. Hence, the penalty levied by the AO is upheld." 17. We have gone through the orders of the authorities below and have heard the Ld. DR who has supported the order of the Ld.CIT(A). 18. It is a fact on record the both the unpaid liabilities had been reflected in the respective columns of the tax audit report. In fact the AO had picked them up from the tax audit report itself for making addition in quantum proceedings, which fact finds mention in the assessment order. Further on going through the assessment order ,which is reproduced at para 4.1 of the CIT(A)'s order in the impugned penalty proceedings ,we find that the assessee had stated that the outstanding demand related to a contested liability the appeal against which was pending at higher level. The assessee had stated that the liability had been fixed ....