2023 (9) TMI 548 - AT - Income Tax

Tribunal overturns CIT(A) decision, stresses importance of additional evidence for fair tax assessment.

Control Risks India Pvt. Ltd. Versus ACIT, Circle-6 (2), New Delhi.

Control Risks India Pvt. Ltd. Versus ACIT, Circle-6 (2), New Delhi. - TMI Issues involved:The issues involved in this case include the alleged upholding of assessment by the CIT(A) under section 143(3) of the Income-tax Act, 1961, the disallowance made under section 40(a)(i) of the Act in respect of inter-company fees and international commission payments, and the refusal to admit additional evidences by the CIT(A) without a formal application under Rule 46A.Assessment Upheld by CIT(A):The appellant challenged the assessment made by the AO under section 143(3) of the Income Tax Act, claiming a loss of Rs. 1,79,51,014, which was assessed as income of Rs. 1,59,62,193 by the CIT(A). The appellant argued that certain documents furnished were not considered without an application under Rule 46A, preventing adjudication of the issues involved.Disallowance of Expenses under Section 40(a)(i):The CIT(A) confirmed the disallowance made by the AO under section 40(a)(i) of the Act in relation to inter-company fees and international commission payments. The appellant contended that the payments made to non-resident entities did not require withholding tax under Section 195 when considering the provisions of the Act and the Double Taxation Avoidance Agreements (DTAA).Refusal to Admit Additional Evidences:The CIT(A) refused to admit additional evidences, such as 'no PE certificate' and Tax Residency Certificate (TRC), filed by the appellant without a formal application under Rule 46A. The appellant argued that these documents were crucial in demonstrating the absence of obligation for withholding tax under Section 195 of the Act.Judgment:The Tribunal found that the CIT(A) erred in not admitting crucial additional evidences, which were vital for determining the appellant's obligations under Section 195 of the Act. The Tribunal emphasized the importance of natural justice and fair opportunity for the appellant to present its case. It concluded that the CIT(A) violated principles of natural justice by ignoring these evidences on technical grounds.Decision and Order:The Tribunal set aside the order of the CIT(A) and remanded the issues back to the Assessing Officer for fresh adjudication in accordance with law. It directed the Assessing Officer to consider all evidences placed before him by the appellant and provide a reasonable opportunity for the appellant to address the issues involved. The appeal of the appellant was allowed for statistical purposes.