2024 (9) TMI 959 - AT - Income Tax

ITAT allows deletion of share capital addition under section 68 but dismisses other challenges including faceless assessment jurisdiction

Ebro India Pvt. Ltd. Versus ACIT, Circle 7 (1), Delhi.

Ebro India Pvt. Ltd. Versus ACIT, Circle 7 (1), Delhi. - TMI Issues Involved:1. Violation of Section 144B, 144C, and principles of natural justice.2. Assessment completed in violation of mandatory directions of the Dispute Resolution Panel (DRP).3. Addition under Section 68 of the Income Tax Act on account of share capital from a non-resident holding company.4. Disallowance of PF/ESI Contribution.5. Charging/computing interest under Sections 234C and 234D.6. Initiation of penalty under Sections 271AAC and 270A.Detailed Analysis:1. Violation of Section 144B, 144C, and Principles of Natural Justice:The assessee argued that the assessment completed under Section 143(3)/144C of the Act was illegal and bad in law due to gross violations of Sections 144B and 144C, and principles of natural justice. The key points raised were:- The assessment was completed without passing and serving a show cause notice-cum-draft order as mandated by Section 144B(1)(xvi)(b).- No opportunity for personal hearing was provided.- The final assessment order was passed by the jurisdictional assessing officer (JAO) instead of the National Faceless Assessment Centre (NFAC).- The final assessment order was passed in violation of specific directions issued by the DRP.The Tribunal noted that the faceless assessment scheme was newly introduced, and administrative constraints led to the transfer of cases to jurisdictional officers. It was held that the initial assessment by NFAC and subsequent transfer to JAO did not cause prejudice to the assessee. The Tribunal dismissed the issue, noting that the procedure under Section 144C provides an additional opportunity before the DRP, thus rectifying any procedural lapses.2. Assessment Completed in Violation of Mandatory Directions of the DRP:The assessee contended that the final assessment order was passed without following the binding directions of the DRP, specifically:- The DRP had directed the NFAC to spell out reasons for any breach of Section 144B.- The DRP directed the NFAC to consider material/evidence placed on record before passing the final order.The Tribunal observed that the JAO, who passed the final assessment order, was not in a position to provide reasons for breaches by NFAC. It was also noted that the JAO had not considered the submissions and evidence provided by the assessee, which was a serious issue. However, instead of remitting the issue back to the AO, the Tribunal decided to adjudicate the matter on merits.3. Addition Under Section 68 on Account of Share Capital from Non-Resident Holding Company:The Tribunal found that the assessee had provided comprehensive details and evidence, including the identity and creditworthiness of the shareholders, and the genuineness of the transaction. The share capital was received from non-resident shareholders through proper banking channels, and the same shareholders had invested in previous years, which was accepted by the Revenue. The Tribunal held that the addition under Section 68 was unwarranted and directed the AO to delete the addition.4. Disallowance of PF/ESI Contribution:The assessee argued that the employee contributions to PF/ESI were deposited before the due date of filing the return of income under Section 139(1). The Tribunal, however, relied on the Supreme Court decision in Checkmate Services Private Limited, which held that belated remittance of employee shares of ESI/PF is not deductible. Thus, the Tribunal dismissed this ground.5. Charging/Computing Interest Under Sections 234C and 234D:The Tribunal noted that this ground was consequential in nature and did not require separate adjudication.6. Initiation of Penalty Under Sections 271AAC and 270A:The Tribunal found this ground to be premature at this stage and dismissed it accordingly.Conclusion:The Tribunal partly allowed the appeal, directing the deletion of the addition under Section 68, while dismissing other grounds raised by the assessee.