TaxTMI 
TaxTMI 
2026 (2) TMI 1311
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....ason for issuing the notice and the implication of the non- compliance. In the absence of requisite particulars, the Show Cause Notice would be liable to be quashed on the ground of being wholly vague. Therefore, the action of AO in completing the assessment without giving proper show cause notice and the action of the Ld. CIT(A), of totally ignoring the important legal aspect and confirming the action of the Ld. AO is against the provision of the laws and need to be quashed. 2. That on the facts and circumstances of the case Ld. CIT (appeal) is not justified in confirming disallowance of Rs. 2,03,43700/- u/s 40(a)(i) due to non-deduction of tax u/s 195. Section 195 requires deduction of tax if the sum is chargeable to tax under the provision of the Income Tax Act. No TDS was deducted by the assessee on these payments because as per the provision of Section 9(1)(vii) no income accrue or arise in India in this case, so no tax was deductible. Therefore, disallowance made by ld. AO and confirmed by CIT(A) is not justified, against the provision of law and uncalled for. 3. That on the facts and circumstances of the case Ld. CIT (appeal) is not justified in concluding ....
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....onstrated that the services rendered by the non-residents were "utilized for the purpose of earning income from a source outside India" within the narrow meaning of clause (b) of section 9(1)(vii). * No independent verification or contemporaneous evidence (such as client confirmation, technical documentation linking services rendered by the foreign consultants to export deliverables, or work-product trails) has been submitted to establish the direct nexus as claimed. * The reliance on Form 15CA/15CB, while relevant for remittance compliance, does not conclusively prove nontaxability of the income in the absence of adequate supporting documentation and analysis of the nature of services. Further, while the appellant relies heavily on legal interpretations and judicial pronouncements, the applicability of those precedents is contingent upon clear demonstration of facts which support the non-taxability claim a burden the appellant has not discharged convincingly in the instant case. Moreover, the appellant chose not to apply for a certificate under section 195(2), which, while not mandatory in all cases, would have certainly aided in establishing bo....
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....s sought and the charge that it has to answer. The notice thus cannot leave the assessee grappling with or trying to discern the provision which it is supposed to have infringed. In the absence of requisite particulars, the Show Cause Notice would be liable to be quashed on the ground of being wholly vague. (b) ITO Ward 6(1)(1) Bangalore Vs. Shubhankar Estates Pvt. Ltd. ITA No.1917/Bang/2024 wherein it has been held as under: 11.2 We are completely in agreement with the Id. CIT(A)/NFAC that assessment order has been passed in breach of the CBDT. instruction no.20/2015 which cast mandatory obligation on the AO to issue prior show cause notice before making additions in the assessment order. Failure to do so is a gross violation of principles of natural justice. Further, we are also of the opinion that CBDT instructions are binding upon the AO and therefore, we also held that the assessment framed by the AO in contravention of the CBDT instruction are liable to be quashed. Since the revenue notably and admittedly has not assailed findings/ conclusion of Id. CIT(A) qua absence of show cause notice in violation of CBDT instruction No.20/2015 in which the Id. ....
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....ause notice on 22.11.2019 in response to which the assessee filed its objections. Thus, the assessee's claim that it was not made aware of the proposed disallowance is not borne out from above facts. On the other hand, in the judicial citations relied upon by the Ld. AR, the assessee was not apprised of the default in the show cause notice to enable it to furnish proper explanation. 6.2 In view of the peculiar facts and circumstances of the instant case discussed hereinbefore, we are of the view that the assessee was given requisite opportunity to submit its objections to the proposed addition and, thus, the ground no. 1 relating to the legal issue regarding non-issue of proper show-cause notice is, hereby, dismissed. 7. Ground No. 2 & 3 relate to the merits of the issue regarding disallowance of Rs. 2,03,43,700/- u/s 40(a)(i) due to non-deduction of tax u/s 195 of the Act. It has been contended by the Ld. AR that as per provisions of section 9(1)(vii), no income accrued or arose in India in this case, and therefore, no tax was deductible. It is the claim of the Ld. AR that during the year, the assessee was providing services to only one client situated at USA. Thus, there is....
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.... Accordingly, I find no merit in the contentions raised by the appellant in this appeal. The legal arguments, though well-articulated, are not supported by adequate factual substantiation. The disallowance made by the Assessing Officer under section 40(a)(i) is, therefore, upheld." 8. We have heard the rival submissions and perused the material placed on record. We note that the relevant provisions of section 40(a)(i) provide as under: "40 Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession"- (i) any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable,- (A) outside India; or (B) in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of s....