2014 (2) TMI 308 - AT - Income Tax

Demand u/s 201(1) and interest u/s 201(1A) - Held that - Voluminous details were submitted by assessee and referred to the first remand report and second remand report to submit that A.O. states that entire information has been furnished in the assessment proceedings itself - The A.O. did not conduct a detailed examination - AO should examine necessary accounts furnished by the assessee along with nature of payment - He has to give a finding whether any payment is required to be subjected to tax as per the provisions of I.T. Act and if there is any default to quantify after due examination - The issue has been restored for fresh adjudication.

Issues:
1. Assessment orders under section 201(1) and 201(1A) for assessment years 2008-2009 and 2009-2010.
2. Dispute over TDS liability on expenses incurred by branch offices in USA and UK.
3. Failure to produce supporting evidence for expenses incurred abroad.
4. Dismissal of appeals by CIT(A) due to lack of evidence supporting the claim of expenses incurred outside India.
5. Contesting the dismissal of appeals by CIT(A) and requesting a fresh examination by the A.O.

Analysis:

1. The appeals were filed against the Orders of the CIT(A)-II, Hyderabad for assessment years 2008-2009 and 2009-2010 under section 201(1) and 201(1A) by the Income Tax Officer, Ward 15(3), Hyderabad. The assessee, a software services company with offices in Hyderabad, USA, and UK, faced demands due to alleged non-production of books of accounts for the financial years and incomplete ledger statements. The A.O. raised demands under sections 201(1) and 201(1A) as the assessee did not provide sufficient details.

2. The assessee contended that payments made by the USA and UK offices were not subject to TDS as the recipients were not assessable in India. Despite submitting details in the form of ledger copies and a CD containing information, the A.O. did not verify the information. The A.O. requested evidence to substantiate the claim that expenses were incurred abroad, but the assessee failed to provide the necessary information, leading to challenges in verifying TDS liability.

3. The A.O. issued remand reports highlighting the lack of evidence supporting the claim of expenses incurred abroad and the absence of TDS on certain payments. The assessee submitted additional details in response to the remand reports, but the A.O. found it challenging to conclude on TDS defaults due to insufficient evidence. The CIT(A) dismissed the appeals, emphasizing the failure of the assessee to produce supporting evidence for expenses incurred outside India.

4. Contesting the CIT(A)'s order, the assessee's counsel argued that voluminous details were submitted, and objections were raised regarding the A.O.'s failure to examine the furnished information thoroughly. The counsel requested a fresh examination by the A.O., highlighting discrepancies in the A.O.'s conclusions and the need for a detailed assessment of the provided information. The Departmental Representative had no objections to this proposal.

5. The ITAT Hyderabad set aside the orders of the A.O. and CIT(A) and restored the matter to the A.O. for a fresh examination. Emphasizing the necessity for a detailed assessment of the information provided by the assessee, the ITAT directed the A.O. to examine the accounts and nature of payments to determine any tax liabilities accurately. The ITAT highlighted the A.O.'s lack of interest in examining the details and stressed the importance of giving the assessee a fair opportunity in the assessment process.

The ITAT Hyderabad allowed the appeals for statistical purposes, providing the assessee with another opportunity for a detailed examination by the A.O. to ensure a fair and accurate assessment of TDS liabilities on expenses incurred by the branch offices in USA and UK.

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