2020 (1) TMI 319 - AT - Income Tax

Disallowance of expenses - CIT(A) deleted the addition without giving an opportunity of being heard to AO to examine the additional evidence produced before him in the form of bills/vouchers, TDS Challans etc, which were not produced before the AO, as mandated by Rule 46A(3) of the Income-tax Rules, 1963 - HELD THAT - Just giving the note will not serve the purpose. Admittedly the various details which have been referred by the learned CIT(A) were not before the assessing officer. Moreover after noting that he has himself examined the bills he has given a general assumption that expenditure must have been incurred for such transportation. When learned CIT (A) has himself verified the bills there was no need of giving such doubtful observation. In this view of the matter there is certainly violation of 46 A and the finding of learned CIT (A) is also not categorical. Accordingly, in our considered opinion the submissions and documents on the basis of which learned CIT (A) has granted relief need to be remitted to the file of Assessing Officer. The Assessing Officer is directed to go through the same and decide as per law. Transfer Pricing adjustment of Singapore AE - HELD THAT - As regards the Transfer Pricing adjustment, ld CIT(A) has noted that assessee s explanation appears to be acceptable and hence the assessing officer is directed to delete the above addition as the AR has established that the said Nomanbhoy Sons Pte Ltd (Singapore) is not an associated enterprise. In this regard we note that ld CIT(A) has not given a categorical finding. He has used the expression that it appears to him that assessee submissions are correct. In our considered opinion such vague orders are not sustainable. There should have been a categorical finding to be sustainable in law. In our considered opinion, this issue also needs to be remitted to the file of Assessing Officer. The Assessing Officer is directed to consider the issue afresh in light of the submissions and explanations given before the learned CIT (A). Transfer Pricing adjustment - CIT(A) has referred to the assessee submissions and has directed the Assessing Officer to verify and allow - HELD THAT - We fail to understand as to how the learned CIT(A) can give such suggestions. Firstly, the learned CIT(A) has no power of remand. Moreover the learned CIT(A) has directed to verify and in the same breath he is directing to be allowed. The direction if any in this regard can be to verify and allow as per law. Be as it may we modify order of learned CIT(A) and remit the issues to the file of assessing officer. Assessing officer is directed to examine the same afresh and pass an order according to law after giving the assessee proper opportunity appeal heard.

Summary

Issues Involved:
1. Deletion of addition of ?1,25,31,547 without allowing the Assessing Officer (AO) to examine additional evidence.
2. Ignoring whether Tax Deducted at Source (TDS) was deposited on time to avoid Section 40(a)(ia) implications.
3. Deletion of addition of ?2,12,24,848 by treating Nomanbhoy & Sons Pte Ltd, Singapore, as not an Associated Enterprise (AE) without calling for a Remand Report.
4. Obligation of the CIT(A) to conduct a proper inquiry into whether Nomanbhoy & Sons Pte Ltd, Singapore, is an AE as per Section 92A(2).
5. Deletion of transfer pricing adjustments of ?27,37,951 and ?6,83,205 without allowing the AO to examine additional evidence.

Detailed Analysis:

1. Deletion of Addition of ?1,25,31,547:
The AO disallowed the claim of ?1,25,31,547 as the assessee did not furnish supporting details for expenses. The CIT(A) later verified the bills and TDS challans during the appeal proceedings and found no reason to uphold the disallowance. The CIT(A) noted that the details were available in the notes appended to the revised return, which the AO failed to verify. However, the Tribunal found that the CIT(A) should have given the AO an opportunity to examine these documents. The Tribunal remitted the issue back to the AO for re-examination.

2. Tax Deducted at Source (TDS) Compliance:
The AO questioned whether the TDS was deposited into the Government Treasury on time to avoid the implications of Section 40(a)(ia). The CIT(A) noted that TDS was duly paid except for transport charges, which were exempt under Section 194C(6). The Tribunal did not provide a separate ruling on this issue but remitted the related expenses back to the AO for re-examination, implicitly covering the TDS compliance aspect.

3. Deletion of Addition of ?2,12,24,848:
The AO treated Nomanbhoy & Sons Pte Ltd, Singapore, as an AE and made a transfer pricing adjustment. The CIT(A) found that the said company was not listed as an AE in Form 3CEB and accepted the assessee's explanation without calling for a Remand Report. The Tribunal noted that the CIT(A) did not provide a categorical finding and used vague language. Therefore, the Tribunal remitted the issue back to the AO for a fresh examination.

4. Obligation to Conduct Proper Inquiry:
The AO did not examine whether the conditions specified in Section 92A(2)(h) were met to classify Nomanbhoy & Sons Pte Ltd, Singapore, as an AE. The CIT(A) also did not conduct a proper inquiry. The Tribunal emphasized the need for a categorical finding and remitted the issue back to the AO for a thorough examination.

5. Deletion of Transfer Pricing Adjustments:
The CIT(A) deleted transfer pricing adjustments of ?27,37,951 and ?6,83,205 without allowing the AO to examine additional evidence. The CIT(A) directed the AO to verify the assessee's submissions and allow the claims. The Tribunal found this approach inappropriate as the CIT(A) has no power of remand and should not direct the AO to allow claims. The Tribunal remitted these issues back to the AO for a fresh examination and ordered the AO to pass an order according to law after giving the assessee a proper opportunity to be heard.

Conclusion:
The Tribunal allowed the revenue's appeal for statistical purposes and remitted all issues back to the AO for re-examination and fresh orders in accordance with the law. The AO is directed to consider the additional evidence and submissions made by the assessee and provide a proper opportunity for the assessee to be heard.