2020 (4) TMI 483 - AT - Income Tax

TDS u/s 195 - payments made to non-residents - assessee s appeal is against not providing sufficient opportunity to rebut the material gathered by the Assessing Officer on the basis of which additions have been made - HELD THAT - We find that the assessee had taken a specific ground for not providing sufficient opportunity in the form of Ground No.1 in form No.35. CIT has duly reproduced the same. However, while disposing of the appeal, the Ld. CIT(A) has not adjudicated this ground. Ld. CIT(A) has only decided the other grounds. Therefore, we set aside the impugned order being contrary to the principles of natural justice. The Ld. CIT(A) ought to have adjudicated this ground. Therefore, the impugned order deserves to be set aside on this ground alone - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Violation of principles of natural justice in confirming the order passed by the ITO u/s 201(1A) of the IT Act.
2. Default in withholding tax u/s 195 of the IT Act for payments made to a non-resident.
3. Existence of a business connection/permanent establishment in India for a non-resident.
4. Profit attribution to activities of agent in India.
5. Applicability of section 195A of the IT Act.
6. Levy of interest u/s 201(1A) of the IT Act.

Analysis:

Issue 1:
The appellant argued that the order passed by the ITO was invalid and violated principles of natural justice as material relied on was not provided for verification/cross-examination. The Tribunal found that the CIT(A) did not adjudicate this ground, setting aside the order due to a lack of opportunity for the appellant to rebut the material gathered by the Assessing Officer.

Issue 2:
The appellant was treated as liable for tax deduction u/s 195 of the IT Act for non-resident payments. The AO held the appellant in default for not deducting tax, resulting in a financial liability for the appellant. The CIT(A) upheld this decision, leading the appellant to appeal to the Tribunal.

Issue 3:
The CIT(A) held that the non-resident had a business connection/permanent establishment in India, which the appellant contested, arguing that the Indian agent acted as a communication channel. The Tribunal set aside this decision for fresh consideration.

Issue 4:
The CIT(A) confirmed the profit attribution to the activities of the non-resident's agent in India. The Tribunal set aside this decision for reevaluation after providing the appellant with sufficient opportunity.

Issue 5:
The applicability of section 195A of the IT Act was confirmed by the CIT(A) based on the silence of the purchase order on applicable taxes. This issue will be reconsidered by the CIT(A) after the order was set aside.

Issue 6:
The CIT(A) confirmed the levy of interest u/s 201(1A) of the IT Act, which will also be reviewed afresh by the CIT(A) after the order was set aside.

The Tribunal allowed the appeal for statistical purposes, setting aside the CIT(A)'s order and directing a fresh consideration of all grounds after providing the appellant with adequate opportunity.