2023 (2) TMI 295 - AT - Income Tax

Income deemed to accrue or arise in India - interest as per Article 12 of Indo-UK DTAA and Section 2(28A) of the Income tax Act - HELD THAT - We find that under the identical set of facts and circumstances of the case, the matter has been decided by the Coordinate Chandigarh Benches in case of Shri Mohinder Singh Sanghera 2018 (9) TMI 2113 - ITAT CHANDIGARH AND Shri Karnial Singh 2022 (12) TMI 1307 - ITAT CHANDIGARH nothing has been brought on record to the effect that the aforesaid decisions of the Coordinate Benches have either been stayed or reversed by the Higher Courts. Further, no contrary decision of any Higher authority has been brought to our notice. Therefore, we see no reason to deviate from the view already taken by the Coordinate Benches and following the same, the assured return from M/s Omaxe is in the nature of interest taxable @ 15% under Article 12 of India-UK DTAA. In the result, ground no. 4 of the assessee s appeal is allowed in favour of the assessee and against the Revenue. Unexplained cash credits - admission of additional evidence - HELD THAT - We deem it appropriate that the additional evidence so submitted by the assessee be considered and specific finding be recorded in this regard after examining the additional evidence. In view of the same, the matter is set-aside to the file of the ld CIT(A) who shall examine the additional evidence and shall decide the matter a fresh as per law after providing reasonable opportunity to the assessee. In the results, the grounds no. 5-7 are allowed for statistical purposes.

Issues Involved:
1. Validity of assessment under section 143(3) read with 153A.
2. Validity of notice under section 153A.
3. Addition of Rs. 321,375 as income from other sources.
4. Applicability of Article 12 of Indo-UK DTAA and Section 2(28A) regarding assured return.
5. Addition of Rs. 43,48,630 as unexplained cash credits.
6. Consideration of additional evidence by CIT(A).

Detailed Analysis:

1. Validity of Assessment under Section 143(3) read with 153A:
The assessee argued that the assessment framed under section 143(3) read with 153A is invalid due to the absence of a warrant of authorization under section 132. The Tribunal did not explicitly address this issue in the detailed judgment, focusing instead on other substantive issues raised.

2. Validity of Notice under Section 153A:
The assessee contended that no notice under section 153A was served, making the assessment time-barred and illegal. This issue was not specifically addressed in the Tribunal's detailed analysis, indicating that the primary focus was on the substantive additions and their justifications.

3. Addition of Rs. 321,375 as Income from Other Sources:
The AO classified the assured return received from M/s Omaxe Ltd. as "income from other sources" under section 56(1) of the Act, arguing it was not interest under Article 12 of the Indo-UK DTAA or Section 2(28A). The CIT(A) upheld this view, stating the payments were assured returns and not interest, as the term "interest" was not used in the agreement.

4. Applicability of Article 12 of Indo-UK DTAA and Section 2(28A) Regarding Assured Return:
The Tribunal referenced the Coordinate Chandigarh Benches' decisions in similar cases, which held that the assured return was in the nature of interest. The Tribunal concluded that the assured return should be taxed as interest at 15% under Article 12 of the Indo-UK DTAA, overturning the CIT(A)'s decision. This was based on the precedent that the assured return was a financial transaction and not merely income from other sources.

5. Addition of Rs. 43,48,630 as Unexplained Cash Credits:
The Tribunal noted that the CIT(A) did not consider additional evidence provided by the assessee explaining the source of these credits. The Tribunal set aside this issue to the CIT(A) for fresh consideration, directing the CIT(A) to examine the additional evidence and provide a specific finding.

6. Consideration of Additional Evidence by CIT(A):
The Tribunal found that the CIT(A) failed to consider additional evidence despite a remand report from the AO. The Tribunal directed the CIT(A) to examine the additional evidence and decide the matter afresh, ensuring a fair opportunity for the assessee to present their case.

Conclusion:
The Tribunal allowed the appeal partly for statistical purposes, directing the CIT(A) to reconsider the additional evidence regarding unexplained cash credits. It also ruled that the assured return from M/s Omaxe Ltd. should be taxed as interest under Article 12 of the Indo-UK DTAA. Other grounds of appeal were dismissed as infructuous. The findings and directions in ITA No. 1573/Chd/2019 were applied mutatis mutandis to related appeals for subsequent assessment years, with the appeals being partly allowed for statistical purposes.

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