2024 (11) TMI 358 - AT - Income Tax

Non deducted the TDS on payments pertaining to the Agency services - CIT(A) found that the TDS was deducted u/s 194C - HELD THAT - AR submitted that the relevant clause 23 of the Form.No.3CD pertains to reporting of particulars of payment made to specified persons u/sec40A(2)(b) of the Act and demonstrated the Form.No.3CD and in particular at Page 23 - clause no 23 along with Annexure D, where the details of payments made to the partner M/s Capricon logistics Pvt Lt is mentioned and TDS was also deducted on the quantum of the Agency services u/sec194C We find the CIT(A) has dealt on the facts, provisions of Act, submissions of the assessee and the clause 23 of the Tax Audit Report Form. No 3CD to clear the wrong observations of the AO. Further the said clause relate to reporting of particulars of payments made to specified persons u/sec 40A(2)(b) of the Act and the assessee has reported the payments made to one of the partner M/s Capricon logistics Pvt Lt in the F.Y.2013-14. CIT(A) has considered these factual information and passed a reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.

Summary

Issues Involved:

1. Deletion of addition of Rs. 2,46,07,278/- due to non-deduction of TDS on payments made to a related party.
2. Validity of the assessment order and notice under sections 147 and 148 of the Income Tax Act.
3. Adequacy of documentation and substantiation of agency charges.
4. Misinterpretation of Tax Audit Report clause by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Deletion of Addition due to Non-deduction of TDS:

The primary contention was the deletion of an addition amounting to Rs. 2,46,07,278/- by the CIT(A), which the revenue argued was erroneous due to the assessee's failure to deduct TDS on payments made to M/s. Capricorn Logistics Pvt. Ltd. The CIT(A) found that the assessee had indeed deducted TDS under section 194C of the Income Tax Act, as evidenced by the relevant TDS certificates and Form 26AS. The CIT(A) observed that the Assessing Officer's reliance on clause 23 of the Tax Audit Report was misplaced, as this clause pertains to payments made to specified persons under section 40A(2)(b) and not to TDS deduction compliance.

2. Validity of Assessment Order and Notice:

The CIT(A) held that the notice under section 148 and the assessment order under section 147 read with section 143(3) were void ab initio. This conclusion was based on the failure of the Assessing Officer to issue a speaking order addressing the objections raised by the assessee regarding the reopening of the assessment. The CIT(A) referenced the Supreme Court's directive in the case of GKN Driveshafts (India) Ltd., which mandates that objections to reopening must be disposed of with a speaking order. The absence of such an order rendered the assessment proceedings invalid.

3. Adequacy of Documentation and Substantiation of Agency Charges:

The revenue argued that the assessee failed to provide adequate documentation to substantiate the agency charges claimed. However, the CIT(A) found that the assessee had submitted sufficient evidence, including TDS certificates and Form 26AS, demonstrating compliance with the TDS provisions. The CIT(A) noted that the agency charges were a recurring business expense, duly supported by documentation.

4. Misinterpretation of Tax Audit Report Clause:

The CIT(A) clarified that the Assessing Officer misinterpreted clause 23 of the Tax Audit Report, which pertains to the reporting of payments made to specified persons under section 40A(2)(b). The CIT(A) emphasized that this clause was incorrectly used to allege non-deduction of TDS, whereas the relevant clause for TDS compliance was 21(B)(ii), which did not report any non-compliance concerning M/s. Capricorn Logistics Pvt. Ltd.

In conclusion, the CIT(A) provided a reasoned order, addressing the factual inaccuracies and procedural lapses in the Assessing Officer's approach. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal and confirming that the addition of Rs. 2,46,07,278/- was rightly deleted. The appeal filed by the revenue was dismissed, and the order was pronounced in the open court on 27.09.2024.