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2019 (7) TMI 926 - AT - Income TaxCondonation of delay of 1159 days - reasonable cause - misplacement of the files by department - HELD THAT - Being a huge Department, all the standard procedures have been laid down and all the officers are required to follow the same and maintain the files accordingly. The learned CIT (DR) had submitted that this is a single case which had got misplaced and that the Department has taken due care in all the cases to file the appeal without any delay. He submitted that it was only due to the huge workload holding other charges and it escaped the attention and it was only after the file got traced out that the appeal could be filed. We find this contention of the learned DR to be acceptable and the reasons explained by the Department are satisfactory. We also accept the assessee s contention that the proceedings of 2014-15 could be trigger point for tracing of the file and filing of the appeal with delay. However, we are of the opinion that it should not come in the way of considering the reasonable cause for condonation of delay and we accept the contention of the learned DR. Therefore, we condone the delay of 1159 days in filing of the appeal before the ITAT. Arms Length rate of interest - Investments in debentures - rate of interest of 15.75% paid by the assessee in respect of debentures of its associate concern M/s Watermarke Residency Private Ltd - AO reduced it to 11.20% and balance taxed as income - CIT upheld rate @15.75% also admitted certain additional evidence - HELD THAT - We find that the assessee had filed additional details before the CIT (A) but the CIT(A) has not called for any remand report from the AO but has accepted the assessee s contention. Though the powers of the CIT (A) are co-terminous with the AO, the CIT (A) has failed to verify the details himself, nor has he called for a remand report, particularly when the AO in the assessment order had clearly brought out that he is not considering the additional information filed by the assessee because it was filed after passing of the draft assessment order. This acceptance of additional evidence without giving the AO an opportunity to verify the same clearly in violation of Rule 46A of the I.T. Rules. Further, it is the case of the assessee that the investments in debentures were made in rupees and therefore, the SBI PLR rate should be adopted. We find that all these contentions need consideration by the AO/TPO along with the additional evidence filed before the CIT (A). Therefore, we deem it fit and proper to remand the issue to the file of the AO/TPO for denovo consideration in accordance with law. Needless to mention that the assessee shall be given a fair opportunity of hearing. Revenue s appeal is allowed.
Issues:
1. Condonation of delay in filing the appeal by the Revenue. 2. Justification of interest rate on debentures and application of DTAA between India and Cyprus. 3. Admission of additional evidence by CIT (A) without following proper procedures. 4. Consideration of comparable cases for determining arms length rate of interest. 5. Taxation of interest income under DTAA without surcharge and education cess. Condonation of Delay: The Revenue filed an appeal with a delay of 1159 days, citing misplacement of files due to cadre restructuring as the reason. The assessee objected, highlighting incomplete details in the Revenue's application for condonation. The Revenue explained the delay due to workload and cross-movement of files. The Tribunal accepted the reasons given by the Revenue, condoning the delay and allowing the appeal. Interest Rate on Debentures and DTAA: The assessee invested in debentures of related parties with an interest rate of 15.75%. The AO proposed adding 4.55% to the income, considering 11.20% as a reasonable rate. The AO also applied the DTAA between India and Cyprus, recharacterizing interest as "income from other sources." The CIT (A) directed to compute interest at 15.75% as the "Arms Length" rate and tax it at 10% under the DTAA. The Tribunal remanded the issue to the AO/TPO for further consideration in accordance with the law. Admission of Additional Evidence: The CIT (A) accepted additional evidence from the assessee without calling for a remand report from the AO, violating Rule 46A of the I.T. Rules. The Tribunal found this acceptance without verification by the AO as improper and remanded the issue for denovo consideration. Comparable Cases and Taxation under DTAA: The Revenue raised multiple grounds of appeal, challenging the CIT (A)'s decision on the interest rate and taxation under the DTAA. The Tribunal found the CIT (A) erred in not following proper procedures and remanded the issue for further consideration by the AO/TPO. Conclusion: The Tribunal allowed the Revenue's appeal, remanding the issue for further consideration. The assessee's Cross Objection was dismissed, and the delay in filing it was condoned. The Tribunal pronounced the order on 12th June 2019.
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