THE DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) , , VISAKHAPATNAM vs. YELAMATI MALLIKARJUNA RAO, , KURNOOL

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER ITA No. 560/VIZ/2018 (Asst. Year : 2013-14) DCIT (International Taxation), vs. Yelamati Mallikarjuna Rao, Visakhapatnam. Flat No. 110, Prasanth Towers, R.S. Road, Kurnool PAN No. ACKPR 3669 N (Appellant) (Respondent)

Assessee by : Shri Sumit Gupta – CA. Department By : Smt. Suman Malik – Sr.DR

Date of hearing : 21/03/2019. Date of pronouncement : 27/03/2019. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-10, Hyderabad, dated 01/08/2018 for the Assessment Year 2013-14. 2. Facts of the case, in brief, are that assessee is a non-resident working as Chief Technical Officer with M/s.Vodafone India Ltd. and is deriving income from salary, house property and other sources. The case of the assessee was selected for scrutiny under CASS with a reason that ‘high ratio of refund to TDS’.

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Subsequently, a notice under section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as 'Act') was issued and assessment was completed under section 143(3) of the Act on 31/03/2016. In the assessment order, the Assessing Officer has noted that on verification of the return of income and information furnished by the assessee, it is seen from the Form 16 (TRACES) that the total amount of salary paid/credited by M/s. Vodafone India Limited during the year was shown as Rs. 1,47,84,843/- and an amount of Rs. 45,04,709/- was deducted as TDS. However, the assessee in his return of income for the Assessment Year 2013-14 under the head ‘income from salary’ was shown Rs.22,53,380/- and claimed refund Rs. 38,71,025/-. A letter dated 19/08/2015 was issued to the assessee requesting to clarify the above position. The above letter was sent to assessee’s e-mail ID. There is no response from the assessee to the above letter. Hence, a show-cause letter dated 10/12/2015 requesting the assessee why the entire amount of Rs. 1,47,84,843/- (salary as per Form 16) should not be treated as his salary income and called for his explanation by 23/12/2015. In response to this letter, assessee vide e-mail stated as under:- “I have furnished the details pertaining to my Netherlands for the said period which gives details on why my employer

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paid excess and claim for refund under double taxation treaty. I also understand you have served notice to Vodafone India. I am working with my employer to furnish details requested by you.”

The Assessing Officer has considered the above explanation, however, he has observed that the assessee has not furnished any information or explanation for not showing the salary of Rs.1,47,84,843/- paid by M/s. Vodafone India Limited (employer) in his return of income. Hence, a final opportunity letter dated 12/01/2016 called for assessee’s explanation was issued by posting the case on 27/01/2016. On 12/01/2016 the assessee informed that he has written to his employer for clarification. A letter dated 07/09/2015 was issued to the M/s. Vodafone India Limited also calling for clarification regarding total amount of salary paid to the assessee during the Financial Year 2012-13 in India and Netherlands along with TDS particulars. Even after taking sufficient time, no explanation was received neither from assessee nor from his employer-M/s. Vodafone India Limited. In view of this, it is treated that the assessee received salary in India as per Form 16 issued by the employer and the entire salary of Rs. 1,47,84,843/- was taxable in India. Since assessee only offered Rs. 22,53,380/- as salary income, the remaining

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undisclosed salary income of Rs. 1,25,31,463/- is added to the total income of the assessee. 3. In the appellate proceedings, the assessee has furnished various documents including the Tax Residency Certificate (TRC) issued by the Netherlands Tax Authorities. The ld. CIT(A) has considered the same and forwarded to the Assessing Officer for remand report. The Assessing Officer submitted the remand report, wherein he observed that the additional evidence submitted by the assessee stating that no specific request from the Assessing Officer was received to produce TRC is not acceptable. The Assessing Officer observed that when the assessee was asked to clarify the position, the assessee should have submitted the TRC and claimed relief and submitted that additional evidence cannot be accepted. The ld. CIT(A) has put the same to the assessee. The assessee has submitted a detailed reply to the remand report which is reproduced as under:-

I refer to the captioned subject and the Notice dtd. 29 June 2018, received by me from your good self scheduling the hearing in the case on 18.0 7.2018. I also refer to the Report dtd. 15 June 2018, submitted by the Learned Deputy Commissioner of Income Tax (IT) [DCIT (IT)/ Assessing Officer], which was attached to the captioned Notice. In this regard, I would like to humbly submit as under:  As submitted in my previous submissions dtd. 19 April 2018, I would like to re-iterate that during the course of the scrutiny assessment proceedings, I

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had promptly supplied information called for by the Learned DCIT (IT), from time to time. I have always been available for the discussions with the Learned DCIT(IT), from time to time.  I received a notice u/s 143(2) of the Act dtd. 02 September 2014 issued by the Learned Assessing Officer. Subsequently, I received a notice u/s 142(1) of the Act dtd. 19 March 2015 wherein I was requested to furnish the details/ explanation as mentioned in the notice and was asked to attend the hearing on 10 April 2015. As I was not physically present in India, I submitted the details as and when requested through various emails and telecons with the Assessing Officer. In the said notices, I had not been specifically requested to provide the Netherlands Tax Residency Certificate (TRC).  Further, another notice dtd. 19 August 2015 was sent to me vide email of 21 August 2015, to which I had responded on 31 August 2015. In the said notice, I had not been specifically requested to provide the Netherlands TRC.  My tax consultant further had a telecon with the Assessing Officer, with respect to his queries on double taxation, on 16 November 2015. My tax consultant explain the reasons for the refund and the treaty claim in detail. The Assessing Officer also informed that a request for information had also been sent to Vodafone India Limited (VIL). I had duly informed VIL in this regard.  With respect to the Notice dtd. 10 December 2015 referred to in the report submitted by the Learned DCIT (IT), I had responded to the notice vide email on 10 December 2015, giving reference to my earlier submissions and discussions with the Assessing Officer which contained the explanation regarding the exclusion of Salary income claimed by me under the Double Taxation Avoidance Agreement between India and Netherlands ('the Treaty'). A copy of my email response dtd. 10 December 2015 is attached herewith for your ready reference.  With respect to the Notice dtd. 12 January 2016 referred to in the report submitted by the Learned DCIT (IT), I had called the Learned DCIT (IT) on 17 February 2016. Post my discussion, I had responded to the email communication stating that at my end, I had sent a written request to my employer (VU) to clarify the queries raised by your good self A copy of my email response attached herewith for your ready reference.  I would like to humbly reiterate that I had not been specifically requested to produce the Netherlands TRC and it was only for this reason, that the same was not produced by me before the Assessing Officer. From my end, I had promptly submitted all the data requested by the Assessing Officer from time to time. Considering the above, I request your goodself to admit the additional evidence submitted by me (i.e. the TRC5) as per the provisions of clause (c) of sub-rule (1) of Rule 46A of the Rules. I request you to kindly take the above on records.

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Should you require any further information/ details/ documents in this regard, I shall be glad to furnish the same on hearing from you."

“8. The material available on record and the assessment

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record have been considered. As seen from the assessment record, the appellant sent an email to the AO on 16.05.2015. The documents attached to this email include passport details of the appellant, Form 16 and Dutch tax filing. In the course of the assessment proceedings, though the AO sought clarification from the appellant, no specific requirement was made out in respect of submission of TRC. Before taking an adverse view, the specific basis for the same was not made known to the appellant. It is another matter that though the appellant was in possession of the TRC, the same was not submitted as there was no specific requirement made out. Considering the factual position, the TRC is admitted as additional evidence. 8.1 As part of the paper book, the appellant furnished the relevant TRC issued by the Netherlands Tax Authorities. The salary income has been derived in respect of the services rendered in Netherlands. The appellant is a nonresident and the treaty conditions prescribed under Article 15(1) are satisfied. The appellant also filed a copy of the return filed before the Dutch Tax Authorities. In view of these facts, the salary income, relatable to the services rendered abroad, needs to be exempted from tax in India. Accordingly, the AO is directed to delete the addition made. This ground of appeal is allowed.”

Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated: 27th March, 2019. vr/-

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Copy to: 1. The Assessee – Yelamati Mallikarjuna Rao, Flat No. 110, Prasanth Towers, R.S. Road, Kurnool 2. The Revenue-DCIT (International Taxation), Visakhapatnam. 3. The CIT(IT & TP), Hyderabad. 4. The CIT(A)-10, Hyderabad. 5. The D.R., Visakhapatnam. 6. Guard file. By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.