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Facts
The assessee company's return of income was scrutinized, revealing that it paid significant brokerage without deducting TDS under Section 195 and failed to provide Tax Residency Certificates (TRCs) for the payees. The Assessing Officer (AO) added the entire brokerage amount of Rs. 5,62,07,050 to the assessee's income, a decision subsequently upheld by the Ld. CIT(A). The original assessment order was also set aside by the PCIT under Section 263 for this issue.
Held
The Income Tax Appellate Tribunal observed that the disallowance was due to the assessee's failure to furnish TRCs and adequately explain the chargeability of the brokerage income. In the interest of justice, the Tribunal decided to provide the assessee another opportunity to present all necessary documents and facts before the AO. Consequently, the orders of the lower authorities were set aside, and the case was remitted back to the AO for a fresh verification and order.
Key Issues
Whether the disallowance of brokerage payments for non-deduction of TDS and failure to provide Tax Residency Certificates was justified, and if the case should be remitted back to the Assessing Officer for fresh consideration after providing the assessee an opportunity to furnish all relevant documents.
Sections Cited
115JB, 195, 263, 142(1), 40a(i), 194, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Pradip Kumar Choubey&Shri Rakesh Mishra]
ORDER / आदेश Per Pradip Kumar Choubey, JM:
This is the appeal preferred by the assessee against the order of Commissioner of Income Tax(Appeals)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 15.03.2024 for AY 2017-18.
Assessment Year: 2017-18 Sunny Trexim Pvt. Ltd.
Brief facts of the case of the assessee are that the assessee company filed its return of income declaring total income of Rs. 1,27,56,100/- under normal provision of the Act and book profit of Rs. 85,10,907/- under the provision of Section 115JB of the Act. The case of the assessee was selected for scrutiny determining the total income of the assessee at Rs. 1,27,83,135/-. Subsequently on perusal of the assessment records, it has been noticed that the assessee company has paid brokerage to the tune of Rs. 5,62,07,050/- as reflected in its profit and loss account as part of note- 22, other expenses clause 34a of the Tax Audit Report revealed that no TDS was made thereon u/s 195 of the Act and this point was missed in the original assessment order, accordingly a proposal for initiating revision proceedings u/s 263 of the Act was sent and Ld. PCIT, Kolkata by virtue of order u/s 263 set aside the assessment order for the limited purpose on the aforesaid issues. In pursuance to the aforementioned direction notice u/s 142(1) was issued to the company. The AO after going over the response submitted by the assessee find that the assessee company did not submit tax residency certification any of the 39 parties, as a result of which, the AO added to the tune of Rs. 5,62,07,050/- in the total assessed income of the assessee.
Aggrieved by the said assessment order, an appeal has been preferred before the Ld. CIT(A) wherein the appeal of the assessee has been dismissed.
Being aggrieved and dissatisfied the assessee preferred an appeal before us.
The Ld. A.R instead of arguing into the merit of the case has only prayed that the assessee has to give an opportunity to place all those facts required by the AO with a direction to AO to verify the same. The Ld. Counsel filed audited financial statement, list of parties to whom brokerage paid in USD, declaration by parties of not having any PE in India along with their TRC, sample invoice and documents for paying brokerage in USD.
Contrary to that, the Ld. D.R supports the impugned order.
Assessment Year: 2017-18 Sunny Trexim Pvt. Ltd.
Upon hearing the submission of the counsel of the respective parties, we have perused the order of AO and find that the AO has disallowed the tune of Rs. 5,62,07,050/- u/s 40a(i) of the Act read with Section 194 of the Act, when the assessee did not submit tax residency certificate. The Ld. CIT(A) has also held in its impugned order that the assessee has not given any clear answer to the vital question of residency chargeability status of the brokerage income those agents so earned from the assessee company. Before us, the Ld. A.R has submitted following documents: i) Audited Financial Statement for the Financial year 2016-17. ii) List of parties to whom brokerage paid in USD iii) Declaration by parties of not having any PE in India along with their TRC. iv) Sample invoice and documents for paying brokerage in USD v) a) Assessment order u/s 143(3) for AY 2010-11 b) Audited Financial Statement for the Financial Year 2009-10 vi) a) Assessment order u/s 143(3) for AY 2012-13 b) Audited Financial Year 20111-12 vii) a) copy of notice u/s 142(1) for AY 2022-23 b) Copy of assessment order u/s 143(3) for the AY 2022-23 c) Details of commission with Audited Financial Statement for the Financial Year 2021- 21.
The prayer of the assessee is that the assessee has to be afforded an opportunity to place all the documents in response to the quarries before the AO . Keeping in view, the submission made by the assessee and for the interest of justice, we are inclined to afford an opportunity to the assessee to place its case before the AO. The AO is directed Assessment Year: 2017-18 Sunny Trexim Pvt. Ltd. to pass a afresh order after proper verification and going over the documents filed by the assessee. Accordingly, the order passed by the AO confirmed by the Ld. CIT(A) is hereby set aside and the case is remitted back to the file of AO.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order is pronounced in the open court on 7th May, 2025 Sd/- Sd/- (Rakesh Mishra /राकेश �म�) (Pradip Kumar Choubey /�द�प कुमार चौबे) Accountant Member/लेखा सद�य Judicial Member/�या�यक सद�य Dated: 7th May, 2025 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- Sunny Trexim Pvt. Ltd., C/o, Shri Jitendra Kaushik, Advocate, 19D, Muktaram Babu Street, Kolkata-700007 2. Respondent – ACIT, Circle-5(1), Kolkata 3. Ld. CIT(A)-NFAC, Delhi 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)