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Facts
The assessee incurred commission expenses paid to non-residents but did not deduct TDS, relying on Double Taxation Avoidance Agreement (DTAA) and Form 15CB. The Assessing Officer treated the assessee as a defaulter under Section 201(1) and 201(1A) of the Income Tax Act, leading to a disallowance of Rs. 7,05,738/-, which the CIT(A) upheld.
Held
The Tribunal observed that the assessee had submitted Form 15CB for payments to non-residents and duly deposited tax at source in accordance with the Income Tax Act and DTAA. Therefore, the Tribunal concluded that the assessee was not a defaulter for non-deduction of TDS.
Key Issues
Whether the assessee was correctly treated as a defaulter for non-deduction of TDS on commission payments to non-residents, given that the assessee claimed compliance with DTAA and submitted Form 15CB.
Sections Cited
201(1), 201(1A), 250, 143(3), 40a(i), 195, 201
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 20-02- 2025 passed by CIT(A)/Addl/JCIT(A)-2, Chandigarh for assessment year 2018-19.
The grounds of appeal
are as under:- “1. Your Appellant submits that CIT (Appeals) i.e. National Faceless Appeal Centre (NFAC) Chandigarh erred in passing order by confirming the order passed u/s 201(1)/201(1A) of the Act.
2. Your Appellant submits that the appellate order passed u/s 250 of the Act by the NFAC which is in haste and hurry and without giving reasonable opportunity of being heard to the appellant. The assessment was completed on presumption, guess work and the same be deleted.
3. Additions/disallowances under the following heads: Head of Additions disallowances Additions Disallowance by the learned Assessing Officer and confirmed by the CIT (A)
1) Failure to deduct TDS on Commission Expenses of Rs. 16,11,287/- as per provisions of Sec 195 of the Act. -Liable to pay the sum u/s 201(1) and Rs. 1,61,129/- -Interest Chargeable thereon u/s. 201(1A) of the IT Act. Rs. 1,51,081/-
Total- Rs. 3,12,210-
Your appellant submits that as per Para 3 of the appeal order it is mentioned that appeal hearing notices were issued to the appellant on various dates and no compliances filed by the company in response to notices issued.
However, please note that appellant has not received any notices on the email id mentioned in the Form-35 i.e. bharat kumar@shantihospitality.in. And because of that no response submitted to the notices issued.
5. The Assessing Officer has erred both in Law and in fact and invoking Sec. 201(1)/201(1A) of the Act and thereby making an unfounded addition of Rs 3,12,210/-.
6. During the course of regular assessment proceedings u/s 143(3) of the Act, the ld AO has erred in disallowing 30% of Commission Expenses of Rs. 23,52,460/- i.e. Rs 7,05,738 on the grounds that details & evidences for claim of the expenditure were not furnished. The ld. AO has erred in making a disallowance of the said expenditure without considering the fact and ignoring the all the relevant supporting details of expenditure, submitted during the e-assessment proceedings.
On the basis of disallowance u/s 143(3), the Ld. AO has initiated proceedings u/s 201 of the Act. And ignored the necessary supporting documents submitted during the assessment.
8. During the assessment proceedings u/s 201 of the Act, assessee has submitted all the relevant documents in support of claim that no TDS provisions applicable to the concerned clients.
Nidra Hospitality Gujarat Pvt. Ltd., A.Y. 2017-18 Thus, not liable to pay the sum u/s 201(1A) of the Act and applicable interest thereon u/s 201(1A) of the IT Act, 1961. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly. Your Appellant reserves right to add, alter, amend to withdraw any or all Ground of Appeal.”
The assessee filed return of income on 31-10-2017 thereby declaring loss at Rs. (-) 5,13,57,857/-. The assessment proceedings were completed u/s. 143(3) of the Act, 1961 on 27- 12-2019 assessing total loss at Rs. (-) 5,03,31,550/- by making disallowances including disallowance u/s. 40a(i) r.w.s. 195 of the Income Tax act amounting to Rs. 7,05,738/- being 30% of Rs. 23,52,460/-. The Assessing Officer observed that as per schedule 26 of notes to accounts (profits and loss account), the assessee debited commission expenses at Rs. 24,00,460/- out of the commission payment of Rs. 23,52,460/- which included the non-residents without deducting TDS u/s. 195 of the Act. Since the assessee failed to deduct tax on commission paid to non-resident, the Assessing Officer treated the assessee as defaulter in making TDS on commission paid to non-residents and passed order u/s. 201(1) and 201(1A) of the Income Tax Act, 1961 vide order dated 30-07-2022.
4. Being aggrieved by the said order u/s. 201(1) and 201(1A) of the Act, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The A.R. submitted that the assessee has filed Form 35 before the CIT(A) with necessary supporting documents including the item-wise details of commission expenses amounting to Rs. 23,52,460/- related to financial year 2016-17 Nidra Hospitality Gujarat Pvt. Ltd., A.Y. 2017-18 as per annexure -2 wherein it is clarified that TDS wherever applicable has been duly deducted by the assessee company in the relevant assessment year and duly filed its TDS return on time. Copies of acknowledgement of TDS return filed along with copies of Form 27Q for assessment year 2017-18 was also attached. The ld. A.R. submitted that the TDS was deducted in accordance with the provisions of the Income Tax Act and on the basis of Double Taxation Avoidance Agreement with countries of residents of the parties concerned. Form15CB was obtained for each transaction involving payment of non-resident taxation at source advised by the chartered accountant was duly deposited. On perusal of clause 24b of Form 3CD issued by the tax auditor, no none compliance on the part of the company with respect to deduction of tax at source was reported. Thus, the assessee is not to be considered as assessee in default as per provisions of section 201 of the Act.
The ld. D.R. relied upon the order u/s. 201(1) r.w.s. 201(1A) of the Act.
We have heard both the parties and perused all the 7. relevant material available on record. It is pertinent to note that the payment was made to the non-resident and the assessee has submitted Form 15CB related to each transaction involving payment to non-resident and tax at source which was duly deposited by the assessee. The assessee at no point of time has defaulted as per TDS and the same was deducted in accordance with the provisions of the Income Tax Act as well as on the basis of DTAA with countries of residents of the parties concerned. Since the Nidra Hospitality Gujarat Pvt. Ltd., A.Y. 2017-18 party was non-resident, the assessee has not deducted the tax at source and adhered to DTAA which is applicable in present case. Therefore, the Assessing Officer as well as CIT(A) was not right in treating the assessee as defaulter u/s. 201(1) r.w.s. 201(1A) of the Act. Thus, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 08-10-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 08/10/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद