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Facts
APL Logistics Vascor Automotive Private Limited, a third-party logistics company, filed its return for AY 2016-17 declaring a loss, which was selected for scrutiny. The AO raised additions for non-deduction of TDS, mismatch in audit report figures, expenses without payee PAN details, and share premium received from non-resident shareholders under section 56(2)(viib). The assessee's appeal to CIT(A) was largely unsuccessful, with CIT(A) confirming the first ground and failing to adjudicate the others.
Held
The Income Tax Appellate Tribunal restored grounds 1 and 2 concerning TDS non-deduction and audit report discrepancy to the CIT(A) for verification of the assessee's suo motu disallowance and fresh adjudication. The Tribunal also allowed grounds 3 and 4 relating to expenses without payee details (u/s 69) and share premium from non-residents (u/s 56(2)(viib)) to be remanded to the CIT(A), as the CIT(A) had failed to consider the assessee's arguments on these points, directing a fresh opportunity of hearing.
Key Issues
Whether the addition for non-deduction of TDS under section 40(a)(ia) is valid; whether an addition for discrepancy in audit report figures is justified; whether Section 69 is applicable for provisional expenses lacking full payee details; and whether Section 56(2)(viib) applies to share premium received from non-resident shareholders.
Sections Cited
154, 139(1), 143(2), 56(2)(viib), 11UA, 40(a)(ia), 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES : A : NEW DELHI
Before: SHRI G.S PANNU, HON’BLE & SHRI ANUBHAV SHARMA
ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the Assessee against the order dated 01.07.2022 of the National Faceless Appeal Centre, Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No.NFAC/2018-19/10026768 arising out of the appeal before it against the order dated 08.10.2020 passed u/s 154 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the CPC Bengaluru (hereinafter referred to as the Ld. AO).
The assessee is a private limited Company engaged in third-party logistics specialist serving the automotive sector in India. Incorporated in 2012, the company is a joint venture of two of the brands in international supply chain management and automotive logistics: APL Logistics and VASCOR. The Company serves some of the major OEMs like Maruti, Honda etc. It claims to have collaboration with key stakeholders, the Indian Railway and transporters, to build up a reliable logistic system for transportation of finished vehicles like passenger cars. Essentially it is a rail-based service provider for Automotive OEMs in India for the domestic transportation of finished vehicles. The assessee Company filed its return under section 139(1) of the Act declaring a loss of INR 15,47,16,019/-. The same was selected for scrutiny under section 143(2) of the Act. In the course of such scrutiny, following were the points of concern as raised by the AO:-
i) There was non-deduction of TDS against payments of INR 10,84,787/- ii) There was mis-match in figures of audit report with respect to expenses incurred to the tune of INR 16,13,849/- iii) There were expenses to the tune of INR 2,15,77,896 against which the details with respect to payee were not available in form of PAN etc. iv) The assessee had received share premium to the tune of INR 9,31,50,000 which was in excess of valuation under Rule 11UA and was subject to section 56(2) (viib). 2.1 Against such doubts raised by the AO, the assessee submitted a point- wise reply as under:- i) With respect to non-deduction of TDS, the assessee had made a suo- motu addition in its return of income. The detail in this regard is enclosed at page 114/ 125 of this submission. ii) There was no discrepancy in the audit report as the amount of non- deduction/ short deduction was mentioned with uniformity in the entire report. iii) That the allegation of no detail available with respect to payee is incorrect as the same was available readily and sample invoices in this regard is enclosed at page 259 of the submission. However, such query was never raised by the AO in the first place. iv) That the assessee was not subject to provisions of section 56(2) (viib) as the receipt was from a non-resident and such transactions were beyond the scope of section 56(2) (viib) which covered only resident payers. Rather the transaction made by the assessee was in 3 consonance with FEMA rules and RBI circular regarding overseas transactions. The extract of which is enclosed at page 150 of the paper book.
2.2. However, the AO was not convinced with the above submissions and he made an addition on all the above points.
That against such assessment order, the assessee preferred an appeal before the CIT(A) and pleaded that the matter is settled in favour of the assessee as per the facts and law involved. However, the Ld. CIT(A) was not convinced and didn’t even adjudicate on all the grounds while simply confirming on the AO’s order on 1st Ground of appeal.
3.1. That aggrieved by the order of the CIT(A), the assessee has moved this Tribunal raising the following grounds:- “
1. That the Ld. Lower authorities erred in law and in fact by making an addition of INR 10,84,787 on account of non deduction of TDS under section 40(a)(ia) when the same was already disallowed by the assessee suo motu.
2. That the Ld. Lower authorities have erred in law and fact by making mechanical additions on grounds of alleged discrepancy between two parts of audit report to the tune of INR 16,13,849 which was otherwise perfectly reconciled and there existed no discrepancy in the first place.
3. That the Ld. Lower authorities have erred in law and fact by making an addition of INR 2,15,77,896 under section 69 with respect to payments made to certain parties when all the details with respect to such payments was duly available and conditions specified under section 69 was never fulfilled for its invocation.
4. That the Ld. Lower authorities erred in fact and law by making an addition of INR 9,31,50,000 under section 56(2)(viib) with respect to share capital issued to non-resident shareholder when section 56(2)(viib) was never applicable to non-residents.
5. That the assessee craves leave to add, alter or amend any ground before or at the time of hearing.”
Heard and perused the record.
In regard to ground 1 arising out of addition of Rs.10,84,787/- on account of non-deduction of TDS u/s 40(a)(ia), the ld. AR submitted that the assessee has disallowed 30% of total expenses on which TDS was reported to be short deducted/ not deposited. The said figures are same in clause 21(b) and 34(a) of Form 3CD. However, the AO has confused the figures in there and has assumed it to be different 5.1 In regard to ground No.2 arising out of addition of Rs.16,13,849/- on the basis of discrepancy in the audit report, the ld. AR has submitted that the alleged difference of 16.13 lacs which is claimed to be less in clause 21(b) is the last line item at the bottom of the said clause which AO seems to have missed. Thus, clearly mis-appreciating the fact and making the said addition. Even otherwise, section 69 is not applicable in the given case.
5.2 In regard to grounds no 1 and 2, after taking into consideration the facts and submissions it comes up that AO has failed to take note of the suo moto disallowance. The same thus requires to be verified. Thus these grounds are restored to the files of CIT(A) to ask the AO to verify the suo moto disallowance and decide afresh.
In regard to ground No.3 arising out of addition of Rs.2,15,77,896/- u/s 69, ld. AR has submitted that these were provisional expenses and not with respect to a single vendor. Thus, PAN not quoted as the entire expense was reported by Auditor. Quoting PAN was an optional field and will not result in disallowance. Even otherwise expenses with respect to firms like SR Batliboi cannot be termed unexplained and also 30% of the expense was suo- motu disallowed for non-deduction. No query was ever raised to provide PAN etc. for such provisional expenses as evident from the last pending requirement list issued by AO. Even otherwise, section 69 is not applicable in the given case as the same is neither an investment not unrecorded or unexplained.
In regard to ground No.4 arising out of addition of Rs.9,31,50,000/- u/s 56(2)(viib) of the Act, the ld. AR has submitted that due details were provided to the AO wherein it was submitted that shares have been allotted to non- resident international JVs. Section 56(2)(viib) for the said AY was clearly not applicable to non-resident and has been amended only vide FA 2023. Valuations were as per FEMA guidelines (RBI Master Direction 11/2017-18) which mandates allotment of shares at a value more than fair value. Number of shares considered for allotment is incorrect as well which has been taken at 10.35 lacs instead of 7.5 lacs.
The ld. DR supported the findings of ld. tax authorities below.
However, what comes up is that the CIT(A) has failed to consider the pleas of appellant and adjudicate the grounds in regard to addition of Rs.2.15 crores and Rs.9.31 crores falling in ambit of ground no. 3 and 4. Thus we are inclined to allow these grounds to the files of CIT(A) to adjudicate on the pleas of assessee. An opportunity of hearing fresh be given to appellant.