Case Law Details
Nirman RMBS Trust Vs DCIT (ITAT Mumbai)
In a recent decision by the Income Tax Appellate Tribunal (ITAT) Mumbai, in the case of Nirman RMBS Trust vs. DCIT, the tribunal directed a fresh adjudication due to non-appearance attributed to technical glitches in Form 26AS generation. The appeal pertained to orders passed under section 201 and section 250 of the Income-tax Act, 1961.
Background: The appellant, Nirman RMBS Trust, challenged the orders of the National Faceless Appeal Centre (NFAC) and Commissioner of Income-tax (Appeals) (CIT(A)) related to issues under section 201 and section 250 of the Income-tax Act.
The grounds of appeal included:
- Appellant being treated as ‘assessee in default’: Dispute arising from the treatment of the appellant as an ‘assessee in default.’
- Non-applicability of section 194LBC of the Act: Challenge against the order stating that tax was required to be deducted at source under section 194LBC on the excess interest spread paid to the originator.
- Non-grant of adjournment as requested: Allegation that the appellant’s adjournment request was not considered, leading to a dismissal of the appeal.
Case Facts: The appellant, established as a securitization trust, raised funds through private placement by issuing pass-through certificates to acquire loan portfolios. A survey conducted in 2019 revealed that the appellant had paid excess interest spread (EIS) without deducting TDS under section 194LBC for the financial year 2016-17. The Assessing Officer (AO) issued a show cause notice, and the appellant responded, explaining the reasons and the nature of transactions. The AO determined TDS and interest liabilities under section 201(1) and section 201(1A) of the Act.
Appeal to CIT(A): The appellant appealed to the CIT(A), who confirmed the AO’s action due to the appellant’s non-compliance with hearing notices. The appellant claimed technical glitches in generating Form 26A, crucial for presenting its case. Unsatisfied with the CIT(A) order, the appellant approached the ITAT.
ITAT’s Decision: During the hearing, the appellant argued that non-appearance was justified as they were in the process of collecting Form No.26A. The ITAT observed that the CIT(A) dismissed the appeal based on non-appearance and decided to provide the appellant with another opportunity to substantiate its case with evidence and information.
The ITAT set aside the CIT(A) order, remitting the disputed issues to the CIT(A) for fresh adjudication. The tribunal emphasized principles of natural justice, providing the appellant with an adequate opportunity for hearing and cooperation in submitting necessary information.
Conclusion: The ITAT’s decision highlights the importance of considering technical issues in the appeals process. The appellant’s claim of facing technical glitches in generating Form 26A was acknowledged, leading to the tribunal directing a fresh adjudication. This case underscores the need for a fair and just resolution, ensuring that technical challenges do not prejudice the parties involved in income tax disputes.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These two appeals are filed by the assessee against the separate orders of the National Faceless Appeal Centre (NFAC)/CIT(A) passed u/sec 201 and U/sec 250 of the Act.
2. Since the issues involved in these appeals are common and identical, hence are clubbed, heard and a consolidated order is For the sake of convenience, we shall take up the ITA No.2230/Mum/2022 for A.Y 2017-18 as lead case and the facts narrated. The assessee has raised the following grounds of appeal:
The following grounds of appeal are distinct and separate and without prejudice to each other.
Ground No 1: Appellant being treated as ‘assessee in default’
The Commissioner of Income-tax (Appeals) [‘learned CIT(A)’] from the National Faceless Appeal Centre erred on facts and in law in dismissing the appeal filed against the order passed under section 201 (‘the order’) of the Income-tax, Act 1961 (the Act’) of the Deputy Commissioner of Income- tax (TDS)-2(3) [‘learned AO’] and by treating the Appellant as ‘assessee in default’.
Ground No 2: Non-applicability of section 194LBC of the Act
The learned CIT(A) erred on facts and in law in upholding the order of the learned AO that tax was required to be deducted at source under section 194LBC of the Act on the amount of excess interest spread paid by the Appellant to the originator.
Without prejudice to the above, the learned CIT(A) ought to have held that, since the payee had furnished its income-tax return (‘ITR’) under section 139 of the Act had taken into account such sum for computing income in its ITR and had paid the sum tax due on the income declared by them in such ITR. The Appellant could not be regarded as an assessee in default merely because a certificate to this effect in the prescribed form could not be furnished on account of technical glitches on the income-tax portal.
Ground No 3: Non-grant of adjournment as requested
The learned CIT(A) erred on facts and in law by mentioning that the Appellant did not respond to any of the hearing notices inspite of the fact that sine die adjournment request was filed in July 2021 stating that the Appellant was in the process of generating Form 26A. The adjournment was being sought as the income tax utility for generation of Form 26A had technical glitches and the said form was not being generated. The generation of the said form was necessary for effective disposal of the alternate claim before the learned CIT(A) i.e. to highlight on the fact that originator has offered the Excess Interest Spread (‘EIS’) income to tax in its ITR.
3. The brief facts of the case are that, the assessee is established as a securitization trust and controlling under the trusteeship of M/s IDBI Trusteeship Service The assessee is engaged in the business of raising monies on private placement basis through issuance of pass through certificates to fund acquisition of loan portfolio from financial institutions. There was a survey operations u/sec 133A(ii)(b) of the Act conducted on 02.01.2019 at the assessee premises and the revenue authorities found that the assessee has paid Rs.4,51,29,905/- under the head Excess interest spread(EIS) without deducting of TDS u/sec 194LBC of the Act to the originator in financial year 2016-17. The Assessing Officer (AO) has perused the facts and has dealt on the process of securitization provisions and TDS provisions applicable to the assessee. Further the A.O has issued show cause notice u/sec 201(1)/201(1A) of the Act dated 25.02.2019 and the assessee has filed the detailed reply on 05.03.2019 explaining the reasons, TDS provisions and the nature of the transactions under the securitization process referred at Para 5 of the order. Whereas the AO found that, the assessee has not deducted TDS on excess interest spread (EIS) paid to the originator, as such the excess interest paid is the difference between the yield on the portfolio acquired from the originator and returns payable to the investor. The AO dealt on the facts and provisions of the Act and is of the view that the assessee has committed default u/sec 194LBC of the Act by non deduction of TDS on the EIS paid to originator and determined the TDS liability payable u/sec 201(1) of the Act of Rs. 1,35,38,971/- and interest liability U/sec 201(1)(A) of Rs.23,75,606/- vide order dated 12.03.2019 passed U/sec 201(1) and U/sec 201(1A) of the Act.
4. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal, statement of facts and findings of the AO and has issued notices of hearing and since there was no compliance by the assessee to Therefore the CIT(A) considering the information on record has confirmed the action of the A.O and dismissed the appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon’ble Tribunal.
5. At the time of hearing, the AR submitted that the there was a sufficient cause for non appearance before the CIT(A) as the assessee was collecting the Form.No.26A from the recipients of excess interest spread (EIS) and therefore the action of the assessee in non appearance is not a wanton act. Further the assessee has a good case on merits and shall substantiate with the material evidences and prayed for an opportunity to explain before the lower authorities. Contra, the Ld. DR supported the order of the CIT(A).
6. We heard the rival submissions and perused the material on Prima-facie the CIT(A) has passed the order considering the fact that there is no appearance after seeking adjournment by the assessee and in spite of providing adequate opportunity of hearing. Therefore, the CIT(A) was of the opinion that the assessee is not interested in prosecuting the appeal and decided the appeal based on the information available on record and dismissed the appeal. The Ld.AR submissions are that the assessee was in the process of collecting the information and the non appearance before the appellate authority is not a wanton act. Whereas the assessee has raised grounds of appeal challenging the TDS liability U/sec 201(1) of the Act and interest payable u/s 201(1A) of the Act determined by the assessing officer and there could be various reasons for non appearance which cannot be overruled. Therefore, considering the principles of natural justice shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) and remit the entire disputed issues to the file of the CIT(A) to adjudicate afresh and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of the appeal. And we allow the grounds of appeal of the assessee for statistical purposes.
7. In the result, the appeal filed by assessee is allowed for statistical purposes.
ITA No. 2231/Mum/2022, A.Y 2018-19.
8. As the facts and circumstances in this appeal is identical to ITA No 2231/Mum/2022, for the Y 2017-18 (except variance in figures) and the decision rendered in above paragraph would apply mutatis mutandis for the appeal also. Accordingly, allow the grounds of appeal of the assessee for statistical purposes.
9. In the result, both the appeals filed by the assessee are allowed for statistical purpose.
Order pronounced in the open court on 04.12.2023.
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