Introduction: In the case of APCA Power Private Limited Vs DCIT (ITAT Delhi), the Income Tax Appellate Tribunal (ITAT) reviewed a complex matter related to share premium received from a non-resident person. The assessment of Section 56(2)(viib) of the Income Tax Act for the Assessment Year 2015-16 was brought into scrutiny. The case also highlighted procedural issues surrounding the appeal process.
Analysis: The key aspects of the case include:
1. Assessment Order & Rectification: The assessee faced an addition under Section 56(2)(viib) related to share premium. Subsequent rectification led to a reduced addition, leading to confusion in the appeal process.
2. Appeal Dismissal by CIT(A): The appeal was dismissed by the CIT(A) on procedural grounds, claiming that the appeal was against the rectification order instead of the initial assessment order.
3. Share Premium from Non-Resident: The core of the matter revolves around the share premium received from Sh. Vivek Chaudhri, a non-resident. The CIT(A) held that Section 56(2)(viib) doesn’t apply to non-residents, leading to the deletion of the penalty.
4. Remand to AO: The Revenue appealed the deletion of the penalty. The Tribunal remitted the matter back to the AO to examine Sh. Vivek Chaudhri’s residential status during the concerned period.
Conclusion: This case demonstrates the complexities involved in both procedural and substantive issues related to taxation. The ITAT’s decision highlights the importance of following proper procedure in appeals and the intricate interpretation of tax provisions. The ruling that Section 56(2)(viib) doesn’t apply to non-residents opens a dialogue for further legal analysis and provides valuable insights into the application of the Income Tax Act in cross-border transactions. The remand to the AO ensures that the case is examined with thoroughness, emphasizing the significance of fair and detailed adjudication in tax matters.
FULL TEXT OF THE ORDER OF ITAT DELHI
ITA No.8184/Del/2019 by the assessee is against the quantum order of the Ld. CIT(A)-1, Gurgaon, for Assessment Year 2015-16.
2. The grounds of appeal raised by the assessee reads as under:-
1. That on the facts & circumstances of the case and in law, the Ld. Commissioner of Income Tax (A) has erred in dismissing the appeal treating the same as against rectification order u/s 154 of the Income Tax Act 1961, whereas the appeal was filed against assessment order us 143(3) of the Act for AY. 2015-16 as has been clearly mentioned in the relevant column 2b of Form No. 35 furnished for appeal.
2. That on the facts & circumstances of the case and in law, the Ld. Commissioner of Income Tax (A) has erred in not deciding the issue on merit regarding unwarranted addition of Rs. 2,13,93,600/- on account share premium u/s 56(2) (viib) of the Income Tax Act 1961 made by the Assessing Officer ignoring the fact that the share capital and share premium have been received by the assessee company from a person, Sh. Vivek Chaudhri, who was not a resident in India.”
3. In this case, the assessment order was passed u/s 143(3) by the AO on 04.12.2017, wherein, the addition of Rs.2,98,43,600/- was made. Thereafter, an order u/s 154 was passed on 10.04.2018, wherein, the addition was reduced to Rs.2,13,99,200/-. Against the above order, the assessee appealed before the Ld. CIT(A) and grounds taken before him in this regard is as under:-
“The assessment order passed w’s 154 of the Income Tax Act, 1961 by the Ld. Assistant Commissioner of Income Tax, assessing the total income for A. Y. 2015-16 by addition of an amount of Rs. 2,13,99,2001- as share premium and reducing the carry forward loss declared by company and assessing at Rs. Nil-, and raising a tax demand of Rs. Nil – is bad in law and needs to be quashed.”
4. Considering the facts of the case and the grounds raised, the Ld. CIT(A) observed that it is apparent from facts on record that the assessee filed the appeal against the order u/s 154 dated 10.04.2018 although in Form 35, it has been mentioned that the appeal is against order u/s 143(3) of the Act. The Ld. CIT(A) noted that the appeal filed by the assessee pertains to the addition made by the AO on account of share premium received by the assessee by invoking section 56(2)(viib). The Ld. CIT(A) further noted that this addition was made by the AO vide order dated 04.12.2017 u/s 143(3) of the Act and not in the order dated 10.04.2018 u/s 154 of the Act. Hence, the Ld. CIT(A) held that it is evident that the ground of appeal filed by the assessee do not arise from the order u/s 154 against which the appeal has been filed. Therefore, he dismissed the appeal being in-fructuous.
5. Against the above order, the assessee is in appeal before the Tribunal.
6. We have heard both the parties and perused the records. The ld. Counsel for the assessee submitted that the assessee was under bonafide belief that the order passed u/s 143(3) by the AO and the order passed u/s 154 have got merged, hence, the assessee has filed one appeal challenging the merits. However, we do not find merit in this submission of the assessee. Clearly the appeal was filed against the order u/s 154 and not against the order u/s 143(3) of the Act. Hence, the ld. CIT(A) is quite correct in holding that the appeal filed by the assessee do not arise from the order passed u/s 154 of the Act against which the appeal has been filed. Therefore, we do not find any infirmity in the order of the Ld. CIT(A). Before parting, we may add that the assessee’s counsel plea that the assessee was under bonafide belief that the order passed u/s 143(3) and order u/s 154 have been got merged would have been a ground for a delay in filing the appeal u/s 143(3) of the Act but cannot be a ground of appeal on the facts of the present case. Hence, we do not find any infirmity in the order of the Ld. CIT(A) and uphold the same.
7. In the result, the appeal of the assessee stands dismissed.
8. This appeal by the Revenue is against the order of the Ld. CIT(A)-1, Gurgaon, dated 26.09.2019 and pertains to AY 2015-16.
9. The grounds of appeal taken by the Revenue reads as under:-
a. In the facts and circumstances of the case, Ld. CIT(A) is not justified in deleting the penalty levied us 271(1)(c) of the Act holding that Sh. Vivek Choudhary was non-resident during the year in which shares were issued. As a matter of fact that Sh. Vivek Choudhary himself confirmed on the noting sheet that he was resident during F.Y. 2014-15 before the AO during the course of assessment proceedings..
b. Ld CIT(A) is not justified in ignoring the facts submitted by the AO through his Remand Report that the assessee has not produced any documents in support of his non-residential status.
7. We have heard both the parties and perused the records. We note that this penalty has been levied on the addition in quantum regarding share premium received by the assessee from a non-resident. The Ld. CIT(A) has deleted the addition by observing that these provisions do not apply to non-residents as such he deleted the penalty. The order of the Ld. CIT(A) in this regard may be gainfully referred as under:-
“I have also perused the documents filed by the appellant. It is seen from the submission of the appellant and the document filed by the appellant that the appellant had issued 26742 shares with face value of Rs. 1,000/- at a premium of Rs. 800/- per share to Sh. Vivek Chaudhri during the year under consideration. It is also seen from the facts on record and the documents filed by appellant that Sh. Vivek Chaudhri was a non-resident during the year in which the shares was issued by the appellant company to Sh. Vivek Chaudhri. The A.O had made the addition in this case u/s 56(2)(viib) with regard to the premium received by the appellant on account of shares issued to Sh. Vivek Chaudhri. However, as Sh. Vivek Chaudhri was non-resident during the year in which shares were issued, the appellant has contended that the provisions of section 56(2)(viib) do not apply in the case of non-resident and as such the penalty imposed may be deleted. I agree with this contention of the appellant. It is evident from the provisions of section 56(2)(viib) reproduced above that these provisions do not apply to non-residents. In these circumstances no penalty is leviable with regard to the addition made by the A.O on this account. The penalty imposed by the A.O is accordingly cancelled.”
8. Against this order, the Revenue is in appeal before us.
9. We find that as per the provisions of section 56(2)(viib), the section is not applicable to the share premium received from a non-resident person. In this view of the matter, the decision of the Ld. CIT(A) has not got infirmity. However, the ld. DR referred to the grounds of appeal and averred that the concerned Sh. Vivek Chaudhri has himself submitted before the AO duly noted in a note-sheet that he was a resident through the concerned period. We note that the above facts are not emanating from either the order of the of the AO or the order of the Ld. CIT(A). However, the interest of justice demands that this aspects be remitted back to the file of the AO. The AO shall examine this issue afresh and bring out the note sheet wherein, Sh. Vivek Chaudhri has said to be himself confirmed that he was resident during the Financial Year 2014-15 Thereafter, after giving proper opportunity to the assessee of being heard to the assessee, the AO shall pass order as per law.
10. In the result, the appeal of the Revenue stands allowed for statistical purposes.
Order pronounced in the open court on 18th July, 2023.