Central Board of Direct Taxes gave the Guidelines under Section 194Q of Income Tax Act, 1961. The CBDT Circular also covers the linkage between Sections 194Q, 194-O and 206C(1H).

1. E-auction services carried out through electronic portal, where the final price and payments are settled by seller/ buyer independently;
2. Adjustment of various state levies and taxes other than GST;
3. Applicability of section 194Q in the cases where exemption has been provided u/s 206C(1A); and
4. Applicability of the provisions of section 194Q in the case of Government Departments (not a PSU).

Important Judicial Precedents

1. Provision for foreign travel expenses payable, as per binding contract, in respect of dealers/distributors who have achieved sales targets as of 31st March, is not a contingent liability and is deductible u/s 37(1) [2021] 133 taxmann.com 43 (Bombay)[22-11-2021]

• Sub-section (9) of section 144B renders non-est any assessment made under Faceless Assessment Scheme, if it is not made in accordance with the procedure laid down in the said Section. [2021] 132 taxmann.com 296 (Bombay)[28-10-2021]

• Receipt of the order passed under section 263 by the assessee has no relevance for the purpose of counting the period of limitation provided under section 263 of the Income Tax Act. CIT vs. Mohammed Meeran Shahul Hameed – Supreme Court – 131 taxmann.com 94.

• Notice u/s 142(1) and response thereto constitutes integral part of assessment proceedings and non-adherence to same would result in violation of principle of natural justice Praveen Kumar Pathi vs. ACIT – Madras High Court – TS-1027-High Court-2021.

• AIR information is starting point for further information and verification and it alone is not sufficient to fasten the tax liability on the assessee Rajesh Chunara vs. ITO – Jaipur ITAT – ITA No. 91/JP/2020 – order dated 06-10-2021.

• Taxability of infrastructure data centre (IDC) charges as royalty – HELD THAT:- As decided in own case [2021 (1) TMI 76 – ITAT MUMBAI] we hold that IDC charges received by the assessee is not in the nature of royalty. Accordingly, additions are deleted.

• Assessment u/s 153A – Disallowance of interest – HELD THAT:- Disallowance was made by the ld. AO without making any reference to seized documents found during the course of search. Infact, the ld. AO himself of his order admits that “in the course of assessment proceedings, it is observed that assessee has claimed expenses towards interest expenses and loan processing charges on loan borrowed from M/s. India Bulls Housing Finance Ltd.,” This observation clearly goes to prove that the ld. AO had only sought to re-examine the existing material already available on record while framing the search assessment for A.Y.2011-12 (being the unabated assessment year). The law is now very well settled that unless there is incriminating material found during the course of search, an unabated assessment shall not be disturbed in the search assessment [ITA No. 851/Mum/2021]

• Penalty u/s 271(1)(c) – Reopening of assessment u/s 147 – addition of unexplained investment in property u/s 69.- jurisdiction of ITO initiating the reopening – HELD THAT:- As it is admitted fact that ITO Ward-4 Phagwara, had no Jurisdiction over the case who has recorded the reasons and issued the notice u/s 148 and thereafter transferred the file to the Jurisdictional ITO i.e. Ward-2 Phagwara who in turn framed the assessment. The issue of jurisdiction in this regard is now settled law by orders of the Amritsar Bench, Agra Bench, Chandigarh Bench and Delhi Bench of ITAT where it has been held that firstly the AO who records the reasons and issues a notice u/s 148 should be a Jurisdictional AO and secondly the assessment also has to be framed by the same AO who initiated the proceedings u/s 147, 148.

In our view, the assessment order passed by the ITO, Ward-2, Phagwara is without jurisdiction and the same is not in accordance with law, hence required to be quashed. The finding of the Ld. CIT(A) on the issue of jurisdiction and thereby confirming the assessment order are unwarranted and perverse and such a finding against the settled position of law cannot be approved.

We accept the grievance of the assessee genuine. We hereby quash the assessment order and the impugned order of the CIT(A) for the aforesaid reasons.

The consequential penalty order u/s 271(1)(c) would become infructuous in view of dismissal of quantum appeal. – Decided in favour of assessee.[ I.T.A. Nos. 65 And 140/Asr/2019]

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