Denial of Exemption to Non-Resident on Failure to Produce Tax Residency Certificate Despite Best Efforts at Assessment / Appellate stage: ITAT directs Re-Adjudication [Read Order]

The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has directed re-adjudication as the exemption was denied to non-resident on his failure to produce tax residency certificate despite his best efforts at assessment or appellate stage.

The assessee, Amol Annaso Teradale, filed his return of income for A.Y. 2020-21 on 14.12.2020 declaring total income towards salary income from John Deere India Pvt. Ltd. Subsequently, the assessee filed revised return declaring income of Rs.820/- after claiming exemption under DTAA between India and USA. The case was selected for scrutiny under CASS to examine the issues of reduction in taxable income shown in revised return when compared to original return and large refund being claimed in the revised return, salary income shown in ITR was less than salary income as per 26AS, Salary income in TDS Schedule was higher than salary income shown, etc.

Hence, notice under Section 143(2) and 142(1) of the Income Tax Act were issued and served on the assessee by NFAC. In response, the assessee filed a reply and submitted that his status was non-resident. The AO after examining the details furnished and the submissions made disallowed the claim of exemption as the assessee had failed to submit Tax Residency Certificate as mandated under section 90(4) of the Income Tax Act,1961 and added back to the returned income.

Kishore Phadke, on behalf of the assessee submitted that the whole basis of denying tax credits to the assessee that the assessee was not able to obtain Tax Residency Certificate from the department of Treasury, USA, certifying that the assessee was taxed in U.S. It was submitted that the delay in filing the additional document was on account of the time taken by the Department of Treasury to issue the certificate in favour of the assessee.

Vijaya Lakshmi, on behalf of the revenue, relied upon the orders passed by the lower authorities.

The two-member Bench of R.K. Panda, (Vice President) and Laliet Kumar, (Judicial Member) observed that, “In our view, the law is fairly settled that a party who had failed to produce the evidences despite his best efforts at the assessment / appellate stage and such evidence are necessary for just and fair disposal of the proceedings, then those documents are required to be admitted.”

In the light of this the Bench allowed the appeal filed by assessee and admitted the documents produced before it as additional evidence as the same goes to the root of the matter. The matter was remanded back to AO with a direction to consider the Tax Residence Certificate and decide the issue afresh and pass a reasoned speaking order after affording of opportunities of hearing to the assessee in accordance with law.

To Read the full text of the Order CLICK HERE

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