Voucher Activation Services India Pvt. Ltd. vs DCIT, Circle 25(1)

“ Grounds in respect of violation of principles of natural justice:

1.

The Ld. NeAC has erred in passing an Assessment Order (“the Order”) dated 21 April 2021 under section 143(3) r.w.s 144B of the Income-tax Act, 1961 (‘the Act’) which is bad in law and on facts.

2.

The Ld. CIT(A) has erred in law and on facts in not granting the Appellant an opportunity of personal hearing through video conferencing, despite specific requests made by the Appellant vide submissions dated 03 July 2025, 04 August 2025 and 26 August 2025 and in contravention of the provisions specified under section 250(6B) of the Act read with Rule 12 of the Faceless Appeal Scheme, 2021.

Grounds in respect of the Order passed being bad in law:

3.

The Ld. CIT(A) has erred in not appreciating that the subject assessment under section 143(3) of the Act, being pending as on 31 March 2021, ought to have been completed by the National Faceless Assessment Centre in accordance with Order F. No. 187/3/2020-ITA-1, dated 31 March 2021 issued by the Central Board of Direct Taxes (“CBDT”), whereas, in the present case, the assessment order has been passed by the National e-Assessment Centre, rendering the assessment to have been concluded without proper authority of law.

4.

The Ld. CIT(A) has erred in not appreciating that the notice dated 22 September 2019, purportedly issued under section 143(2) of the Act, was not made available to the Appellant.

5.

The Ld. CIT(A) has erred in not appreciating that the assessment order is violative of the principles of natural justice and the mandatory procedural requirements under section 144B(1)(xvi)(b) read with section 144B(7)(vii) of the Act (as in force on 01 April 2021), inasmuch as no show-cause notice setting out all the proposed variations prejudicial to the Appellant was issued.

6.

The Ld. CIT(A) has erred in not appreciating that the Order was pre-decided and passed in disregard of the submissions made by the Appellant, as the Order was passed on 21 April 2021, i.e., on the very date on which the Appellant filed its response to the notice dated 19 April 2021 issued under section 142(1) of the Act.

Grounds in relation to addition under section 68 of the Act:

7.

The Ld. CIT(A) has erred in upholding the Order by treating the credit of INR 10,38,42,842, pertaining to the share capital and share application money received towards the investment made by the Voucher Activation Services Limited, Mauritius (“the Holding Company”), as unexplained cash credit without appreciating that the identity, genuineness and creditworthiness of the Holding Company had been established.

8.

The Ld. CIT(A) / NeAC have erred by failing to appreciate that the provisions of section 68 r.w.s 115BBE of the Act shall not apply in case of remittances received from non-residents through banking channels.

9.

The Ld. CIT(A) / NeAC have erred in making an adjustment under section 68 of the Act on ground that the creditworthiness and genuineness of the transaction were not established, without making a specific enquiry with the Appellant, either by way of notice under section 142(1) of the Act or a show-cause notice.

10.

The Ld. CIT(A) / NeAC have erred by adjusting INR 19,51,289 under section 68 of the Act without appreciating that the said amount pertaining to the share application money has been received in March 2017 i.e., not pertaining to FY 2017-18 relevant to the AY 2018-19.

11.

The Ld. CIT(A) has erred in disregarding the additional evidences produced under Rule 46A of the Income-tax Rules, 1962 (“the Rules”) in the course of the appellate proceedings, and further erred in not forwarding such evidences to the Ld. AO for the purpose of verification.

12.

The Ld. CIT(A) has erred in upholding the adjustment on the ground that the Appellant failed to furnish details of the Holding Company’s business activities and the commercial rationale for the investment, without appreciating that such details were neither sought during the assessment proceedings nor recognizing that the commercial rationale was disclosed in Note 23 of the audited financial statements.

Grounds in relation to disallowance under section 40(a)(i) of the Act:

13.

The Ld. CIT(A) / NeAC have erred in not appreciating that the expenses of INR 2,11,14,557 and INR 18,60,565 in respect of Management Fees and Technology Fees pertains to the cost-tocost reimbursements paid to the holding company for the costs paid by it on behalf of the Appellant, and no mark-up has been charged on such costs.

14.

The CIT(A) / NeAC have erred in holding that the TDS under section 195 of the Act is deductible in respect of the aforesaid expenses, without appreciating the fact that mere reimbursement of expenses does not constitute ‘Fees for Technical Services’ under the India-Mauritius Double Taxation Avoidance Agreement.

15.

The Ld. CIT(A) has erred in disregarding the additional evidences produced under Rule 46A of the Rules in the course of the appellate proceedings, and further erred in not forwarding such evidences to the Ld. AO for the purpose of verification.

16.

Without prejudice to the above, the Ld. CIT(A) has failed to appreciate that the aforementioned expenses, in view of the losses incurred by the Appellant, were waived off by the Holding Company and were accordingly offered to tax by the Appellant under section 41 of the Act in the AY 2021-22. Accordingly, the tax liability in respect of the aforementioned expenses has been discharged by the Appellant and the disallowance in the present case under section 40(i)(a) of the Act would result in double taxation of the same amount.

17.

Without prejudice to the above, the Ld. CIT(A) / NeAC have erred in disallowing 50% of the management fees amounting to INR 1,05,57,529 under section 37 of the Act on the ground that the business expediency of the expenditure was not established and that the payment had not been remitted to the Holding Company, without considering the submissions made by the Appellant regarding the underlying business expediency of the expenses and without appreciating that the non-remittance was solely due to the financial losses incurred by the Appellant.

Grounds in relation to addition of ICDS adjustment:

18.

The Ld. CIT(A) / NeAC have erred in adding an amount of INR 6,79,496 on account of adjustment under Income Disclosure and Computation Scheme (“ICDS”) merely on the basis of disclosure in the tax audit report under section 44AB of the Act.

19.

The Ld. CIT(A) / NeAC have erred in making adjustment under ICDS without appreciating that the same has already been suo-moto disallowed in the return of income filed for the AY 2018- 19.

20.

The Ld. CIT(A) has erred in upholding the ICDS adjustment on the grounds of no clear reconciliation was furnished, disregarding the submission dated 03 July 2025, which provided reconciliation workings along with supporting evidence. Other grounds:

21.

The NeAC has erred raising a demand on INR 10,98,86,160 including levying consequential interest of INR 2,96,65,490 under section 234B of the Act.

22.

The NeAC has erred in initiating penalty proceedings under section 270A of the Act.

The Appellant craves leave to add, alter, rescind and modify the grounds herein above or produce further documents, facts and evidence before or at the time of hearing of this appeal.

For the above and any other grounds which may be raised at the time of hearing, it is prayed that necessary relief may be provided.”