Rashtriya Ispat Nigam Ltd., Visakhapatnam V. THE ADDL.CIT, Visakhapatnam

ITA 116/VIZ/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2168 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 09-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: I SARISH KUMAR
• Keywords: Revised return
• Section: 206AA; 201(1)

Judgement Text

ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , ' BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NOS.115 TO 117/VIZAG/2015 ( / ASSESSMENT YEARS : 2011-12 TO 2013-14) RASHTRIYA ISPAT NIGAM LTD. VISAKHAPATNAM VS. ADDL. CIT, RANGE-6 (TDS) VISAKHAPATNAM [ PAN:AABCR0435L] ( ) / APPELLANT) ( *+) / RESPONDENT ) ' # / APPELLANT BY : SHRI G.V.N. HARI, AR &'' # / RESPONDENT BY : SHRI I. SARISH KUMAR, DR # + / DATE OF HEARING : 18.01.2016 # + / DATE OF PRONOUNCEMENT : 22.01.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDER OF COMMISSIONER OF INCOMETAX (APPEALS)-2, VISAKHAP ATNAM DATED 28-1-2015 AND PERTAINS TO THE ASST. YEARS 2011-12, 2012-13 AND 2013-14. SINCE, THE ISSUES INVOLVED IN THESE APPEAL S ARE COMMON, THEY ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 2 ARE HEARD TOGETHER AND DISPOSED OFF BY WAY OF COMMO N ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A PUBLIC SECTOR UNDERTAKING WHICH IS ENGAGED IN THE BUSINESS OF MAN UFACTURE AND SALE OF IRON AND STEEL PRODUCTS, HAS FILED ITS ETDS RETU RNS IN FORM NO. 24Q. THE CPC-TDS, GHAZIABAD HAS PROCESSED THE ETDS RETUR N FOR THE 4 TH QUARTER OF FY 2010-11 AND INTIMATION UNDER SEC. 200 A WAS SERVED ON THE ASSESSEE ON 26-11-2013 WITH A DEMAND OF TAX AND INTEREST OF RS. 2,53,27,830/-. ON RECEIPT OF INTIMATION UNDER SEC. 200A, THE ASSESSEE HAS DOWNLOADED JUSTIFICATION REPORT FROM THE TRACES AND FOUND THAT THE DEMAND WAS RAISED ON ACCOUNT OF LEVY OF NORMAL RATE OF TAX FOR FURNISHING INVALID PAN, NON FURNISHING OF PAN, WRON G CLASSIFICATION OF CATEGORY OF EMPLOYEES IN RESPECT OF FEMALE AND SEN IOR CITIZENS AND ALSO FOR ROUNDING OFF TAX AND INTEREST TO NEAREST TEN RU PEES. 3. BEING AGGRIEVED BY THE INTIMATION UNDER SEC. 200 A, THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A). BEFORE CIT(A), T HE ASSESSEE CATEGORISED THE DEFAULTS INTO 7 CATEGORIES AND MADE HIS SUBMISSION WITH REGARD TO EACH OF THE SEVEN CATEGORIES. THE ASSESSE E SUBMITTED THAT BASICALLY THE SHORT DEDUCTION WAS COMPUTED FOR THE FOLLOWING DEFAULTS. (I)INVALID PAN THEN AND NOT YET CORRECTED.(II) INVA LID PAN THEN BUT VALID PAN OBTAINED LATER.(III) INVALID PAN THEN BUT VALID PAN WAS AVAILABLE ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 3 THEN.(IV) PAN NOT AVAILABLE THEN AND NOW TOO.(V) PA N NOT AVAILABLE THEN BUT PAN OBTAINED LATER.(VI) ROUNDING OFF OF TDS TO NEAREST TEN RUPEES.(VII) ERROR IN EMPLOYEE CATEGORISATION INTO FEMALE AND SENIOR CITIZEN. THE ASSESSEE HAS EXPLAINED THE REASONS FOR EACH OF THE SEVEN CATEGORIES OF DEFAULTS. THE ASSESSEE FURTHER SUBMIT TED THAT IT IS A PUBLIC SECTOR UNDERTAKING HAVING LARGE WORK FORCE OF MORE THAN 17000 EMPLOYEES. THE ASSESSEE HAS TAKEN ALL OUT EFFORTS T O COLLECT PAN NUMBERS FROM EACH EMPLOYEE. HOWEVER, THERE WERE CER TAIN DISCREPANCIES IN THE PAN QUOTED IN TDS RETURNS WHIC H RESULTED IN MISMATCH OF PAN NUMBERS WHILE PROCESSING THE TDS RE TURNS. THE ASSESSEE HAS FILED RECTIFICATION REQUEST AND CORREC TED MOST OF THE DEFAULTS BY OBTAINING CORRECT PAN FROM THE EMPLOYEE S. ALTHOUGH, IT HAS CORRECTED MOST OF THE DEFAULTS, THE DEFAULTS MENTIO NED IN CATEGORY (I) AND (IV) WAS NOT RECTIFIED, BECAUSE EVEN NOW FEW EM PLOYEES HAVE NOT FURNISHED CORRECT PAN. THE ASSESSEE FURTHER SUBMITT ED THAT FOR SUCH DISCREPANCIES, THE TAX WAS CALCULATED AT 20% WITHOU T EVEN ALLOWING BASIC EXEMPTION LIMIT, WHICH HAS AN ADVERSE IMPACT IN THE CASE OF EMPLOYEES, WHOSE INCOME IS SUBJECT TO TAX AT PROGRE SSIVE RATE OF TAXATION. THE ASSESSEE FURTHER SUBMITTED THAT DEMAN D CAN BE MADE AGAINST THE ASSESSEE, ONLY WHEN THERE WAS A FAILURE ON THE PART OF EMPLOYEES IN THE PAYMENT OF TAX. TO THIS EFFECT PLA CED ITS RELIANCE ON ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 4 THE FOLLOWING TWO DECISIONS. (I) JAGRAN PRAKASHAN L TD VS. DCIT (2012) 345 ITR 288 (ALL)(II) ALLAHABAD BANK VS. ITO(TDS), ALGARH IN ITA NO. 448 TO 454/AGRA/2011. THE CIT(A), AFTER CONSIDERING THE EXPLANATION OF ASSESSEE, SET ASIDE THE ISSUE TO THE FILE OF AO/TDS OFFICER, IN RESPECT OF DEFAULTS REFERRED IN CLAUSE (II), (III) AND (V) AND DIRECTED THE AO/TDS OFFICER TO VERIFY THE REVISED TDS RETURNS AND WHERE VER CORRECT PAN AND STATUS OF EMPLOYEE IS QUOTED BY THE ASSESSEE, THEN CREDIT SHOULD BE GIVEN AGAINST THE SHORT DEDUCTION DETERMINED. IN RE SPECT OF CASES FALLING UNDER CATEGORY (I) AND (IV), UPHELD THE ACTION OF A O/TDS OFFICER. WITH THESE OBSERVATIONS, THE CIT(A) ALLOWED THE APPEAL F OR STATISTICAL PURPOSE. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSE E IS IN APPEAL BEFORE US. 4. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT THE CIT(A) WAS ERRED IN CONFIRMING THE DEFAULT S REFERRED IN CATEGORY (I) AND (IV), I.E. INVALID PAN THEN AND NOT YET COR RECTED AND PAN NOT AVAILABLE THEN AND NOW TOO. THE A.R. SUBMITTED THAT ASSESSEE IS A PUBLIC SECTOR UNDERTAKING HAVING LARGE WORK FORCE OF MORE THAN 17000 EMPLOYEES. THE ASSESSEE HAS TAKEN ALL OUT EFFORTS T O COLLECT PAN NUMBERS FROM EACH EMPLOYEE. IN SPITE OF REPEATED RE MINDERS, FEW EMPLOYEES DID NOT FURNISHED PAN FOR VARIOUS REASONS . HOWEVER, THE ASSESSEE HAS FILED RECTIFICATION STATEMENTS AND COR RECTED MOST OF THE ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 5 DEFAULTS BY OBTAINING CORRECT PAN FROM THE EMPLOYEE S. ALTHOUGH, IT HAS CORRECTED MOST OF THE DEFAULTS, THE DEFAULTS MENTIO NED IN CATEGORY (I) AND (IV) WAS NOT RECTIFIED, BECAUSE EVEN NOW FEW EM PLOYEES HAVE NOT FURNISHED CORRECT PAN. THE ASSESSEE FURTHER SUBMITT ED THAT FOR SUCH DISCREPANCIES, THE TAX WAS CALCULATED AT 20% WITHOU T EVEN ALLOWING BASIC EXEMPTION LIMIT, WHICH HAS AN ADVERSE IMPACT IN THE CASE OF EMPLOYEES, WHOSE INCOME IS SUBJECT TO TAX AT PROGRE SSIVE RATE OF TAXATION. THE ASSESSEE FURTHER SUBMITTED THAT DEMAN D CAN BE MADE AGAINST THE ASSESSEE, ONLY WHEN THERE WAS A FAILURE ON THE PART OF EMPLOYEES IN THE PAYMENT OF TAX. TO THIS EFFECT PLA CED ITS RELIANCE ON THE FOLLOWING TWO DECISIONS. (I) JAGRAN PRAKASHAN L TD VS. DCIT (2012) 345 ITR 288 (ALL)(II) ALLAHABAD BANK VS. ITO(TDS), ALGARH IN ITA NO. 448 TO 454/AGRA/2011. THEREFORE, REQUESTED TO SET ASIDE THE ORDER OF CIT(A). 5. ON THE OTHER HAND, THE D.R. STRONGLY SUPPORTED T HE ORDER OF CIT(A). THE LD. D.R. SUBMITTED THAT THE CIT(A) HAS CONSIDERED THE ASSESSEE REQUEST AND SET ASIDE THE ISSUE TO THE FIL E OF A.O., WHEREVER, THE ASSESSEE HAS OBTAINED CORRECT PAN AND FILED REV ISED TDS RETURN. IN RESPECT INVALID PAN THEN AND NOW AND PAN NOT AVAILA BLE THEN AND NOW TOO, EVEN NOW THE ASSESSEE COULD NOT RECTIFIED THE DEFAULTS. THEREFORE, THE A.O./TDS OFFICER WAS CORRECT IN COMPUTING THE S HORT DEDUCTION AND HIS ORDER SHOULD BE UPHELD. ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 6 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE CPC-TD S HAS PROCESSED ETDS RETURNS AND ISSUED INTIMATION UNDER SEC. 200A OF THE ACT. THE AO/TDS OFFICER HAS COMPUTED SHORT DEDUCTION OF TAX AND INTEREST FOR DEFAULTS IN FURNISHING INVALID PAN, NON FURNISHING OF PAN AND ERROR IN CATEGORISATION OF EMPLOYEES. IT WAS THE CONTENTION OF THE ASSESSEE THAT IT HAS FILED REVISED RETURN AND CORRECTED MOST OF T HE DEFAULTS FOR WHICH SHORT DEDUCTION WAS DETERMINED BY THE CPC-TDS. THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE AND SET ASIDE THE ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO ALLOW CREDIT FOR TDS W HEREVER PAN IS CORRECTED IN THE REVISED RETURNS. IN RESPECT OF INV ALID PAN THEN AND NOW TOO, THE CIT(A) UPHELD THE ACTION OF A.O./TDS OFFIC ER IN COMPUTING THE SHORT DEDUCTION. 7. THE CONTENTION OF THE ASSESSEE WAS THAT BOTH THE AUTHORITIES HAVE FAILED TO TAKE NOTE OF THE FACT THAT THE ASSESSEE H AS COMPLIED WITH THE PROVISIONS OF TDS BY DEDUCTING APPROPRIATE TDS AS P ER LAW. HOWEVER, THERE WERE CERTAIN DISCREPANCIES IN THE PAN NUMBERS AND ERRORS IN KEYING THE DATA OF THE EMPLOYEES AT THE TIME OF FIL ING THE ETDS RETURNS. IN THE RECTIFICATION STATEMENTS, MOST OF THE DEFAUL TS REFERRED TO IN TRACES HAVE BEEN RECTIFIED WITH CORRECT PAN NUMBERS . BUT, IN FEW CASES, IT WAS UNABLE TO RECTIFY THE DEFAULTS WITH C ORRECT PAN, AS THERE ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 7 WAS MISMATCH IN PAN FURNISHED BY THE EMPLOYEES. THE ASSESSEE HAS TAKEN ALL OUT EFFORTS TO COLLECT PAN NUMBERS FROM E ACH EMPLOYEE. IN SPITE OF REPEATED REMINDERS, FEW EMPLOYEES DID NOT FURNISHED PAN FOR VARIOUS REASONS. HOWEVER, THE CORRECT AMOUNT OF TDS RECOVERABLE FROM THE PAYMENTS HAVE BEEN DEDUCTED AND PAID TO THE GOV T. ACCOUNT. THERE IS NO SHORT FALL IN RECOVERY OF TDS AS PER LAW. THE SHORT DEDUCTION WAS DETERMINED BY APPLYING HIGHER RATE OF TDS WITHOUT E VEN DEDUCTING BASIC EXEMPTION LIMIT ALLOWABLE UNDER THE ACT, WHICH HAS AN ADVERSE IMPACT IN THE CASE OF EMPLOYEES, WHOSE INCOME IS SUBJECT TO T AX AT PROGRESSIVE RATE OF TAXATION. 8. SECTION 206AA OF THE ACT, PROVIDES FOR DEDUCTION OF TAX AT HIGHER RATES, IN CASE THE DEDUCTEE FAILS TO FURNISH THE CO RRECT PAN TO THE PERSON RESPONSIBLE FOR DEDUCTING TAX AT SOURCE. IN THE EVE NT, THE DEDUCTEE FAILS TO FURNISH PAN, THEN THE DEDUCTOR SHALL DEDUCT TAX AT THE RATES WHICH IS HIGHER OF (I) AT THE RATES SPECIFIED IN THE RELEVAN T PROVISIONS OF THE ACT, OR (II) AT THE RATE OR RATES IN FORCE, OR (III) AT THE RATE OF TWENTY PERCENT. A CAREFUL STUDY OF THE PROVISIONS OF SECTION 206AA MADE IT CLEAR THAT IT IS NOT AUTOMATIC THAT A FLAT RATE OF 20% SHALL BE DEDU CTED WHEREVER PAN IS NOT FURNISHED. THE DEDUCTOR SHALL COMPUTE THE TAX I N THE MANNER SPECIFIED UNDER SECTION 206AA OF THE ACT, BY APPLYI NG THE RATE SPECIFIED UNDER THE RELEVANT PROVISION OF THIS ACT, OR AT THE RATE OR RATES IN FORCE ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 8 AND THEN, COMPARED TO FLAT RATE OF 20% TO DECIDE WH ICHEVER IS HIGHER. IN THE INSTANT CASE, THE ASSESSEE DEDUCTED TDS ON SALA RY PAYMENTS TO EMPLOYEES UNDER SEC. 192 OF THE ACT. SEC. 192 OF TH E ACT PROVIDES FOR COMPUTATION OF TAX UNDER NORMAL RATES IN FORCE FOR THE FINANCIAL YEAR IN WHICH PAYMENT IS MADE, ON THE ESTIMATED INCOME OF T HE ASSESSEE. THE ASSESSEE CONTENDED THAT IT HAS DEDUCTED TAX AT SOUR CE AS PER THE APPLICABLE RATES IN FORCE IN THE MANNER SPECIFIED U NDER SEC. 192 AFTER ALLOWING BASIC EXEMPTION LIMIT. WE FIND FORCE IN TH E ARGUMENTS OF THE ASSESSEE, FOR THE REASON THAT THE PAYMENT COVERED U NDER DISPUTE IS SALARY TO EMPLOYEES. TDS ON SALARY SHALL BE DEDUCTE D IN THE MANNER SPECIFIED UNDER SEC. 192 OF THE ACT, AFTER ALLOWING BASIC EXEMPTION LIMIT AND DEDUCTIONS TOWARDS INVESTMENTS IN SAVINGS SCHEM E ETC. UNLIKE OTHER PROVISIONS OF TDS, TDS ON SALARY CANNOT BE DEDUCTED BY APPLYING FLAT RATE OF TAX ON GROSS PAYMENT. THEREFORE, SEC. 206AA PROVIDES FOR HIGHER OF THE THREE, I.E. AT THE RATES SPECIFIED IN THE RE LEVANT PROVISIONS OF THE ACT, OR AT THE RATE OR RATES IN FORCE OR AT THE RAT E OF TWENTY PERCENT. IT IS NOT NECESSARILY THAT ALL PAYMENTS ARE COMES UNDER 2 0% FLAT RATE, IN SOME CASES THE RATE OF TAX MAY BE AT 10% AND IN SOM E CASES IT MAY BE AT 30%. UNLESS, THIS WAS DONE, THE A.O. CANNOT APPL Y FLAT RATE OF 20% AND COMPUTE THE SHORT DEDUCTION OF TAX. THUS, IT IS CLEAR THAT THE ONUS IS ON THE REVENUE TO DEMONSTRATE THAT THE CORRECT TAX HAS NOT BEEN ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 9 RECOVERED FROM THE PERSON WHO HAD THE PRIMARY LIABI LITY TO PAY TAX. WITHOUT DOING SO, THE A.O. CANNOT SIMPLY COMPUTE THE SHORT DEDUCTION BY APPLYING FLAT RATE OF 20% TAX ON GROSS PAYMENT. 9. IN THE PRESENT CASE ON HAND, THE ASSESSEE BEING A PUBLIC SECTOR UNDERTAKING HAS DEDUCTED TDS AT THE RATES PRESCRIBE D UNDER THE ACT AND FILED THE NECESSARY ETDS RETURNS. THE CPC TDS, PRO CESSED THE RETURN AND COMPUTED THE SHORT DEDUCTION OF TAX BY APPLYING THE 20% FLAT RATE SPECIFIED UNDER SEC. 206AA, MERELY BASED ON THE STA TEMENTS FILED BY THE ASSESSEE, WITHOUT BEING APPLYING THE HIGHER OF THE THREE RATES PRESCRIBED UNDER SEC. 206AA. IT IS SETTLED POSITION OF LAW THAT A SHORT DEDUCTION OF TAX AT SOURCE, BY ITSELF DOES NOT RESU LT IN A LEGALLY SUSTAINABLE DEMAND UNDER SEC. 201(1) AND 201(1A). T HE TAXES CANNOT BE RECOVERED ONCE AGAIN FROM THE ASSESSEE IN A SITU ATION WHERE THE RECIPIENT OF INCOME HAS ALREADY PAID THE DUE TAXES ON SUCH INCOME. UNLESS, THE A.O. VERIFIED HIMSELF THAT THE RECIPIEN T OF INCOME HAS NOT PAID THE TAX ON SUCH INCOME AND ALSO DEMONSTRATE TH AT THE RATE APPLIED BY HIM WAS IN ACCORDANCE WITH THE PROVISIONS OF SEC . 206AA, THE ASSESSEE CANNOT BE HOLD AS ASSESSEE IN DEFAULT UNDE R SEC. 201(1) AND 201(1A). THEREFORE, WE ARE OF THE OPINION THAT THE A.O./TDS OFFICER WAS NOT CORRECT IN COMPUTING THE SHORT DEDUCTION OF TAX AND INTEREST, BY APPLYING FLAT RATE OF 20% TAX. THE CIT(A), WITHOUT APPRECIATING THE ITA NOS.115 TO 117/VIZAG/2015 RASHTRIYA ISPAT NIGAM LIMITED, VSKP 10 FACTS, SIMPLY UPHELD THE ACTION OF A.O./TDS OFFICER . THEREFORE, WE DEEM IT APPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF THE A.O./TDS OFFICER AND DIRECT THE A.O. TO EXAMINE THE ISSUE IN THE LIG HT OF THE DISCUSSIONS ABOVE, AFTER AFFORDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. NEEDLESS TO SAY, THE ASSESSEE IS DIRECTED TO FURNIS H ALL THE DETAILS BEFORE THE A.O./TDS OFFICER, FOR EARLY DISPOSAL OF THE CAS E. 10. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IN ITA. NOS. 115/V/2015 TO 117/V/2015 ARE ALLOWED FOR STATISTICA L PURPOSE. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND JAN16. SD/- SD/- (. ) ( . ) ( V. DURGA RAO ) ( G. MANJUNATHA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 1 /VISAKHAPATNAM: 5 / DATED : 22.01.2016 VG/SPS # & 71 81/ COPY OF THE ORDER FORWARDED TO :- 1. ' / THE APPELLANT RASHTRIYA ISPAT NIGAM LTD., TAXATION CELL, F&A DEPARTMENT, ADMINISTRATIVE BUILDING, VISAKHAPATNAM STEEL PLANT, VISAKHAPATNAM. 2. &'' / THE RESPONDENT ADDL. CIT, RANGE-6(TDS), VISAKH APATNAM 3. 9 / THE CIT, VISAKHAPATNAM 4. 9 () / THE CIT (A), VISAKHAPATNAM 5. 1 & >, + > , 1 / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER