The Area Manager Food Corporation of India, Aligarh V. I.T.O. (TDS), Aligarh

ITA 126/AGR/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67498 (ITAT-AGRA)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Assessee Lawyers: RAJENDRA SHARMA
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO. 126/AGRA/ 2013 ASSESSMENT YEAR: 2008-09 THE AREA MANAGER, VS. INCOME TAX OFFICER (TDS) FOOD CORPORATION OF INDIA, ALIGARH. RAMGHAT ROAD, ALIGARH. (PAN AAACF 0365 N)) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJENDRA SHARMA, ADVOCATE RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 16.12.2013 DATE OF PRONOUNCEMENT : 20.12.2013 ORDER PER PRAMOD KUMAR, ACCOUNTANT MEMBER: BY WAY OF THIS APPEAL, THE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 8 TH JANUARY, 2013, IN THE MATTER OF TAX WITHHOLDING RE COVERY DEMANDS UNDER SECTION 201(1) AND 201(1A) OF THE INC OME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2008-09. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOWS :- 1. THAT THE LD CIT HAS ERRED ON FACT AND IN LAW WH ILE DISMISSING OF THE APPELLANTS APPEAL WITHOUT APPRECIATING OF T HE FACT AND POSITION OF LAW, AFTER TAKING INTO CONSIDERATION THE FACT AN D WRITTEN SUBMISSION FURNISHED BEFORE THEM, THE APPELLANT IS NOT LIABLE TO DEDUCT THE TAX AS PER PROVISION OF SECTION 194C/194H OF THE I.T. ACT. THE AMOUNT DETERMINED AT RS.349083/- U/S 201/201(1) READ WITH SECTION R.W.S. 194C/194 I OF THE I.T. ACT AND INTEREST THEREOF AT RS.38399/- HAS WRONGLY BEEN DETERMINED AND CHARGED BY THE AO AND S USTAINED BY THE CIT(APPEALS), SAME IS LIABLE TO BE DELETED. ITA NO.126 /AGRA/2013 A.Y. 2008-09 2 2. THAT WHILE COMPUTING AND CHARGING OF THE TAX U/S 201/201(1) OF THE I.T. ACT AND INTEREST THEREOF IN RESPECT OF PUR CHASE OF FOOD GRAIN FROM NAFED, THE AUTHORITIES BELOW HAVE COMPLETELY I GNORED THE FACT THAT THE ASSESSEE (FOOD CORPORATION OF INDIA) HAS P URCHASED THE GRAIN FROM NAFED AS PER SALE INVOICE ISSUED BY NAFED, THE AMOUNT PAID IS THE PURCHASE PRICE OF WHEAT ON WHICH NO DEDUCTIO N OF TAX HAS TO BE MADE, THE AUTHORITIES BELOW HAVE WRONGLY TREATED TH E SAME AS THE AMOUNT PAID UNDER THE VARIOUS HEADS SUBJECT TO TDS, NO TDS IS LIABLE TO BE DEDUCTED BEING THE ENTIRE AMOUNT PAID REPRESE NTS THE PURCHASE PRICE OF WHEAT, NO AMOUNT IS LIABLE TO BE CHARGED U /S 201/201(1) OF THE I.T. ACT, THE ORDER PASSED ON THIS SCORE IS LIABLE TO BE QUASHED. 3. THAT THE AUTHORITIES BELOW HAVE ERRED ON FACT AN D IN LAW WHILE TREATING THE PAYMENT MADE TO STATE WAREHOUSING CORP ORATION AS FREIGHT CHARGES AND LABOUR CONTRACT PAYMENT ETC. WH ILE THE ASSESSEE HAS NOT PAID THE AFORESAID AMOUNT AGAINST THE FREIG HT AND LABOUR CONTRACT CHARGES. THE AFORESAID AMOUNT REPRESENTS THE REIMBURSEMENT OF THE EXPENSES INCURRED BY THE S.W.C . AGAINST STORING OF THE FOOD GRAIN, NO DEDUCTION OF TAX IS LIABLE TO BE MADE BY THE ASSESSEE AGAINST SUCH PAYMENT BEING ROAD FREIGHT AN D LABOUR PAYMENT HAVE NOT BEEN MADE BY THE APPELLANT AND WERE MADE B Y THE S.W.C., ASSESSEE IS NOT LIABLE TO DEDUCT THE TAX AS PER SEC TION 194C AND 194 I OF THE I.T. ACT, THE AMOUNT WORKED OUT AND CHARGED BY THE AUTHORITIES BELOW U/S 201/201(1) OF I.T. ACT IS LIABLE TO BE CA NCELLED. 4. THAT WHILE CALCULATING THE AMOUNT OF TDS AT RS.3 49083/- AND INTEREST THEREOF AT RS.38399/- U/S 201/201(1) OF TH E I.T. ACT THE AUTHORITIES BELOW HAVE COMPLETELY IGNORED THAT THE ASSESSEE HAS DULY DEDUCTED THE TAX AT SOURCE AND HAS PAID WITH THE GO VERNMENT WITHIN THE STIPULATED TIME IN RESPECT OF THE PAYMENT MADE BY THE ASSESSEE TO THE CONTRACTOR WHICH THE AUTHORITIES BELOW HAVE IGN ORED WHILE CALCULATING/WORKING OUT THE AMOUNT ON SUCH PAYMENT AGAINST WHICH THE ASSESSEE HAS DULY DEDUCTED THE TAX AT SOURCE, O RDER PASSED U/S 201(1)/201(IA) IS LABIAL TO BE CANCELLED. 5. THAT WHILE TREATING THE ASSESSEE IN DEFAULT FOR THE PURPOSE OF SECTION 201/201(1) READ WITH R.W.S. 194C/194 I OF T HE I.T. ACT IN RESPECT OF PAYMENT MADE TO S.W.C., THE AUTHORITIES BELOW HAVE COMPLETELY IGNORED AND HAVE NOT APPRECIATED THAT TH E S.W.C. HAS DULY DEDUCTED THE TAX AT SOURCE IN RESPECT OF CONTRACT G IVEN TO THE CONTRACTOR AND ALSO AGAINST THE LABOR PAYMENT, THE ASSESSEE HAS NO CONCERN WHATSOEVER EITHER WITH THE CONTRACTOR OR WI TH THE LABOUR RESULTANT, WAS NOT UNDER LEGAL OBLIGATION TO DEDUCT THE TAX ON SUCH ITA NO.126 /AGRA/2013 A.Y. 2008-09 3 PAYMENT MADE BY S.W.C. TO THE CONTRACTOR AGAINST WH ICH THE TAX HAS DULY BEEN DEDUCTED BY THEM, THE AMOUNT WORKED OUT U /S 201/201(1) AND INTEREST THEREOF HAS BEEN WRONGLY CALCULATED AN D WORKED OUT, SAME IS LIABLE TO BE DELETED. 6. THAT THE ORDERS OF THE AUTHORITIES BELOW ARE BAD IN LAW AND LIABLE TO BE QUASHED. 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIA L FACTS ARE TO BE TAKEN NOTE OF. DURING THE COURSE OF SURVEY CONDUCTED AT THE P REMISES OF THE APPELLANT, IT WAS NOTED THAT THE APPELLANT HAS NOT PROPERLY FULFILLED HIS TAX DEDUCTION AT SOURCE OBLIGATION. ON THE BASIS OF THESE OBSERVATIONS, WH ATEVER BE THE MERITS THEREOF, THE ASSESSING OFFICER (TDS) RAISED DEMAND UNDER SECTION 201(1) AND UNDER SECTION 201(1A) OF THE ACT FOR RS.3,49,083/- AND RS.38,399/ - RESPECTIVELY. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). AS EVIDENT FROM A PLAIN READING OF GROUNDS OF APPEAL BEFORE THE CIT(A), IT WAS ONE OF THE SPECIFIC CONTENTIONS OF THE ASSESSEE THAT SINCE RECIPIENTS O F MONIES IN QUESTION HAVE DULY PAID TAXES ON INCOME EMBEDDED IN THESE PAYMENTS, TH E ASSESSEE CANNOT BE ASKED TO PAY THE IMPUGNED DEMANDS UNDER SECTION 201. THERE W ERE, OF COURSE, ARGUMENTS IN SUPPORT OF THE BASIC CONTENTION THAT, EVEN ON MERIT S, THE ASSESSEE DID NOT HAVE ANY TAX WITHHOLDING OBLIGATIONS FROM THE IMPUGNED PAYME NTS, BUT, FOR THE REASONS WE WILL SET OUT IN A SHORT WHILE, IT IS NOT REALLY NEC ESSARY TO DEAL WITH THAT ASPECT OF THE MATTER. LEARNED CIT(A) SIMPLY BRUSHED ASIDE THIS G ROUND OF APPEAL AND HELD THAT THE ASSESSEE HAD A TAX WITHHOLDING OBLIGATION FROM THE PAYMENTS IN QUESTION, AND, ACCORDINGLY, IMPUGNED DEMANDS DESERVE TO BE CONFIRM ED. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. ITA NO.126 /AGRA/2013 A.Y. 2008-09 4 4. WE HAVE NOTED THAT ASSESSEE HAS ALL ALONG CONTEN DED THAT THE RECIPIENTS OF PAYMENTS HAVE ALREADY PAID DUE TAXES ON INCOME EMBE DDED IN THE PAYMENTS IN RESPECT OF WHICH IMPUGNED DEMANDS ARE RAISED. THIS POSITION IS NOT CONTROVERTED BY THE AUTHORITIES BELOW, AND YET THE IMPUGNED DEMA ND IS SUSTAINED IN APPEAL BY THE CIT(A). THIS IS CLEARLY CONTRARY TO THE LAW LAI D DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF JAGRITI PRAKASHAN LIMITED VS. DCIT [(2012) 21 TAXMAN.COM 489). A CO-ORDINATE BENCH OF THIS TRIBU NAL, IN THE CASE OF RAMAKRISHNA VEDANTA MATH VS. ITO [18 ITR (TRIB) 603 ], HAS EXPLAINED THE LEGAL POSITION AS FOLLOWS :- 6. LEARNED COUNSELS VEHEMENT RELIANCE IS ON HONB LE ALLAHABAD HIGH COURTS JUDGEMENT IN THE CASE OF JAGRAM PRAKAS HAN LTD VS. DCIT [(2012) 21 TAXMANN.COM 489 ALL] WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLOWS: IT IS CLEAR THAT DEDUCTOR CANNOT BE TREATED AN A SSESSEE IN DEFAULT TILL IT IS FOUND THAT ASSESSEE HAS ALSO FAILED TO P AY SUCH TAX DIRECTLY. IN THE PRESENT CASE, THE INCOME TAX AUTHORITIES HAD NO T ADVERTED TO THE EXPLANATION TO SECTION 191 NOR HAD APPLIED THEIR MI ND AS TO WHETHER THE ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIRECT LY. THUS, TO DECLARE A DEDUCTOR, WHO FAILED TO DEDUCT THE TAX AT SOURCE AS AN ASSESSEE IN DEFAULT, CONDITION PRECEDENT IS THAT ASSESSEE HAS A LSO FAILED TO PAY TAX DIRECTLY. THE FACT THAT ASSESSEE HAS FAILED TO PAY TAX DIRECTLY IS THUS, FOUNDATIONAL AND JURISDICTIONAL FACT AND ONLY AFTER FINDING THAT ASSESSEE HAS FAILED TO PAY TAX DIRECTLY, DEDUCTOR C AN BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX. 7. IT IS THUS ARGUED THAT THE ONUS IS ON THE REVENU E TO DEMONSTRATE THAT THE TAXES HAVE NOT BEEN RECOVERED FROM THE PER SON WHO HAD THE PRIMARILY LIABILITY TO PAY TAX, AND IT IS ONLY WHEN THE PRIMARY LIABILITY IS NOT DISCHARGED THAT VICARIOUS RECOVERY LIABILITY CAN BE INVOKED. LEARNED COUNSEL CONTENDS THAT ONCE ALL THE DETAILS OF THE PERSONS TO WHOM PAYMENTS HAVE BEEN MADE, IT IS FOR THE ASSESSI NG OFFICER, WHO HAS ALL THE POWERS TO REQUISITION THE INFORMATION F ROM SUCH PAYERS AND FROM THE INCOME TAX AUTHORITIES, TO ASCERTAIN WHETH ER OR NOT TAXES HAVE BEEN PAID BY THE PERSONS IN RECEIPT OF THE AMO UNTS FROM WHICH TAXES HAVE NOT BEEN WITHHELD. IT IS LEARNED COUNSE LS SUBMISSION THAT AS A RESULT OF HONBLE ALLAHABAD HIGH COURTS JUDGE MENT IN THE CASE ITA NO.126 /AGRA/2013 A.Y. 2008-09 5 OF JAGARAN PRAKASHAN (SUPRA), THIS PARADIGM SHIFT I N THE INTERPRETATION OF SECTION 201(1) HAS BEEN BROUGHT A BOUT. 8. THE PLEA IS INDEED WELL TAKEN. LEARNED COUNSEL I S QUITE RIGHT IN HIS SUBMISSION THAT, AS A RESULT OF THE JUDGEMENT O F HONBLE ALLAHABAD HIGH COURT IN JAGRAN PRAKASHANS CASE (SUPRA) AND I N THE ABSENCE OF ANYTHING CONTRARY THERETO FROM HONBLE JURISDICTION AL HIGH COURT, THERE IS A PARADIGM SHIFT IN THE MANNER IN WHICH RE COVERY PROVISIONS UNDER SECTION 201(1) CAN BE INVOKED. AS OBSERVED B Y THEIR LORDSHIPS, THE PROVISIONS OF SECTION 201(1) CANNOT BE INVOKED AND THE TAX DEDUCTOR CANNOT BE TREATED AN ASSESSEE IN DEFA ULT TILL IT IS FOUND THAT ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIREC TLY. ONCE THIS FINDING ABOUT THE NON PAYMENT OF TAXES BY THE RECIP IENT IS HELD TO A CONDITION PRECEDENT TO INVOKING SECTION 201(1), THE ONUS IS ON THE ASSESSING OFFICER TO DEMONSTRATE THAT THE CONDITION IS SATISFIED. NO DOUBT THE ASSESSEE HAS TO SUBMIT ALL SUCH INFORMATI ON ABOUT THE RECIPIENT AS HE IS OBLIGED TO MAINTAIN UNDER THE LA W, ONCE THIS INFORMATION IS SUBMITTED, IT IS FOR THE ASSESSING O FFICER TO ASCERTAIN WHETHER OR NOT THE TAXES HAVE BEEN PAID BY THE RECI PIENT OF INCOME. THIS APPROACH, IN OUR HUMBLE UNDERSTANDING, IS IN C ONSONANCE WITH THE LAW LAID DOWN BY HONBLE ALLAHABAD HIGH COURT. 9. IT IS IMPORTANT TO BEAR IN MIND THAT THE LAPSE O N ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE IS TO BE VISITED WITH TH REE DIFFERENT CONSEQUENCES PENAL PROVISIONS, INTEREST PROVISION S AND RECOVERY PROVISIONS. THE PENAL PROVISIONS IN RESPECT OF SUC H A LAPSE ARE SET OUT IN SECTION 271C. SO FAR AS PENAL PROVISIONS ARE CO NCERNED, THE PENALTY IS FOR LAPSE ON THE PART OF THE ASSESSEE AN D IT HAS NOTHING TO DO WITH WHETHER OR NOT THE TAXES WERE ULTIMATELY RECOV ERED THROUGH OTHER MEANS. THE PROVISIONS REGARDING INTEREST IN DELAY IN DEPOSITING THE TAXES ARE SET OUT IN SECTION 201(1A). THESE PROVIS IONS PROVIDE THAT FOR ANY DELAY IN RECOVERY OF SUCH TAXES IS TO BE CO MPENSATED BY THE LEVY OF INTEREST. AS FAR AS RECOVERY PROVISIONS AR E CONCERNED, THESE PROVISIONS ARE SET OUT IN SECTION 201(1) WHICH SEEK S TO MAKE GOOD ANY LOSS TO REVENUE OR ACCOUNT OF LAPSE BY THE ASSESSEE TAX DEDUCTOR. HOWEVER, THE QUESTION OF MAKING GOOD THE LOSS OF RE VENUE ARISES ONLY WHEN THERE IS INDEED A LOSS OF REVENUE AND THE LOSS OF REVENUE CAN BE THERE ONLY WHEN RECIPIENT OF INCOME HAS NOT PAID TA X. THEREFORE, RECOVERY PROVISIONS UNDER SECTION 201(1) CAN BE INV OKED ONLY WHEN LOSS TO REVENUE IS ESTABLISHED, AND THAT CAN ONLY B E ESTABLISHED WHEN IT IS DEMONSTRATED THAT THE RECIPIENT OF INCOME HAS NO T PAID DUE TAXES THEREON. IN THE ABSENCE OF THE STATUTORY POWERS TO REQUISITION ANY INFORMATION FROM THE RECIPIENT OF INCOME, THE ASSES SEE IS INDEED NOT ITA NO.126 /AGRA/2013 A.Y. 2008-09 6 ALWAYS ABLE TO OBTAIN THE SAME. THE PROVISIONS TO MAKE GOOD THE SHORTFALL IN COLLECTION OF TAXES MAY THUS END UP BE ING INVOKED EVEN WHEN THERE IS NO SHORTFALL IN FACT. ON THE OTHER H AND, ONCE ASSESSEE FURNISHES THE REQUISITE BASIC INFORMATION, THE ASSE SSING OFFICER CAN VERY WELL ASCERTAIN THE RELATED FACTS ABOUT PAYMENT OF TAXES ON INCOME OF THE RECIPIENT DIRECTLY FROM THE RECIPIENTS OF IN COME. IT IS NOT THE REVENUES CASE BEFORE US THAT, ON THE FACTS OF THIS CASE, SUCH AN EXERCISE BY THE ASSESSING OFFICER IS NOT POSSIBLE. IT DOES PUT AN ADDITIONAL BURDEN ON THE ASSESSING OFFICER BEFORE H E CAN INVOKE SECTION 201(1) BUT THATS HOW HONBLE HIGH COURT HA S VISUALISED THE SCHEME OF ACT AND THATS HOW THEREFORE, IT MEETS TH E END OF JUSTICE. 5. IN VIEW OF THE ABOVE LEGAL POSITION, WE DEEM IT FIT AND APPROPRIATE TO QUASH THE IMPUGNED DEMANDS UNDER SECTION 201(1) AND 201(1 A), AS THERE IS NO MATERIAL BEFORE US TO DEMONSTRATE THAT THE RECIPIENTS OF PAY MENTS IN QUESTION HAVE NOT PAID THEIR DUE TAXES DIRECTLY. ACCORDINGLY, THE GRIEVAN CE OF THE ASSESSEE IS UPHELD AND THE IMPUGNED DEMANDS UNDER SECTION 201(1) AND 201(1 A) STAND QUASHED. 6. WE, HOWEVER, MAKE IT CLEAR THAT IN CASE IT IS FO UND THAT THE RECIPIENTS OF PAYMENTS IN QUESTION HAVE NOT PAID DUE TAXES DIRECT LY, THE ASSESSING OFFICER SHALL BE AT LIBERTY TO TAKE SUCH ACTION, ON MERITS, AS HE DEMANDS FIT, AND THE ASSESSEES CHALLENGE ON MERITS WILL THEN HAVE TO BE DEALT WITH ON MERITS. FOR THE TIME BEING, HOWEVER, THAT ASPECT OF THE MATTER IS WHOLLY ACADEM IC AND DOES NOT CALL FOR OUR ADJUDICATION AT THIS STAGE. 7. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERM S INDICATED ABOVE. (ORDER PRONOUNCED IN THE OPEN COURT ON 20.12.2013) SD/- SD/- (BHAVNESH SAINI) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* ITA NO.126 /AGRA/2013 A.Y. 2008-09 7 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY