The DCIT, Circle-3(1), Vijayawada V. The Sr. Accounts Officer, O & M, M/s AP GENCO,

ITA 159/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50238 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Section: 133A; 201(1); 2

Judgement Text

ITA NO. 159/VIZAG/2011 OF APGENCO VIJAYAWADA PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.159/VIZAG/2011 ASSESSMENT YEAR: 2009-10 DY.COMMISSIONER OF INCOME TAX CIRCLE-3(1) VIJAYAWADA VS. SR.ACCOUNTS OFFICER, O&M M/S APGENCO, RAYALSEEMA THERMAL POWER PROJECT, KADAPA (APPELLANT) (RESPONDENT) TAN NO:HYDR02587E APPELLANT BY: SHRI D.S. SUNDER SINGH, SR.DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31.1.2011 PASSED BY LEARNED CIT(A), VIJAYAWADA AND IT RELATES TO THE ASSESSMENT YEAR 2009-10. 2. THOUGH THE REVENUE HAS RAISED AS MANY AS 15 GROU NDS, ALL OF THEM ARE DIRECTED AGAINST A SINGLE ISSUE VIZ., WHETHER T HE LEARNED CIT(A) IS JUSTIFIED (A) IN HOLDING THAT THE ASSESSEE HEREIN HA S DISCHARGED THE LIABILITY IMPOSED ON IT UNDER SECTION 192 OF THE ACT BEFORE T HE END OF THE FINANCIAL YEAR AND (B) IN VACATING THE ORDER PASSED SECTION 2 01(1) AND 201(1A) OF THE ACT. 3. THE FACTS RELATING TO THE ISSUE ARE STATED I N BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER AND IS A STATE GOVERNMENT UNDERTAKING OF GOVERNMENT OF ANDHRA PRADESH. THE D EPARTMENT CARRIED OUT A SURVEY OPERATION UNDER SECTION 133A OF THE AC T IN THE HANDS OF THE ITA NO. 159/VIZAG/2011 OF APGENCO VIJAYAWADA PAGE 2 OF 5 ASSESSEE. AT THE TIME OF SURVEY, IT WAS NOTICED TH AT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE (TDS) FROM SALARIES UNDER S ECTION 192 OF THE ACT AT UNIFORM AMOUNT AS MANDATED BY SUB SECTION (1) OF SE CTION 192. THE ASSESSEE HAD ESTIMATED THE TOTAL AMOUNT OF TAX TO B E DEDUCTED FOR THE FINANCIAL YEAR 2008-09 AT RS.83,18,459/- AND ACCORD INGLY THE AVERAGE AMOUNT OF TAX TO BE DEDUCTED EVERY MONTH WAS WORKED OUT BY THE ASSESSING OFFICER AT RS.6,93,205/-. ACCORDINGLY TH E TOTAL AMOUNT OF TAX THAT SHOULD HAVE BEEN DEDUCTED UP TO DECEMBER 2008 WAS C ALCULATED AT RS.69,32,050/-. HOWEVER, THE ASSESSEE HAD ACTUALLY DEDUCTED A SUM OF RS.60,17,909/- BY DECEMBER, 2008 AND THUS THERE WAS A SHORTFALL OF RS.9,14,951/-. THE ASSESSING OFFICER TREATED THE ASSESSEE AS IN DEFAULT FOR THE SHORTFALL AMOUNT OF RS.9,14,951/- UNDER SECTION 201(1) OF THE ACT AND ALSO LEVIED INTEREST OF RS.96,020/- UNDER SECTION 2 01(1A) OF THE ACT. THE LEARNED CIT(A) SET ASIDE THE ORDER OF THE ASSESSING OFFICER. HENCE THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THERE IS NO DISPUTE WITH THE FACT THAT THE ASSESSEE HAS MADE GOOD THE SHORT FALL AMOUNT CITED ABOVE IN THE MONTHS SUBSEQU ENT TO DECEMBER 2008. NOW THE QUESTION THAT ARISES IS WHETHER THE ASSESSE E CAN BE DEEMED TO BE IN DEFAULT FOR THE SHORT FALL OCCURRED DURING THE C OURSE OF YEAR EVEN THOUGH THE SAID SHORT FALL WAS MADE GOOD BY THE END OF THE FINANCIAL YEAR. BY PLACING RELIANCE ON SEC. 192(3) OF THE ACT, THE LEA RNED AUTHORISED REPRESENTATIVE CONTENDED THAT THE SHORT FALL, IF AN Y, IN DEDUCTION OF THE TAX DURING THE COURSE OF THE YEAR CAN BE MADE GOOD BY T HE END OF THE RELEVANT FINANCIAL YEAR BY MAKING APPROPRIATE DEDUCTION OF A DDITIONAL AMOUNTS. THE LEARNED AUTHORISED REPRESENTATIVE ALSO PLACED RELIA NCE ON THE FOLLOWING DECISIONS. A. CIT VS. ENRON EXPAT SERVICES INC. (2011)(330 ITR 49 6 (UTTARKHAND) B. HYDERABAD METROPOLITAN WATER SUPPLY & SEWERAGE BOAR D VS. A.C.I.T (ITA NO.1483 TO 1485/HYD/08 ORDER DATED 9 TH JAN, 2009) ITA NO. 159/VIZAG/2011 OF APGENCO VIJAYAWADA PAGE 3 OF 5 5. THE SUB SECTION (1) AND SUB-SECTION 3 OF SEC . 192 OF THE ACT READ AS UNDER: (1) ANY PERSON RESPONSIBLE FOR PAYING ANY INCOME CHARGEABLE UNDER THE HEAD SALARIES SHALL, AT THE TIME OF PAYMENT, DEDUCT INCOME TAX ON THE AMOUNT PAYABLE AT THE AVERAGE RATE OF INCOME TAX COMPUTED ON THE BASI S OF THE RATES IN FORCE FOR THE FINANCIAL YEAR IN WHICH THE PAYMENT IS MADE, ON THE ESTIMATED INCOME OF THE ASSESSEE UNDER THIS HEAD FOR THAT FINANCIAL YEAR. (3) THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT REFERRED TO IN SUB-SECTION (1) OR SUB-SECTION (1A) OF SUB- SECTION (2) OR SUB SECTION (2A) OR SUB-SECTION (2B) MAY, AT THE TIME OF MAKING ANY DEDUCTION, INCREASE OR REDUC E THE AMOUNT TO BE DEDUCTED UNDER THIS SECTION FOR THE PU RPOSE OF ADJUSTING ANY EXCESS OR DEFICIENCY ARISING OUT O F ANY PREVIOUS DEDUCTION OR FAILURE TO DEDUCT DURING THE FINANCIAL YEAR. WE NOTICE THAT THE ASSESSING OFFICER HAS PLACED REL IANCE ON SUB SECTION (1) OF SEC. 192 WHICH PROVIDES FOR DEDUCTION OF TDS AMO UNT AT AVERAGE RATE OF TAX ON THE ESTIMATED INCOME OF THE ASSESSEE FROM TH E SALARIES, WHICH GIVES A MEANING THAT THE AMOUNT OF TAX THAT IS REQUIRED T O BE DEDUCTED FROM SALARIES SHOULD BE UNIFORM. HOWEVER, SUB SECTION ( 3) AUTHORISES FOR MAKING ADJUSTMENTS IN THE AMOUNT OF TDS, IN ORDER TO TAKE CARE OF EXCESS/SHORTFALL MADE IN DEDUCTION OF TDS IN THE EARLIER MONTHS. TH E COMBINED EFFECT OF BOTH SUB-SECTION (1) AND SUB-SECTION (3) OF SECTION 192 WAS INTERPRETED BY THE HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF E NRON EXPAT SERVICES INC.,(SUPRA) AND THE RELEVANT OBSERVATIONS OF THE HI GH COURT IN THIS REGARD ARE EXTRACTED BELOW: IT IS TRUE THAT SUB-SECTION (1) OF SECTION 192 OF THE ACT CONTEMPLATES DEDUCTION OF INCOME TAX AT THE TIME OF PAYMENT AND AT THE SAME TIME, SECTION 201(1A) DEALS WITH A SITUATION WHEN TAX IS NOT DEDUCTED, BUT SUB-SECTION (3) OF SE CTION 192 IS A PART OF SECTION 192 REQUIRED TO BE READ WITH S UB-SECTION (1) THEREOF, FOR NOTHING HAS BEEN EXPRESSED IN THE ACT TO TREAT SUB-SECTION (3) AS A SEPARATE PROVISION. THE OBJEC T AND PURPOSE OF SUB-SECTION (3) IS TO PERMIT THE PERSON OBLIGED TO DEDUCT TO MAKE ADJUSTMENTS. SUB-SECTION (3) DOES N OT STOP WHILE AUTHORIZING ADJUSTMENT IN CASE OF EXCESS OR D EFICIENT ITA NO. 159/VIZAG/2011 OF APGENCO VIJAYAWADA PAGE 4 OF 5 DEDUCTION, BUT ALSO AUTHORISES ADJUSTMENT IN CASE O F TOTAL FAILURE TO DEDUCT DURING THE FINANCIAL YEAR. SUB-S ECTION (3), THEREFORE, MAKES IT ABUNDANTLY CLEAR THAT IF THERE IS A FAILURE TO DEDUCT IN A FINANCIAL YEAR, THE SAME CAN BE DEDU CTED BY WAY OF ADJUSTMENT DURING THE FINANCIAL YEAR. IN THOSE CIRCUMSTANCES, THE OBLIGATION TO DEDUCT AT THE TIME OF PAYMENT, WHICH IS MANDATE OF SUB-SECTION (1) OF SECTION 192, STANDS EXTENDED UP TO THE END OF THE FINANCIAL YEAR BY VIRTUE OF THE PROVISIONS CONTAINE D IN SUB-SECTION (3) OF SECTION 192 OF THE ACT. THE RIGHT TO ADJUST, GRANTED BY SUB-SECTION (3), DOES NOT EXTEND BEYOND THE FINANCIAL YEAR. THE LEARNED COUNSEL FOR THE APPELLANTS SUBMITTED TH AT IN VIEW OF THE PRONOUNCEMENT AS ABOVE, THE PROVISIONS OF SE CTION 201(1A) OF THE ACT WOULD BECOME OTIOSE. WE DO NOT THINK SO. SECTION 201(1A) APPLIES ONLY WHEN DURING THE FINANC IAL YEAR WHOLE OR ANY PART OF TAX DEDUCTIBLE HAS NOT BEEN DE DUCTED. WE ACCORDINGLY, CONCLUDE THE MATTER AND ANSWER THE QUESTION, AS ABOVE, IN FAVOUR OF THE ASSESSEE, WHIL E DISMISSING THE APPEAL. THE HYDERABAD BENCH OF THE ITAT IN THE CASE OF M/S HYDERABAD METROPOLITAN WATER SUPPLY & SEWERAGE BOARD, (SUPRA) HAS ALSO EXPRESSED SIMILAR VIEWS. WE NOTICE THAT THE LEARNED CIT(A) H AS, INTER ALIA, FOLLOWED BOTH THE DECISIONS CITED ABOVE. 6. IN THE INSTANT CASE ALSO, THOUGH THERE WAS A SHORT FALL IN DEDUCTION OF TDS FROM SALARIES DURING THE COURSE OF THE YEAR, I. E. UP TO DECEMBER 2008, IT WAS MADE GOOD BY THE END OF THE FINANCIAL YEAR. AS ALREADY NOTICED, THE HON'BLE UTTARAKAHAND HIGH COURT IN THE CASE OF ENRO N EXPAT SERVICES INC. HAS HELD THAT THE OBLIGATION TO DEDUCT TAX AT THE T IME OF PAYMENT, WHICH IS THE MANDATE OF SUB-SECTION (1) OF SECTION 192, STAN DS EXTENDED UP TO THE END OF THE FINANCIAL YEAR BY VIRTUE OF THE PROVISIO NS CONTAINED IN SUB-SECTION (3) OF SECTION 192 OF THE ACT. HENCE, WE ARE IN AG REEMENT WITH THE DECISION OF LEARNED CIT(A) IN HOLDING THAT THE ASSESSEE HERE IN HAS DISCHARGED ITS ENTIRE LIABILITY UNDER SECTION 192 OF THE ACT BEFOR E THE END OF THE FINANCIAL YEAR. CONSEQUENTLY, WE UPHOLD THE ORDER OF LEARNED CIT(A) IN SETTING ASIDE ITA NO. 159/VIZAG/2011 OF APGENCO VIJAYAWADA PAGE 5 OF 5 THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SEC TION 201(1) AND 201(1A) OF THE ACT. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON 3/6/2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 3 RD JUNE, 2011 COPY TO 1 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1 ) (TDS), D.NO.40- 6-15 MOGALRAJPURAM, 2 ND FLOOR, SVR PLAZA, SIDDARTHA PUBLIC SCHOOL ROAD, VIJAYAWADA 520 002 2 M/S APGENCO, RAYALASEEMA THERMAL POWER PROJECT, V V REDDY NAGAR, KADAPA DISTRICT. 3 4. THE CIT VIJAYAWADA THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM