M/s. Surya Land Developers, Bhuj V. The Income Tax Officer, GANDHIDHAM

ITA 160/RJT/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8578 (ITAT-RAJKOT)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 06-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Section: 201(1); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: RAJKOT BENCH, RAJKOT (BEFOR E SHRI ANIL CHATURVEDI , A.M. & SHRI KUL BHARAT, J.M. ) I. T. A. NO. 160& 161 / RJT / 20 1 4 (A SSESSMENT YEAR: 20 0 6 - 07 & 2007 - 08) M/S. SURYA LAND DEVELOPERS. 114, 1 ST FLOOR, DHAVAL COMERCIAL CENTRE, OPP. JILLA PANCHAYAT BHUJ - KACHCHH. V/S THE ITO TDS - 4, G ANDHIDHAM (APPELLANT) (RESPONDENT) PAN: ABEFS 1451N APPELLANT BY : SHRI VIMAL DESAI, C.A. RESPONDENT BY : SHRI AVINASH KUMAR, D.R. ( )/ ORDER DATE OF HEARING : 3 - 12 - 2014 DATE OF PR ONOUNCEMENT : 05 - 12 - 2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE 2 APPEALS FILED BY THE ASSESSEE ARE AGAINST THE ORDER OF CIT(A) - II, RAJKOT DATED 22.01.2014 FOR A.YS. 2006 - 07 & 2007 - 08 RESPECTIVELY . 2. BEFORE US, AT THE OUTSET BOTH THE PARTIES SUBMI TTED THAT THE FACTS AND CIRCUMSTANCES OF BOTH THE CASES ARE SIMILA R EXCEPT FOR THE AMOUNTS AND THE ASSESSMENT YEARS AND THE SUBMISSIONS ARE THEREFORE COMMON FOR BOTH THE APPEALS AND THEREFORE BOTH THE APPEALS CAN BE HEARD TOGETHER. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS TOGETHER FOR THE SAKE OF CONVENIENCE AND THUS PROCEED WI TH THE FACTS IN ITA/RJT/2014 FOR A.Y. 2006 - 07 . ITA NOS. 160 & 161/RJT/2014 . A.Y. 2006 - 07 - 2007 - 08 2 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF LAND DEVELOPING. A SURVEY WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 20.03.2007 FOR TDS VERIFICATION AND IT WAS NOTICED THAT ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON THE PRICE/DRAW EXPENSES UNDER THE PROVISIONS OF SECTION 194B OF THE ACT. A.O NOTICED THAT ASSESSEE HAD FLOATED SCHEM E WHEREBY MEMBERS WERE GATHERED AND EACH MEMBER WAS REQUIRED TO PAY FIXED NUMBER OF MONTHLY INSTALLMENT. AT THE END OF FIXED PERIOD OF INSTALLMENTS, E ACH MEMBER WOULD GET PLOT OF LAND. AT THE END OF EACH MONTH ASSESSEE CONDUCTED A DRAW OF LOTS FOR THE MEMBERS WHO HAD PAID MONTHLY INSTALLMENTS AND BY THE DRAW OF LOT S WINNERS WERE SELECTED AND PRIZ ES WERE DISTRIBUTED. A.O WAS OF THE VIEW THAT THE PRI Z E DIST RIBUTED FALL UNDER THE PURVIEW OF SECTION 194B OF THE ACT AS THE TERM LOTTERY WAS AMEN DED TO INCLUDE WINNING FROM PRIZ ES AWARDED TO ANY PERSON BY DRAW OF LOTS OR BY CHANCE. A.O WAS OF THE VIEW THAT THE TOTAL EXPENSES DEBIT ED ON PRIZ ES WAS RS. 34,84,000/ - AND ASSESSEE SHOULD HAVE DEDUCT ED TAX UND ER SECTION 194B. SINCE ASSE SSEE HAD NOT DEDUCTED THE TAX A.O CONSIDERED ASSESSEE TO BE IN DEFAULT WITHIN THE PROVISIONS OF SECTION 201(1) R.W.S. 194 B OF THE ACT. HE ACCORDINGLY WORKED OUT THE TOTAL DEFAULT COMPRISING OF TDS OF RS. 10,66,104/ - AND INTEREST U/S 201(1A) AT RS. 7,74,135/ - BOTH AGGREGATE TO RS. 18,40,239/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE COPY, THE REMAND REPORT AND ASSESSEE S REPLY TO THE REMAND REPO RT , UPHELD THE ORDER OF A.O BY HOLDING AS UNDER: - 9.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ORDER PASSED BY THE A.O. AS WELL AS THE REMAND REPORT SUBMITTED BY THE A.O. IT IS IMPORTANT TO NOTE THAT THE FINANCE ACT, 2001 HAS AD DED AN EXPLANATION BELOW SECTION 2(24)(IX) W.E.F. 1/04/2002. THIS EXPLANATION DEFINES LOTTERY AS UNDER: - LOTTERY INCLUDES WINNINGS FROM PRIZES AWARDED TO ANY PERSON BY DRAW OF LOTS OR BY ANY CHANCE OR IN ANY OTHER MANNER WHATSOEVER, UNDER ANY OTHER SCHEME OR ARRANGEMENT BY WHATEVER NAME CALLED. THIS DEFINITION OF LOTTERY IS VERY CLEAR AND UNAMBIGUOUS. IT IS CONTENDED BY THE APPELLANT THAT THIS HOWEVER DOES NOT ALTER THE BASIS INGREDIENTS OF LOTTERY AS DESCRIBED BY THE HON BLE SUPREME COURT IN THE CASE OF H. ANRAJ (SUPRA). HOWEVER, IT IS IMPORTANT TO NOTE THAT THIS DEFINITION OF LOTTERY HAS BEEN BROUGHT IN FROM 1/4/2002 AND WAS NOT AVAILABLE BEFORE THE HON BLE SUPREME COURT WHILE GIVING THE DECISION IN CASE OF H. ANRAJ (SUPRA). IN THE CASE OF CIT VS. JHAVE RI INDUSTRIES (2008) 300 ITR 300, THE; HON BLE GUJARAT HIGH COURT HAS HELD THAT PRIOR TO INSERTION OF EXPLANATION TO SECTION 2(24(IX) W.E.F. 1/4/2002 AMOUNT ITA NOS. 160 & 161/RJT/2014 . A.Y. 2006 - 07 - 2007 - 08 3 DISTRIBUTED AS PRIZE BY DRAW OF LOTS DID NOT FORM PART OF THE TERM LOTTERY. THIS INDIRECTLY IMP LIES THAT AMOUNT DISTRIBUTED AS PRIZE BY DRAW OF LOTS IS CLASSIFIED AS LOTTERY W.E.F. 1/4/2002. IN MY OPINION, THE PRIZES DISTRIBUTED BY THE APPELLANT DEFINITELY FALL UNDER THE CATEGORY OF LOTTERY AS EXPLAINED IN SECTION 2(24)(IX). THE APPELLANT HAS ALSO CONTENDED THAT THERE WAS NO CONSIDERATION PAID BY THE MEMBERS AND HENCE THIS DOES NOT QUALIFY TO BE A LOTTERY. I DO NOT AGREE WITH THE APPELLANT. EACH OF THE MEMBERS WAS PAYING A FIXED MONTHLY INSTALLMENT AND THE DRAW WAS CONDUCTED FOR THE MEMBERS WHO HAVE PAID THE MONTHLY INSTALLMENTS. IN OTHER WORDS, IF ANY MEMBER HAD DEFAULTED ON PAYING OF THE MONTHLY INSTALLMENTS, HIS NAME WOULD NOT BE INCLUDED IN THE DRAW. THUS, THE MONTHLY INSTALLMENT ITSELF CAN BE EQUATED TO CONSIDERATION. ALL THE THREE INGREDIENTS A S LAID OUT BY THE HON BLE SUPREME COURT IN THE CASE OF H. ANRAJ (SUPRA) ALSO STANDS SATISFIED AND THUS THE APPELLANT S SCHEME IS PROPERLY CLASSIFIED BY THE A.O AS LOTTERY. 5. CIT(A) THEREAFTER RELYING ON THE DECISION OF CHANDIGARH TRIBUNAL IN THE CASE OF HI ND MOTORS PVT. LTD. 2006 9 SOT 556 UPHELD THE ACTION OF A.O. IN RESPONSE TO THE ASSESSEE S ALTERNATIVE PLEA THAT BEFORE INVOKING OF SECTION 201(1) AND BEFORE HOLDING THAT ASSESSEE TO BE IN DEFAULT. A.O SHOULD HAVE ESTABLISHED THAT THE PAYEES WERE LIABLE T O PAY TAX AND HAD NOT PAID TAX ON THE IMPUGNED AMOUNT. CIT(A) DECIDED THE ISSUE BY HOLDING AS UNDER: - 9.3 THE APPELLANT HAS RAISED AS ALTERNATIVE PLEA THAT THE A.O. SHOULD HAVE VERIFIED WHETHER THE PAYEES HAVE PAID TAX OR NOT AND ONLY THEN THE DEFAULT CAN BE QUANTIFIED BY THE A.O. THE APPELLANT HAS RELIED ON THE DEC ISION OF THE HON BLE KOLKATA ITAT IN THE CASE OF RAMKRISHNA VEDANTA MATT IN ITA NO. 477, 478 & 479/KOL/2012. I HAVE CONSIDERED THE APPELLANT S CONTENTION. IN MY OPINION, THE PRIMARY ONUS LIES ON THE APPELLANT TO SHOW BEFORE THE A.O THAT THE PAYEES HAD PAID TAX AND THEREFORE TAX WAS NOT DEDUCTED AS REQUIRED. SECONDLY, THE DEDUCTION OF TAX IS DURING THE SAME FINANCIAL YEAR WHILE THE RETURN OF INCOME IS FILED SUBSEQUENTLY. THE A.O. CANNOT BE EXPECTED TO KNOW WHETHER THE PAYEE IS GOING TO FILE HIS RETURN OF INCOME AND PAY TAX PRIOR TO FILING OF RETURN. THIRDLY, DURING THE REMAND PROCEEDINGS, THE A.O, HAD SPECIFICALLY ISSUED LETTERS TO ALL THE PAYEES TO ASCERTAIN THE DETAILS OF PAYMENT OF TAX. THE SUMMA RY OF THE ACTION TAKEN BY THE A.O IS AS UNDER: - THERE ARE 181 CASES WHERE NOTICES COULD NOT BE SERVED. THERE ARE 139 CASES WHERE NOTICES HAVE BEEN SERVED BUT THE REPLIES HAVE NOT BEEN RECEIVED. THERE ARE 11 CASES WHERE NOTICES HAVE BEEN SERVED, REPLIES H AVE BEEN RECEIVED BUT THE PARTIES HAVE NOT OFFERED THE IMPUGNED AMOUNT FOR TAXATION. THERE ARE 2 CASES WHERE THE PARTIES HAVE PAID THE TAX. IN ITS REJOINDER, THE APPELLANT HAS CONTENDED THAT THESE ARE VERY OLD MATTERS AND HENCE SHOULD NOT BE RELIED UPON. IN MY OPINION, THE A.O HAS PROPERLY TRIED TO ASCERTAIN THE PAYMENT OF TAX BY THE PAYEES AND HAS RECEIVED THE REPLIES IN ONLY TWO CASES OUT OF 333 CASES. THE APPELLANT S CONTENTION THEREFORE DOES NOT HOLD FORT AND IS THEREBY DISMISSED. THE DEFAULT IN RESPE CT OF TWO CASES WHERE THE PAYEES HAVE PAID TAX IS HOWEVER DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED FOR BOTH THE ASSESSMENT YEARS ,I.E. 2006 - 07 & 2007 - 0 8 . 6. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A) ASSESSEE IS NOW IN APPE AL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS: - . 1. THE ORDER U/S. 201(1) & 201(1A) R.W.S. 194B IS BAD IN LAW. 2. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THE APPELLANT AS IN DEFAULT U/S. 201(1) R.W.S. 194B IN RESPECT OF ALL EGED NON DEDUCTION IN CASE OF PAYMENT OF PRIZES DISTRIBUTED AS INCENTIVES AND THEREBY RAISING LIABILITY OF RS. 10,66,104/ - . THE LD. CIT(A) ERRED IN CONFIRMING THE SAME EXCEPT IN 2 CASES. ITA NOS. 160 & 161/RJT/2014 . A.Y. 2006 - 07 - 2007 - 08 4 3. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN HO LDING THE PRIZES DISTRIBUTED BY THE APPELLANT AS LOTTERY WITHIN THE MEANING OF SECTION 2(24)(IX) OF THE ACT. THE LD. CIT(A) ERRED IN UPHOLDING THE SAME. 4. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN NOT ADJUDICATING THE CORE STAND OF T HE APPELLANT THAT BY VIRTUE OF KARNATAKA HIGH COURT DECISION IN CASE OF HINDUSTAN LEVER LTD. (39 TAXMANN.COM 152) THE APPELLANT IS NOT OBLIGED TO DEDUCT TDS U/S. 194B IN RESPECT OF PRIZED PAID IN KIND. 5. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN NOT ADJUDICATING THE CONTENTION OF THE APPELLANT THAT WHERE THE LIABILITY RAISED U/S. 201(1) IS INCAPABLE OF ADJUSTMENT AGAINST THE PAYEE S LIABILITY TO BE DETERMINED U/S. 148, THE ORDER PASSED U/S. 201(1) R.W.S. 201(1A) CANNOT SUSTAIN IN SPITE OF THE FACT THAT THE SAID CONTENTION WAS REMANDED TO THE A.O AND REPORT OF THE A.O WERE ALSO RECEIVED ON THE SAME. 6. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN CHARGING INTEREST U/S. 201(1A) OF RS. 7,74,135/ - . THE LD. CIT(A) ERRED IN CONFIRMING THE SAME EXCEPT IN 2 CASES. 7. BEFORE US, THE LD. A.R. SUBMITTED THAT THOUGH ASSESSEE HAS RAISED VARIOUS GROUNDS THE ONLY ISSUE IS WITH RESPECT TO HOLDING THE ASSESSEE TO BE IN DEFAULT U/S 201(1) R.W.S. 194B. 8. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) . HE FURTHER SUBMITTED THAT THE PRIZ ES GIVEN BY THE ASSESSEE WERE NOT IN THE NATURE OF LOTTERY AS DEFINED UNDER THE INCOME TAX ACT AND WAS JUST INCENTIVE TO ENCOURAGE THE MEMBERS TO PAY THE INSTALLMENTS IN TIME. HE F URTHER SUBMITTED THAT ASSESSEE HAD NOT DISTRIBUTED CASH AS PRIZ ES BUT THE PRIZE WAS IN KIND WHICH RAISED FROM TABLE FAN TO MOTORCAR. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 194B ARE NOT APPLICABLE TO THE ASSESSEE. HE ALSO PLACED RELIANCE ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN LEVER LTD. (2013) 39 TAXMAN.COM 152 AND ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISIONS. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND CIT(A) AND SUBMITTED THAT TH ERE IS NO ILLEGALITY IN THE ORDER PASSED BY THE A.O. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AND THE JUDGMENT RELIED BY LD. A.R. WE FIND THAT THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. HINDUSTAN LEVER (SUP RA) UNDER THE IDENTICAL FACTS HAS DECIDED THE ISSUE BY HOLDING AS UNDER: - 11. WE WOULD LIKE TO HAVE A CLOSE LOOK AT SECTION 194B AND SECTION 201 OF THE ACT. SECTION 201 HAS UNDERGONE CHANGES FROM TIME TO TIME AND, FOR OUR PURPOSE THE PROVISIONS CONTAINED I NTHIS SECTION AS IT STOOD ON 1.04.2002 IS RELEVANT. BEFORE WE DEAL WITH SECTION 201, IT WOULD BE ADVANTAGEOUS TO REPRODUCE SECTION 194B AS WAS IN FORCE DURING THE ASSESSMENT YEARS 2001 - 02 AND 2002 - 03, WHICH READS THUS: ITA NOS. 160 & 161/RJT/2014 . A.Y. 2006 - 07 - 2007 - 08 5 WINNINGS FROM LOTTERY OR CROSSWORD P UZZLE - 194B. THE PERSON RESPONSIBLE FOR PAYING TO ANY PERSON ANY INCOME BY WAY OF WINNINGS FROM ANY LOTTERY OR CROSSWORD PUZZLE OR CARD GAME AND OTHER GAME OF ANY SORT IN AN AMOUNT EXCEEDING TEN THOUSAND RUPEES SHALL AT THE TIME OF PAYMENT THEREOF DEDUCT I NCOME - TAX THEREON AT THE RATES IN FORCE: PROVIDED THAT IN A CASE WHERE THE WINNINGS ARE WHOLLY IN KIND OR PARTLY IN CASH AND PARTLY IN KIND BUT THE PART IN CASH IS NOT SUFFICIENT TO MEET THE LIABILITY OF DEDUCTION OF TAX IN RESPECT OF WHOLE OF THE WINNINGS , THE PERSON RESPONSIBLE FOR PAYING SHALL, BEFORE RELEASING THE WINNINGS, ENSURE THAT TAX HAS BEEN PAID IN RESPECT OF THE WINNINGS . 11.1 F ROM BARE PE RU S AL OF T H IS SECTIO N , I T I S CL EA R T HA T TH E P E R SON RESPONS IBL E FOR P A YING T O A N Y P ERSO N AN Y IN C OM E B Y WA Y OF WIN NI NGS F R O M A N Y L OTTE R Y I N A N A M OU NT EXCEE D ING TE N TH O U SA ND RUP EES S H A LL , A T T H E TIM E OF PA Y M E NT THEREOF I S O BLI GE D TO DE DU CT IN CO M E - T AX TH E R EO N AT T H E R A T ES IN F O RC E. P ROV I SO T O THI S SECTION C L AR I FI E S T H A T IN CASE W H E R E T H E W INNIN GS A R E W H O LL Y IN KI ND O R P A RTL Y IN CAS H O R P A RTL Y IN KIND BUT T H E P AR T IN CAS H I S N O T S UFF IC I E NT T O M EE T TH E LI A BILIT Y OF D E DUCTI O N OF T A X IN R ES P E CT O F W HOL E OF TH E W IN NINGS, T H E PE R SO N R ES P O N SI BL E FO R P AY IN G S H A LL , B E F O R E R E LEA S IN G TH E W I N NIN GS, E N S UR E TH A T T AX H AS B EE N PA I D IN R ESPECT OF T H E W INNIN GS. F R OM PL A IN R E ADIN G OF TH E PRO V I SO, IT I S C L E AR TH A T IT D OES NOT PR OV ID E FO R DED U CT I O N OF TAX A T SO UR CE W H ERE TH E W IN N ING S AR E W H O LL Y I N KIND AND IT S IMPL Y PUT S A R ES P O N S IBILIT Y T O EN S UR E PA Y M E NT OF T A X, W H E R E W INN I N GS I S W H O L L Y IN K IND . IN TH E P R ESE NT CASE, A DMITT E DL Y, TH E W I N NIN GS WA S WHO L L Y IN K I ND . 12. WE ARE CO N CE RN E D W I T H SECT I O N 201 AS IT S T OOD B EFO R E IT S A M E N D M E NT B Y F IN A N CE AC T , 2 0 08, W HI C H R EADS T HU S: ' C ON S EQUENCES OF F A I LURE T O DEDUCT OR PA Y. - 20 1 ( 1 ) IF A N Y S U C H P E R SO N [REFERRED TO IN SEC TI O N 200 ] A ND IN TH E CA S ES R EFE RR E D T O IN SEC TI O N 1 9 4 , TH E PRINCIP A L OF F I C E R A ND TH E CO MP A N Y O F WHI C H H E IS TH E PR I N C IP A L OFFICER DOE S NO T D E DUCT [TH E W HOL E OR A N Y PART O F TH E TA X ] O R AFT E R DEDUCTING FA IL S T O PAY TH E T AX AS REQUI RE D B Y OR U ND E R THI S AC T , H E O R IT S HALL , W ITHOUT PREJUDI CE T O A N Y O TH E R CO N S E QU E N CES W HICH H E O R IT M AY IN C UR , B E D EE M E D TO B E A N ASS E SS E E IN DE FA ULT IN R E SP EC T OF TH E T AX: P R OV I DED TH A T N O P E N A LT Y S H A LL BE C H A R GE D UND E R SEC TI O N 2 2 1 F R O M S UCH P E R S ON , PRI NCIP A L O FF ICE R OR CO MP A N Y UNL ESS TH E A SSESS IN G OFFICE R I S SA TI SFIE D T H A T S U C H P E R SO N O R PRINCIPAL OFFIC E R OR CO MPAN Y, A S T H E CASE M AY BE H AS W ITH O U T GOOD A ND S U F F ICIE NT R EASO N S FA IL E D T O DEDU C T A ND PA Y THE T AX. ' 12.1 A P L AI N REA DIN G OF S EC TI O N 20 1 S H OWS TH A T IF TH E P E R SO N R E F E RR E D TO THER E IN D OES N O T D E DU C T T H E W H O L E OR A N Y PART OF TH E TA X OR A FT E R D E DU C TIN G . FA IL S T O P AY TH E T AX AS R E QUIR E D BY OR UND E R TH E AC T . H E S H A LL W ITH O UT P R EJU DI CE T O A N Y O TH ER CO N SE QU E N CES W H IC H H E M AY IN C UR , B E D E EMED T O B E A N A SSESSEE IN D EFAULT IN RESPECT OF T H E TAX . T H E PROVI S O TO THI S SECTIO N S TATES TH A T N O P E N A LT Y S H A L L B E C H A R G ED UN DER S EC TI O N 221 O F THE AC T , U NL E S S TH E AO I S S ATI S FI E D THAT S U C H PE R SO N H AS WI TH O UT GOO D OR S U FFICIENT REASON S FA I LED TO DE DU C T A ND P AY T H E T AX . 13. W E H AVE ALREAD Y PERU S ED SECTION 1 9 4B , IN P A RTI C U L A R , TH E PR OV I SO TH E R E T O. I T IS CLEAR TH A T T H ERE CO ULD B E W INNIN GS W HO L LY IN KIND AND IN WHICH C ASE , THE DUT Y CAS T S O N T H E P E R SO N RESPO N S I BL E FOR PAY IN G IS T O ENSURE TH A T TA X H A S BEEN PAID IN R ES P E CT OF T H E W I NN I N GS B E F O R E RE L EAS IN G IT T O T H E W IN NE R . T HE PROVISO M A K ES I T FURTHER CLEAR THAT NO DUT Y OF DEDU C TI O N O F TA X IN R ES PE C T O F TH E W INNI NGS I S CAS T ON TH E PERSO N W H O I S RES P O N S IBLE FOR P AY IN G, W HER E TH E W INNIN G S IS W H O LL Y IN KIND . U ND O UBT E DL Y I N TH A T EVE N T U A L ITY S U C H P E R SO N S H O ULD E NSURE TH A T TH E T AX H AS B EE N PAID IN RES P EC T OF T HE W INN I N GS BEFO R E RE L E AS ING I T TO TH E W INN E R . T H E COMBINED R EA DIN G OF SE CTI O N 1 9 4B A ND SEC TI O N 20 1 WO ULD S H OW TH AT IF A N Y S U C H PERSO N FA IL S T O 'D E DU C T' THE WHOL E O R A N Y P A RT OF TH E T AX O R A FT E R D E DUCTIN G , F AI LS T O P AY TH E TAX O R REQUI R E D B Y OR UND ER T HI S ACT , W ITHOUT PRE JUD ICE T O AN Y OT H ER CONSE QU ENCES , WHIC H HE MAY INCUR , B E D E EM E D T O B E AN A S SES S EE IN D E F A ULT IN RE S P ECT OF T H E TAX. IN O TH E R WO RD S , TH E PR OV I S I O N S CO N TAI N ED I N TH E S E S ECT I O N S DO NO T CAS T A N Y DUT Y / R ES P O N S IBIL I T Y T O D E DU C T T H E T AX A T SO UR CE W H ERE TH E W INNIN GS I S W H O L LY I N KIN D. IF TH E WI NN I N G S I S W H O LL Y IN KIND , AS A M AT T E R OF FAC T , T H E R E CA NN O T B E A N Y D E DU C TI ON OF TA X A T S O UR CE . 14. THE WO RD / T E RM D E DU C TI O N , E M PL OYE D IN T HI S PRO V I S I O N S , P OS TUL A T ES A RE DU CTIO N OR S UBT R A C TI O N OF AN A M O UNT FRO M A G R OSS S UM T O B E P A ID A ND P AY M E NT OF T H E N E T A M O UNT TH E R EA F TE R. W H E R E T H E W I N NIN G S I S W H O LL Y IN KIND S UBTR AC TI O N / R E DU C TI ON OF A N Y S UM TH E R E FRO M D OES NO T A R ISE. T H E LEGI S L A TUR E , T HER E FORE , H A S CAS T DU T Y / R ESPO N S IBILIT Y O N S UCH P E R SO N T O E N S UR E TH A T TH E T AX I S P A ID B EFO R E T H E W IN NING I S RE L EASED. T HU S , I T I S M A ND A T O R Y FO R TH E P E R SO N W H O IS RES P O N S IBL E FOR PA Y I NG A N Y I NCOME B Y WA Y OF W INN I N GS W H O LL Y IN K I ND , T O E N S UR E TH A T T AX H AS BEE N PAI D IN R E S PEC T OF T HE W INNIN GS , BEFO R E IT IS RE L EA S E D TO TH E WI NN ER . 15. I N S H O RT , T H E CO NJOINT R EA DIN G OF SECT I O N 2 01 A ND SEC TI O N 1 9 4B WO ULD S H OW T H A T THE PER S ON RESPO N S I B L E TO D E DU C T T AX A T SO URC E , I F H E E ITH E R FA IL S T O D E DU C T OR A FT ER D E DU C T I NG , FAI L S TO PAY. I S DEE M ED TO BE A N A S SESSEE I N D E F A ULT , IN R ES P EC T OF TH E T AX. HO WEVE R , W H ERE TH E PAY M E N T OF T H E WI NNI N GS I S W H OL L Y IN K IND A ND N OT I N CAS H A T A LL , THE QU ES TI O N OF D E DUCTI O N D OES N O T AR I SE A ND I N TH AT EVE NTU A LIT Y, T H E O N L Y RESPO N S I BI LIT Y, AS CAS T S UNDER SE CTI O N 1 9 4B , I S T O EN S UR E TH A T T AX I S P A ID B Y TH E WINN ER OF P R I ZE BEFO R E T HE PR I Z E / WINNINGS I S RE L EASE D IN H I S ITA NOS. 160 & 161/RJT/2014 . A.Y. 2006 - 07 - 2007 - 08 6 FAVO U R . 16 H AV I NG SO O B SE R V ED , IN OUR OPINION , INITI A TION OF THE PR OCE EDIN GS UND E R SEC TI O N 20 1 AGA IN S T TH E ASSESSEE , WAS WI TH O UT JURI S DICTION . WE OB SE R V E , THAT TH E A UTHORITI ES UNDER THE AC T IN S U C H S ITU A TI O N WO ULD NOT R EN D E R RE M E DIL ESS AGA IN S T S U C H PER SO N W H O FAIL S T O E N S UR E THAT TA X I S P A ID B E F O R E TH E W INN I N GS I S RELEASE D IN FAVO UR O F IT S WI NN E R . IN THE A CT , THERE AR E T WO PR OV I SIO N S , N A M E LY SEC TI ONS 27 1 C A ND 276B . SE CTI O N 27 1 C E MP O WER S THE JOINT C OMMI SS IONER TO LE VY AN Y P E NAL TY W HER E A N A SSESSEE F A I LS T O D E DU C T TH E W H O L E O R A N Y PA RT O F THE TA X AS REQUIR E D B Y OR UND E R THE PR OV ISI O NS O F C H A PTER XV II - B OR FA IL S TO D ISC H A R GE TH E O BLI GA TION UNDER THE S EC O ND PROVI S O TO S ECTION 19 4 B . S IMILARL Y , SE CTI O N 276 B M A K ES IT AN OFFE N CE AGAI N S T TH E PER S ON WHO FAILS TO PA Y TO THE CREDIT O F THE CE NTR A L G OVERNMENT TH E T AX DEDU C T E D A T S O UR CE AS RE QUIR E D B Y O R UNDER THE PRO V I S ION S OF CHAPT E R XVII - B OR THE TA X P AY ABL E AS RE QUIR E D B Y O R UND E R TH E SECO ND PROVI S O TO SECTION 194B . SECTION 2 7 1C AND SECTION 270B M A KE REFER E NC E T O TH E S ECO ND PROV I SO T O SEC TION 194B , I .E ., THE PROVI S O A S IT S T A ND S T O D AY . TH E 1 ST PR OV IS O W AS DEL ETE D B Y TH E FI N A N CE AC T , 1 999 W I TH EF FE C T FR O M 01. 04.2 000 . IT I S AGA IN S T THI S B AC KDROP. WE H AVE N O H ES IT A TI O N TO H O LD TH A T TH E P ROCEE DIN GS A G A IN S T THE P E R SO N UND E R SEC TION 2 01 , S U C H AS THE ASSESSEE IN TH E PRE S EN T CA S E , W H O F A IL S TO E N S UR E P AY MENT OF T AX , AS C O NTEMPLATED B Y PR O VI S O T O SE C TION 194 B , B EF OR E R E L EAS IN G TH E W INNIN GS , I S N OT M A INTAINABLE OR THE PROCEEDINGS AGAINST S UCH PER SO N I S W ITHOUT JURISDICTION , 10. BEFORE US, REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECISION IN ITS SUPPORT NOR COULD BRING ANY DISTINGUISHABLE FEATURE OF T HE DECISION AS RELIED BY THE LD. A.R. IN VIEW OF THESE FACTS AND RESPECTFULLY FOLLOWING THE DECISION OF HON BLE KARNATAKA HIGH COURT, W E ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS NOT RE QUIRED TO DEDUCT TDS ON THE PRIZ E DISTRIBUTED IN KIND. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ITA NO. 161/RJT/2014 FOR A.Y. 2007 - 08 12. THE GROUNDS RAISED BY ASSESSEE READS AS UNDER: - 1. THE ORDER U/S. 201(1) & 201(1A) R.W.S. 194B IS BAD IN LAW. 2. THE LD. ASSESSING OFFIC ER HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THE APPELLANT AS IN DEFAULT U/S. 201(1) R.W.S. 194B IN RESPECT OF ALLEGED NON DEDUCTION IN CASE OF PAYMENT OF PRIZES DISTRIBUTED AS INCENTIVES AND THEREBY RAISING LIABILITY OF RS. 1 4,9 6 ,03 4/ - . THE LD. CIT( A) ERRED IN CONFIRMING THE SAME EXCEPT IN 2 CASES. 3. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THE PRIZES DISTRIBUTED BY THE APPELLANT AS LOTTERY WITHIN THE MEANING OF SECTION 2(24)(IX) OF THE ACT. THE LD. CIT(A) ERRED IN UPH OLDING THE SAME. 4. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN NOT ADJUDICATING THE CORE STAND OF THE APPELLANT THAT BY VIRTUE OF KARNATAKA HIGH COURT DECISION IN CASE OF HINDUSTAN LEVER LTD. (39 TAXMANN.COM 152) THE APPELLANT IS NOT O BLIGED TO DEDUCT TDS U/S. 194B IN RESPECT OF PRIZED PAID IN KIND. 5. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN NOT ADJUDICATING THE CONTENTION OF THE APPELLANT THAT WHERE THE LIABILITY RAISED U/S. 201(1) IS INCAPABLE OF ADJUSTMENT AGAI NST THE PAYEE S LIABILITY TO BE DETERMINED U/S. 148, THE ORDER PASSED U/S. 201(1) R.W.S. 201(1A) CANNOT SUSTAIN IN SPITE OF THE FACT THAT THE SAID CONTENTION WAS REMANDED TO THE A.O AND REPORT OF THE A.O WERE ALSO RECEIVED ON THE SAME. ITA NOS. 160 & 161/RJT/2014 . A.Y. 2006 - 07 - 2007 - 08 7 6. THE LD. ASSESSING O FFICER HAS ERRED IN LAW AS WELL AS ON FACTS IN CHARGIN G INTEREST U/S. 201(1A) OF RS. 8,61,880 / - . THE LD. CIT(A) ERRED IN CONFIRMING THE SAME EXCEPT IN 2 CASES. 13. BEFORE US, SINCE BOTH THE PARTIES HAVE SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE PRESE NT CASE ARE IDENTICAL TO THAT OF A.Y. 2006 - 0 7 IN ITA NO. 160/RJT/2014 , WE THEREFORE FOR THE SIMILAR REASONS STATED HEREINABOVE WHILE DECIDING THE APPEAL OF THE ASSESSEE FOR A.Y. 200 6 - 07 AND FOR SIMILAR REASONS ALSO ALLOW THE GROUND OF ASSESSEE RAISED IN P RESENT APPEAL . THUS THE APPEAL OF ASSESSEE IS ALLOWED. 14. IN THE RESULT BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 05 - 12 - 201 4 . SD/ - SD/ - (KUL BHARAT ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT . TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT