Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 2491 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 6 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-03-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
29-02-2016
Assessment Year
2009-2010
Appeal Filed On
10-09-2013
Judgement Text
] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.1730/PN/2013 ASSESSMENT YEAR : 2009-10 M/S SILVEX REALTY PVT. LTD., SILVEX HOUSE, NANA MASTER NAGAR, OPP. ROYAL GARDEN, KARJAT, KARJAT 410 201. PAN : AAKCS3724Q . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, TDS, CIRCLE, THANE. . RESPONDENT / APPELLANT BY : SHRI PRAMOD SHINGTE / RESPONDENT BY : SMT. SHAILAJA RAI / DATE OF HEARING : 29.02.2016 / DATE OF PRONOUNCEMENT: 16.03.2016 % / ORDER PER BENCH: THE CAPTIONED APPEAL ARISES OUT OF THE ORDER OF THE ASSESSING OFFICER (TDS) UNDER S. 154 DATED 10.01.2012 REJECTING PETIT ION OF THE ASSESSEE SEEKING RECTIFICATION OF ORDER PASSED UNDER SECTION 201(1) & 201(1A) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30.03.2011 RELEVANT TO ASSESSMENT YEAR 2009-10 AND WHICH REJECTION IS SUSTAINED BY TH E CIT(A) VIDE ITS ORDER DATED 25.06.2013. 2. IN THE PRESENT APPEAL, THE ASSESSEE HAS ASSAILED THE ORDER OF THE ASSESSING OFFICER (TDS) DISMISSING THE PETITION UND ER S. 154 IN CONNECTION WITH THE ORDER PASSED UNDER SECTION 201(1) & 201(1A ) OF THE ACT AND IN TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT IN RES PECT OF SALARY REMAINING UNPAID TO ITS EMPLOYEES TILL THE END OF THE RELEVAN T ASSESSMENT YEAR. 2 ITA NO.1730/PN/2013 3. THE RELEVANT FACTS GOVERNING THE ISSUE IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF READY TO USE PANELS AND ALLIED CONSTRUCTION INDUSTRIAL MATERIALS. IN T HE COURSE OF CARRYING ON OF THE BUSINESS, THE ASSESSEE COMPANY MAKES A NUMBER OF PA YMENTS TOWARDS VARIOUS EXPENSES INTER-ALIA TOWARDS SALARY WHICH IS SUBJECTED TO LIABILITY OF D EDUCTION OF TAX AT SOURCE (TDS) WHILE MAKING SUCH PAYMENTS. THE LIABILITY TO DEDUCT TDS CONCERNING SALARY EXPENDITURE IS REGULATED BY S ECTION 192 UNDER CHAPTER XVII-B OF THE ACT. THE AO OBSERVED CERTAIN DEFAULTS IN COMPLIANCES OF LIABILITY TO DEDUCT AT SOURCE AS PROVIDED UNDER CHA PTER XVII-B OF THE ACT. ONE SUCH DEFAULT FOUND WAS LOWER DEDUCTION TOWARDS SALA RY EXPENSES WITH WHICH WE ARE CONCERNED IN THE PRESENT APPEAL. THUS, WHILE PASSING THE ORDER UNDER SECTION 201(1) & 201(1A) OF THE ACT FOR DEFAULTS UN DER VARIOUS SECTIONS OF CHAPTER XVII B, THE ASSESSING OFFICER INTER ALIA SADDLED THE TDS LIABILITY ON THE ASSESSEE AND INTEREST THEREON AT RS. RS.47,04,5 65/- AND RS.12,29,273/- RESPECTIVELY FOR COMMITTING DEFAULT UNDER S. 192 OF THE ACT. THE ASSESSEE MOVED AN APPLICATION UNDER SECTION 154 OF THE ACT B EFORE THE ASSESSING OFFICER (TDS) TO CORRECT THE APPARENT ERROR ALLEGED LY CREPT IN THE AFORESAID ORDER. WITH RESPECT TO ALLEGED DEFAULT IN SHORT DED UCTION OF TDS UNDER THE HEAD SALARY, THE ASSESSEE TOOK A STAND BY INVOKING S. 15 4 THAT THE AO COMMITTED ERROR IN INCLUDING UNPAID SALARY FOR DETERMINING TH E QUANTUM OF DEFAULT UNDER S. 201(1) AND CONSEQUENTIAL S. 201(1A). ACCORDINGLY TO THE ASSESSEE, S. 192 ENVISAGE LIABILITY FOR DEDUCTION OF TAX ONLY AT THE TIME OF PAYMENT AND NOT PRIOR THERETO UNLIKE SOME OTHER SECTIONS GOVERNING SIMILA R LIABILITY OF DEDUCTIONS ETC. CONCERNING OTHER TYPES OF EXPENSES UNDER THE SAID C HAPTER. SALARY EXPENSES WHICH REMAINED UNPAID AT THE END OF THE YEAR AS ON 31.03.2009 ACCORDING TO THE ASSESSEE ON WHICH LIABILITY TO DEDUCT TAX DID N OT ACCRUE IN TERMS OF S. 192 STANDS AT RS.1,22,25,827/-. THUS, NO DEFAULT CAN BE ATTRIBUTED IN RESPECT OF THIS UNPAID SUM UNDER S. 192 OF THE ACT. THEREFORE, IN S HORT, FOR THE PURPOSES OF DETERMINATION OF QUANTUM OF DEFAULT UNDER S. 201(1) AND UNDER S. 201(1A), THE UNPAID SALARY IS NOT INCLUDIBLE. SO TO SAY IN NUTSH ELL, IT IS THE CASE OF THE ASSESSEE COMPANY THAT IT IS NOT LIABLE FOR DEPOSITI NG TDS ON SALARY REMAINING 3 ITA NO.1730/PN/2013 UNPAID TO ITS EMPLOYEES WHICH IS OUTSTANDING AND CO NSEQUENTLY NO DEFAULT CAN BE QUANTIFIED UNDER S. 201(1) AND S. 201(1A) FOR UN PAID SUM. 4. THE ASSESSING OFFICER REJECTED THE APPLICATION O F THE ASSESSEE UNDER SECTION 154 OF THE ACT ON THE SOLITARY GROUND THAT UNPAID SALARY OUTSTANDING AT THE END OF THE YEAR IS NOT REFLECTED AS LIABILITY I N THE BALANCE SHEET AS ON 31.03.2009. THE ASSESSING OFFICER (TDS) OBSERVED T HAT IF THE SALARY IS NOT PAID, IT SHOULD HAVE APPEARED IN THE BALANCE SHEET AT THE YEAR-END. WHEN OUTSTANDING LIABILITY IS NOT SHOWN IN THE BALANCE S HEET, IT SUGGESTS THAT SALARY HAS ALREADY BEEN PAID AND CONSEQUENTLY TDS PROVISIO NS ARE APPLICABLE. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (TDS), THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE REITERATED THAT ENTIRE SALARY WAS NOT PAID DURING T HE YEAR UNDER CONSIDERATION AND THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX TOW ARDS UNPAID SALARY AND DEPOSIT THE AMOUNT TO THE CREDIT OF GOVERNMENT TREA SURY. HE SUBMITTED THAT THE OUTSTANDING SALARY IS DULY APPEARING IN THE BAL ANCE SHEET UNDER THE HEAD SUNDRY CREDITORS AND THEREFORE THE ASSERTIONS OF ASSESSING OFFICER WHILE REJECTING THE APPLICATION UNDER SECTION 154 IS WHOL LY INCORRECT. A CERTIFICATE TO THIS EFFECT FROM CHARTERED ACCOUNTANT WAS ALSO FILE D. THE CIT(A), HOWEVER, DISCREDITED THE STAND OF THE ASSESSEE AND OBSERVED THAT ONCE TAX HAS BEEN DEDUCTED, THE ASSESSEE IS UNDER STATUTORY OBLIGATIO N TO PAY THE SAME TO THE GOVERNMENT ACCOUNT AND CANNOT WITHHOLD THE SAME. H E ACCORDINGLY DECLINED TO ENTERTAIN THE APPEAL AGAINST ORDER PASSED BY THE ASSESSING OFFICER (TDS) UNDER SECTION 154 OF THE ACT. 6. AGGRIEVED FURTHER, THE ASSESSEE IS IN APPEAL BEF ORE US. 7. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE IMPUGNED THE ACTION OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASS ESSING OFFICER HAS WRONGLY APPLIED THE PROVISIONS OF SECTION 192 OF THE ACT FO R THE PURPOSES OF DETERMINATION OF QUANTUM OF DEFAULT ON THE FACE OF THE APPARENT FACTS AVAILABLE 4 ITA NO.1730/PN/2013 ON RECORD. THE LD. AUTHORIZED REPRESENTATIVE FOR TH E ASSESSEE ADVERTED OUR ATTENTION TO SCHEDULE 7 OF THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2009 AS APPEARING AT PAGE NO.12 OF THE PAPER BOOK FILED AND SUBMITTED THAT THE CURRENT LIABILITIES OUTSTANDING AT THE END OF THE Y EAR INCLUDED A FIGURE OF RS.25,08,07,581/- UNDER THE HEAD SUNDRY CREDITORS . A FURTHER BREAKUP OF THIS AMOUNT UNDER THE HEAD SUNDRY CREDITORS AS APPEARI NG AT PAGE NO.75 OF THE PAPER BOOK WOULD SHOW SALARY AND WAGES OUTSTANDING AND PAYABLE AT RS.1,22,25827/-. HE THEREFORE SUBMITTED THAT THE V ERY PREMISE OF THE ASSESSING OFFICER (TDS) TO REJECT THE APPLICATION U NDER SECTION 154 OF THE ACT ON THE GROUND THAT THE SALARY OUTSTANDING IS NOT RE FLECTED IN LIABILITY IN THE BALANCE SHEET RUNS CONTRARY TO THE RECORDS EX FACIE . HE THEREAFTER SUBMITTED THAT NOTWITHSTANDING THE FACT THAT THE PROVISION FO R SALARY AND TDS LIABILITY THEREON HAS BEEN MADE BY THE ASSESSEE BY WAY OF MER E BOOK ENTRY BY FOLLOWING MERCANTILE BASIS OF ACCOUNTING AS PER THE STATUTORY MANDATE. THE LIABILITY TO PAY TDS UNDER SECTION 192 OF THE ACT A RISES ONLY AT THE TIME OF ACTUAL PAYMENT TO ITS EMPLOYEES AS DISTINCT FROM TH E TIME OF MAKING CREDIT IN THE BOOKS FOR SUCH LIABILITY. HE THEREFORE SUBMITT ED THAT MANIFEST MISTAKE HAS BEEN COMMITTED BY THE AUTHORITIES BELOW IN WRONGLY APPLYING THE PROVISIONS OF SECTION 192 OF THE ACT TO THE FACT OF THE CASE. HE SUBMITTED THAT A PLAIN READING OF THE PHRASEOLOGY EMPLOYED IN SECTION 192 OF THE A CT WOULD REVEAL THAT THE RESPONSIBILITY TO DEDUCT INCOME-TAX ARISES ON THE E MPLOYER ONLY AT THE TIME OF MAKING PAYMENT NOTWITHSTANDING UNPAID LIABILITY REC OGNIZED IN THE BOOKS. HE THEREAFTER ADVERTED OUR ATTENTION TO RULE 30(2) OF THE INCOME TAX RULES, 1962 AND SUBMITTED THAT ALL SUMS WHICH ARE DEDUCTED IN A CCORDANCE WITH PROVISIONS OF CHAPTER XVII-B OF THE ACT SHALL BE DEPOSITED WIT H THE CENTRAL GOVERNMENT ON OR BEFORE THE DATE SPECIFIED THEREIN. SECTION 19 2 OF THE ACT FORMS PART OF CHAPTER XVII-B OF THE ACT. THE LIABILITY TO DEPOSIT THE TAX WILL ARISE ONLY WHEN THE LIABILITY TO COLLECT TDS ARISES UNDER SECTION 1 92 OF THE ACT. IN THE INSTANT CASE, THE LIABILITY TO DEDUCT THE TAX DID NOT ARISE AND CONSEQUENTLY LIABILITY TO DEPOSIT THE SAME ALSO DOES NOT ARISE ON A MERE BOOK ENTRY RECOGNIZING THE SALARY OUTSTANDING AT THE END OF THE YEAR. TO COMP LIMENT HIS STAND ON S. 192, HE CANVASSED RELIANCE ON FOLLOWING DECISIONS : (I) CIT VS. TEJ QUEBECOR 5 ITA NO.1730/PN/2013 PRINTING LTD., (2006) 151 TAXMANN.COM 210 (DELHI-HC ) AND (II) CITIGROUP GLOBAL MARKETS INDIA (P.) LTD. VS. DCIT, (2009) 29 SOT 326 (MUM-TRIB.). HE NEXT REFERRED THE ORDER OF THE CIT(A) DATED 09.11.2 012 IN ITS OWN CASE UNDER SECTION 201(1) & 201(1A) OF THE ACT CONCERNING SUBS EQUENT ASSESSMENT YEAR 2010-11 WHERE THE CIT(A) HAS CORRECTLY ACCEPTED THE PLEA OF THE ASSESSEE THAT TDS LIABILITY UNDER SECTION 192 OF THE ACT ARISES QUA ACTUAL PAYMENT OF SALARY. 8. THE LD. DEPARTMENTAL REPRESENTATIVE OF THE REVEN UE, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND IN FURTHERANCE SUBMITTED THAT OUTSTANDING TDS LIABILITY WOULD IMPLY THAT ASS ESSEE HAS DEDUCTED TAX AT SOURCE ON SALARY INCLUDING UNPAID SALARY AND THEREF ORE OBLIGATION TO DEPOSIT THE SAME WITH THE GOVERNMENT TREASURY IS CRYSTALLIZED U PON THE ASSESSEE. SHE RELIED UPON THE DECISION OF THE HONBLE KARNATAKA H IGH COURT IN THE CASE OF CIT VS. KINGFISHER AIRLINES LTD., (2014) 49 TAXMANN .COM 49 (KARNATAKA-HC) FOR THE PROPOSITION THAT THE ASSESSEE COMPANY WILL BE TREATED AS ASSESSEE IN DEFAULT UNDER SECTION 201(1) WHEN THE ASSESSEE COMP ANY HAS DEDUCTED TAX AT SOURCE FROM SALARY BUT FAILED TO DEPOSIT THE SAME W ITH THE CENTRAL GOVERNMENT WITHIN THE PRESCRIBED TIME. SHE ALSO CONTENDED THA T PARTICULARS OF LIABILITY TOWARDS SALARY PAYABLE DOES NOT MATCH WITH THE SUBS EQUENT PAYMENTS IN THE CASE OF SOME OF THE EMPLOYEES. SHE THEREFORE PLEAD ED THAT NO INTERFERENCE IS WARRANTED WITH THE ORDER OF THE CIT(A). 9. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND MATERIAL PLACED BEFORE US. THE SHORT CONTROVERSY ARISING BEFORE US IS TO DETERMINE WHETHER THE REVENUE WAS JUSTIFIED IN HOLDING THE ASSESSEE AS AS SESSEE IN DEFAULT UNDER SECTION 201(1) & 201(1A) FOR FAILURE TO DEDUCT TDS ON SALARY AS CONTEMPLATED UNDER S. 192 IN RESPECT OF UNPAID AMOUNT AND IN CON SEQUENCE COMMITTING DEFAULT IN NOT DEPOSITING THE SAME IN GOVT. TREASUR Y. AS NOTED ABOVE, IT IS THE CASE OF THE ASSESSEE THAT OUT OF THE TOTAL SALARY D EBITED TO THE PROFIT & LOSS ACCOUNT, A SUM OF RS.1,22,25,827/- HAS NOT BEEN PAI D AND REMAINED OUTSTANDING AS UNPAID SALARY AT THE END OF THE YEAR . IT IS FURTHER CASE ON BEHALF OF THE ASSESSEE THAT MERELY BECAUSE THE PROVISION F OR UNPAID SALARY TOGETHER 6 ITA NO.1730/PN/2013 WITH PROVISIONS FOR UNPAID TDS HAS BEEN REFLECTED A S LIABILITY IN THE BALANCE SHEET, SUCH BOOK ENTRY FOR UNPAID AND UNCOLLECTED T DS DOES NOT GIVE RISE TO ANY OBLIGATION ENVISAGED UNDER S. 192 OF THE ACT. WE AGREE WITH THE STAND OF THE ASSESSEE AT THE FIRST INSTANCE. WE FIND THAT TH E PROVISIONS OF SECTION 192 OF THE ACT HAS IN MISTAKABLE TERMS PROVIDED THAT THE L IABILITY TO DEDUCT TAX ARISES UNDER SECTION 192 OF THE ACT ONLY WHEN THE SALARY I S ACTUALLY PAID TO ITS EMPLOYEES. IN ANY EVENT, THIS POSITION OF LAW IS N O LONGER RES-INTEGRA AND IS SQUARELY COVERED BY THE DECISIONS CITED ON BEHALF O F THE ASSESSEE NOTED SUPRA. ON FACTS, WE FIND THAT THE ASSESSEE HAS BEEN ABLE T O PRIMA-FACIE DEMONSTRATE FROM THE BALANCE SHEET AND ITS ANNEXURES STATED TO BE AVAILABLE BEFORE AO THAT AN AMOUNT OF RS.1,22,25,827/- IS DECLARED AS OUTSTA NDING AT THE END OF THE YEAR. IF THIS IS SO, THE PROVISION OF S. 192 DOES NOT CAS T OBLIGATION ON THE ASSESSEE TO DEDUCT TDS ON UNPAID SALARY. IN VIEW OF THE EXPRESS PROVISION OF S. 192, THE ASSESSEE CANNOT BE DEEMED TO BE IN DEFAULT UNDER S. 201(1) AND S. 201(1A) TO THIS EXTENT. THE LIABILITY TO DEPOSIT SUM, NOT DEDU CTED OR COLLECTED, WITH THE GOVT. TREASURY DOES NOT ARISE UNDER CHAPTER XVII-B OF THE ACT READ WITH RULE 30(2) OF THE INCOME TAX RULES 1962. THUS, THE ACTI ON OF THE ASSESSING OFFICER UNDER SECTION 201(1) & 201(1A) IMPOSING LIABILITY T OWARDS UNPAID SALARY IS WITHOUT AUTHORITY OF LAW. AS A SEQUEL TO THESE AFO RESAID OBSERVATIONS, WE DO NOT FIND ANY MERIT IN THE PLEA OF THE REVENUE THAT LIABILITY TO DEPOSIT THE TAX ARISES SIMPLY BECAUSE PROVISION THEREOF HAS BEEN MA DE IN THE BOOKS OF ACCOUNT. IT IS TRITE THAT THE DETERMINATION OF TAX LIABILITY DEPENDS UPON THE PROVISIONS OF LAW RELATING TO IT AND MERE BOOK ENTRIES MADE IN TH IS REGARD ARE NOT CONCLUSIVE. AS A COROLLARY, PATENT MISTAKE HAS BEEN COMMITTED B Y THE AO IN APPLYING THE STATUTORY PROVISIONS OF S. 192 WHILE FRAMING IMPUGN ED ORDER WHICH IS RECTIFIABLE UNDER S. 154. IN THIS VIEW OF THE MATTE R, WE DIRECT THE ASSESSING OFFICER NOT TO HOLD THE ASSESSEE AS ASSESSEE IN DEF AULT UNDER SECTION 201(1) & 201(1A) OF THE ACT IN RESPECT OF TDS LIABILITY ATTR IBUTABLE TO UNPAID SALARY. WHILE COMPUTING THE REVISED LIABILITY FOR DEFAULT U NDER S. 201(1) & 201(1A), HOWEVER, THE ASSESSING OFFICER SHALL BE AT LIBERTY TO SATISFY HIMSELF ABOUT THE ARITHMETICAL CORRECTNESS OF QUANTUM OF OUTSTANDING SALARY REMAINING UNPAID AT THE END OF THE YEAR QUA THE TOTAL SALARY EXPENDITURE INCURRED BY THE ASSES SEE IN 7 ITA NO.1730/PN/2013 PURSUIT OF ITS OWN BUSINESS FOR THE YEAR IN CONSIDE RATION AND SHALL GIVE SUITABLE RELIEF IN TERMS OF DIRECTION ABOVE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN TERMS OF DIRECTIONS NOTED ABOVE. ORDER PRONOUNCED ON THIS 16 TH DAY OF MARCH, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 16 TH MARCH, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, THANE; 4) THE CIT-II, THANE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE
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