Shri Nareshkumar P. Patel, Banaskantha V. The Income Tax Officer, Ward-1, Palanpur

ITA 1767/AHD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8530 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 30-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Recovery proceedings

Judgement Text

ITA NO. 1767/AHD/2016 SHRI NARESHKUMAR P PATEL VS. ITO ASSESSMENT YEAR : 2011-12 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM] ITA NO. 1767/AHD/2016 ASSESSMENT YEAR: 2011-12 SHRI NARESHKUMAR P PATEL ............. APPELLANT AMBICA NAGAR, B/H. PRATIK GAS, MAHAVIR ROAD, PALANPUR, BANASKANTHA-385001 [PAN : AGWPP 3366 N] VS. INCOME TAX OFFICER .......................RESPONDENT WARD-1, B.K., PALANPUR APPEARANCES BY: ARTI N SHAH FOR THE APPELLANT SUMIT KUMAR VERMA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 14, 2 017 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 19, 2017 O R D E R PER PRAMOD KUMAR AM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-4, AHMEDABAD D ATED 27.05.2016 PASSED FOR ASSESSMENT YEAR 2011-12. 2. GRIEVANCE RAISED BY THE APPELLANT IS AS FOLLOWS: - THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-4, AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY DISALLOWIN G THE CREDIT FOR TDS OF RS.36,189/- CLAIMED BY THE APPELLANT ON THE GROUND THAT THE SAME DOES NOT MATCH IN THE ITD SYSTEM THOUGH THE APPELLANT HAS FU RNISHED TDS CERTIFICATE ISSUED BY THE DEDUCTOR. 3. THERE IS NO DISPUTE THAT THE ASSESSEE HAS DULY P RODUCED THE TDS CERTIFICATE, IN RESPECT OF WHICH CREDIT IS CLAIMED, BUT CREDIT I S DECLINED AS THE TDS CERTIFICATE IS UNDATED AND THE SAME DOES NOT MATCH IN THE ITD SYST EM. THE ASSESSEE DID CARRY THE MATTER IN APPEAL BEFORE THE CIT(A), BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOW IN SECOND APPEAL BEFORE US. ITA NO. 1767/AHD/2016 SHRI NARESHKUMAR P PATEL VS. ITO ASSESSMENT YEAR : 2011-12 PAGE 2 OF 5 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLIC ABLE LEGAL POSITION. 5. AS LEARNED COUNSEL FOR THE ASSESSEE RIGHTLY POIN TS OUT, THE ISSUE IN APPEAL IS NOW SQUARELY COVERED, IN FAVOUR OF THE APPELLANT, B Y HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IN THE CASE OF SUMIT DEVENDRA RAJA NI VS. ACIT [(2014) 369 ITR 673 (GUJ)] WHEREIN THEIR LORDSHIPS HAVE OBSERVED AS FOLLOW:- 7. THE GRIEVANCE WHICH IS VOICED IN THE PRESENT PE TITION BY THE ASSESSEE IS THAT THOUGH THE DEDUCTOR-EMPLOYER, AMAR REMEDIES LT D., HAD DEDUCTED THE TDS FOR TOTAL RS. 5,86,606 AND FOR WHICH FORM 16A H AS BEEN ISSUED BY IT, THE DEPARTMENT HAS NOT GIVEN CREDIT OF THE SAID TDS TO THE PETITIONER- ASSESSEE- DEDUCTEE AND WHEN THE ASSESSEE HAS CLAIMED THE SAID DEDUCTION, THE SAME HAS NOT BEEN GRANTED AND DEMAND IS RAISED BY ISSUIN G NOTICE AT ANNEXURE D. THEREFORE, THE SHORT QUESTION WHICH IS POSED FOR CO NSIDERATION OF THIS COURT IS WHETHER IN CASE THE DEDUCTOR HAD DEDUCTED THE TDS A ND FOR THE SAME FORM NO. 16A HAS BEEN ISSUED BY THE DEDUCTOR, THE CREDIT OF THE SAME CAN BE DENIED TO THE ASSESSEE AND THE DEDUCTEE SOLELY ON T HE GROUND THAT SUCH CREDIT DOES NOT APPEAR ON THE ITD SYSTEM OF THE DEP ARTMENT AND/ OR THE SAME DOES NOT MATCH WITH THE ITD SYSTEM OF THE DEPARTMEN T ? 8. AT THE OUTSET, IT IS REQUIRED TO BE NOTED THAT U NDER CHAPTER XVII, MORE PARTICULARLY, SECTION 204 OF THE ACT THE LIABILITY TO DEDUCT THE TAX AT SOURCE WOULD BE UPON THE EMPLOYER/PAYER/DEDUCTOR IN THE PR ESENT CASE AMAR REMEDIES LTD. AS PER SECTION 205 OF THE ACT, WHETHE R TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII, THE ASSESSEE SHALL NOT B E CALLED UPON TO PAY TAX HIMSELF TO THE EXTENT TO WHICH TAX HAS BEEN DEDUCTE D FROM THAT INCOME. THAT THE DEDUCTOR IS REQUIRED TO ISSUE FORM NO. 16A PROV IDING PARTICULARS WITH RESPECT TO THE AMOUNT OF TAX DEDUCTED AT SOURCE IN THE RELEVANT ASSESSMENT YEAR. IN THE PRESENT CASE, IT IS THE CASE ON BEHALF OF THE PETITIONER AND/ OR AS PER THE RETURN OF INCOME FILED THE TOTAL SUM OF RS. 5,86,606 HAS BEEN DEDUCTED BY THE DEDUCTOR, AMAR REMEDIES LTD., AS TDA AND FOR WHICH M/S. AMAR REMEDIES LTD. DEDUCTOR HAS ISSUED FORM NO. 16A. IT IS ALSO THE CASE ON BEHALF OF THE PETITIONER THAT OUT OF THE TOTAL SALA RY OF RS. 21,60,000 TO BE RECEIVED FROM M/S. AMAR REMEDIES LTD.-DEDUCTOR HE H AS RECEIVED SALARY AFTER DEDUCTING THE AMOUNT OF TAX AT SOURCE BY THE DEDUCT OR FOR WHICH FORM NO. 16A HAS BEEN ISSUED, I.E., HE HAS RECEIVED RS. 5,86 ,606 AND ON ACCOUNT OF THE SAID AMOUNT DEDUCTED AT SOURCE BY M/S. AMAR REM EDIES LTD. UNDER THE CIRCUMSTANCES AND CONSIDERING SECTIONS 204 AND 205, WHEN THE DEDUCTOR WHO IS LIABLE TO DEDUCT THE TAX AT SOURCE UNDER CHAPTER XVII DEDUCTS THE TDS AND ISSUED FORM NO. 16A THE ASSESSEE-DEDUCTEE SHALL BE ENTITLED TO CREDIT OF THE SAME. AS STATED ABOVE AND AS PER SECTION 205 OF THE ACT, WHETHER TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII, THE ASSESS EE SHALL NOT BE CALLED UPON TO PAY THE TAX HIMSELF TO THE EXTENT OF WHICH TAX HAS BEEN DEDUCTED FROM THAT INCOME. MEANING THEREBY, THE ASSESSEE- DEDUCTE E IS ENTITLED TO CREDIT OF SUCH AMOUNT OF TDS. ASSUMING THAT IN A GIVEN CASE T HE DEDUCTOR AFTER ITA NO. 1767/AHD/2016 SHRI NARESHKUMAR P PATEL VS. ITO ASSESSMENT YEAR : 2011-12 PAGE 3 OF 5 DEDUCTING THE TDS MAY NOT HAVE DEPOSITED WITH THE D EPARTMENT. HOWEVER, IN SUCH SITUATION, THE DEPARTMENT IS TO RECOVER THE SA ID AMOUNT FROM THE DEDUCTOR AND THE ASSESSEE-DEDUCTEE CANNOT DENY THE CREDIT OF THE SAME. IDENTICAL QUESTION CAME TO BE CONSIDERED BY THE BOM BAY HIGH COURT IN THE CASE OF YASHPAL SAHNI (SUPRA) AND CONSIDERING SECTI ON 205 OF THE ACT IN PARAGRAPH 15 OF THE BOMBAY HIGH COURT HAS OBSERVED AS UNDER : 'CHAPTER XVII OF THE INCOME-TAX ACT, 1961, PROVIDES FOR COLLECTION AND RECOVERY OF TAX BY TWO MODES. THEY ARE (ONE) DIRECT LY FROM THE ASSESSEE AND (TWO) INDIRECTLY BY DEDUCTION OF TAX A T SOURCE. IN THE PRESENT CASE, WE ARE CONCERNED WITH THE SECOND MODE OF RECOVERY, NAMELY, RECOVERY OF TAX BY DEDUCTION AT SOURCE.' 9. IN THE SAID DECISION, THE BOMBAY HIGH COURT HAS CONSIDERED AND RELIED UPON THE DECISION OF THE OM PRAKASH GATTANI (SUPRA) . IN THE SAID DECISION, THE GAUHATI HIGH COURT, AFTER CONSIDERING THE RELEVANT PROVISION UNDER CHAPTER XVII, HAS OBSERVED AND HELD THAT SO FAR AS THE ASSE SSEE IS CONCERNED, HE IS NOT SUPPOSED TO DO ANYTHING IN THE WHOLE TRANSACTIO N EXCEPT THAT HE IS TO ACCEPT THE PAYMENT OF THE REDUCED AMOUNT WHICH IS D EDUCTED INCOME-TAX AT SOURCE. IT IS OBSERVED THAT ON THE AMOUNT BEING DED UCTED THE ASSESSEE ONLY GETS A CERTIFICATE TO THAT EFFECT BY THE PERSON RES PONSIBLE TO DEDUCT THE TAX. IN THE SAID DECISION OF THE GAUHATI HIGH COURT HAS QUA SHED AND SET ASIDE THE NOTICE ISSUED UNDER SECTION 226(3) OF THE ACT TO TH E BANKERS OF THE ASSESSEE OBSERVING IN PARAGRAPH 7 AS UNDER: '7. SO FAR THE ASSESSEE IS CONCERNED, HE IS NOT SUP POSED TO DO ANY THING IN THE WHOLE TRANSACTION EXCEPT THAT HE IS TO ACCEPT THE PAYMENT OF THE REDUCED AMOUNT FROM WHICH IS DEDUCTED INCOME -TAX AT SOURCE. THE RESPONSIBILITY TO DEPOSIT THE AMOUNT DEDUCTED A T SOURCE AS TAX IS THAT OF THE PERSON WHO IS RESPONSIBLE TO DEDUCT THE TAX AT SOURCE. ON THE AMOUNT BEING DEDUCTED THE ASSESSEE ONLY GETS A CERTIFICATE TO THAT EFFECT BY THE PERSON RESPONSIBLE TO DEDUCT THE TAX. IN A CASE WHERE THE AMOUNT HAS BEEN DEDUCTED BY THE PERSON RESPONSIBLE TO DEDUCT THE AMOUNT UNDER THE STATUTORY PROVISIONS, THE ASSESSEE HAS NO CONTROL OVER THE MATTER. IN CASE OF DEFAULT IN MAKING OVER THE AMOUNT TO THE ACCOUNT OF THE CENTRAL GOVERNMENT, IT IS OBVIOUSLY THE PERSON RESPONSIBLE TO DEDUCT OR THE PERSON WHO HAS MADE TH E DEDUCTION WHO IS HELD RESPONSIBLE FOR THE SAME. THE RESPONSIBILIT Y OF SUCH PERSON IS TO THE EXTENT THAT HE HAS TO BE DEEMED TO BE AN ASSESS EE IN DEFAULT IN RESPECT OF THE TAX. HE MAY BE DEEMED TO BE AN ASSES SEE IN DEFAULT NOT ONLY IN CASES WHERE AFTER DEDUCTION HE DOES NOT MAK E OVER THE AMOUNT TO THE CENTRAL GOVERNMENT BUT ALSO IN CASES WHERE T HERE IS FAILURE ON HIS PART TO DEDUCT THE AMOUNT AT SOURCE. THIS RESPO NSIBILITY HAS BEEN FASTENED UPON HIM UNDER SECTION 201 OF THE INCOME-T AX ACT. IT IS, OF COURSE, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE OR IT MAY INCUR. PRESENTLY WE ARE NOT CONCERNED WITH THE CASE WHERE THE PERSON RESPONSIBLE TO MAKE THE DEDUCTIONS HAS NOT D EDUCTED THE ITA NO. 1767/AHD/2016 SHRI NARESHKUMAR P PATEL VS. ITO ASSESSMENT YEAR : 2011-12 PAGE 4 OF 5 AMOUNT AT ALL. IT MAY OR MAY NOT FALL IN A DIFFEREN T CATEGORY FROM ONE WHERE THE AMOUNT HAS BEEN DEDUCTED AND NOT MADE OVE R TO THE CENTRAL GOVERNMENT. WE ARE CONCERNED WITH THE LATTE R CATEGORY OF CASES. AS INDICATED EARLIER, ON THE FACTS IT IS NOB ODY'S CASE THAT THE AMOUNT WAS ACTUALLY NOT DEDUCTED AT SOURCE BY CHAND RA AGENCIES. WHAT SEEMS TO BE IN DISPUTE IS THE DEPOSIT OF THE S AID AMOUNT IN THE ACCOUNT OF THE CENTRAL GOVERNMENT. THE INCOME-TAX D EPARTMENT SEEMS TO HAVE MADE ENQUIRIES ABOUT THE EXACT DATE O F PAYMENT TO THE CENTRAL GOVERNMENT WHICH CHANDRA AGENCIES COULD NOT FURNISH ON THE GROUND THAT THE PAPERS WERE FORWARDED TO THE CHAIRM AN OF VAIBHAVSHALI BUMPER. IN SUCH A CATEGORY OF CASES WE FEEL THAT TH E AMOUNT OF TAX CAN BE RECOVERED BY THE INCOME-TAX DEPARTMENT TREATING THE PERSON RESPONSIBLE TO DEDUCT TAX AT SOURCE AS AN ASSESSEE IN DEFAULT IN RESPECT OF THE TAX. IT WOULD NOT BE POSSIBLE TO PRO CEED TO RECOVER THE AMOUNT OF TAX FROM THE ASSESSEE. THE ASSESSEE CANNO T BE DOUBLY SADDLED WITH THE TAX LIABILITY. DEDUCTION OF TAX AT SOURCE IS ONLY ONE OF THE MODES OF RECOVERY OF TAX. ONCE THIS MODE IS ADO PTED AND BY VIRTUE OF THE STATUTORY PROVISIONS THE PERSON RESPONSIBLE TO DEDUCT THE TAX AT SOURCE DEDUCTS THE AMOUNT, ONLY THAT MODE SHOULD BE PURSUED FOR THE PURPOSE OF RECOVERY OF TAX LIABILITY AND THE ASSESS EE SHOULD NOT BE SUBJECTED TO OTHER MODES OF RECOVERY OF TAX BY RECO VERING THE AMOUNT ONCE AGAIN TO SATISFY THE TAX LIABILITY. IT IS, THE REFORE, PROVIDED UNDER SECTION 201 OF THE INCOME-TAX ACT THAT THE PERSON R ESPONSIBLE TO DEDUCT THE TAX AT SOURCE WOULD BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN CASE HE DEDUCTS THE AMOUNT AND FAILS TO DEPOSIT IT IN THE GOVERNMENT TREASURY. AS OBSERVED EARLIER, THE ASSESSEE HAS NO CONTROL OVER SUCH PERSON WHO IS RESPONSIBLE TO DEDUCT THE INCOME- TAX AT SOURCE, BUT FAILS TO DEPOSIT THE SAME IN THE GOVERNMENT TREASURY. IN THIS LIGHT OF THE MATTER, IN OUR VIEW, THE NOTICES ISSUED UNDER SECTI ON 226(3) OF THE INCOME-TAX ACT TO THE BANKERS OF THE PETITIONER RES PONDENT TO SATISFY THE TAX LIABILITY FROM THE BANK ACCOUNT OF THE PETI TIONER RESPONDENT ARE ILLEGAL. IT IS NOT THAT THE INCOME-TAX DEPARTMENT W AS HELPLESS IN THE MATTER. THE PERSON RESPONSIBLE TO DEDUCT THE TAX AT SOURCE WOULD MOVE INTO THE SHOES OF THE ASSESSEE AND HE WOULD BE DEEM ED TO BE AN ASSESSEE IN DEFAULT. WHATEVER PROCESS OR COERCIVE M EASURES ARE PERMISSIBLE UNDER THE LAW WOULD ONLY BE TAKEN AGAIN ST SUCH PERSON AND NOT THE ASSESSEE.' 10. WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKE N BY THE BOMBAY HIGH COURT AND GAUHATI HIGH COURT. APPLYING THE AFORESAI D TWO DECISIONS OF THE BOMBAY HIGH COURT AS WELL AS THE GAUHATI HIGH COURT , THE FACTS OF THE CASE ON HAND AND EVEN CONSIDERING SECTION 205 OF THE ACT ACTION OF THE RESPONDENT IN NOT GIVING THE CREDIT OF THE TAX DEDUCTED AT SOU RCE FOR WHICH FORM NO. 16A HAVE BEEN PRODUCED BY THE ASSESSEE-DEDUCTEE AND, CO NSEQUENTLY, IMPUGNED DEMAND NOTICE ISSUED UNDER SECTION 221(1) OF THE AC T CANNOT BE SUSTAINED. CONCERNED RESPONDENT, THEREFORE, IS REQUIRED TO BE DIRECTED TO GIVE CREDIT OF TAX DEDUCTED AT SOURCE TO THE ASSESSEE-DEDUCTEE OF THE AMOUNT FOR WHICH FORM NO. 16A HAVE BEEN PRODUCED. ITA NO. 1767/AHD/2016 SHRI NARESHKUMAR P PATEL VS. ITO ASSESSMENT YEAR : 2011-12 PAGE 5 OF 5 6. WE, THEREFORE, UPHOLD THE PLEA OF THE ASSESSEE A ND DIRECT THE ASSESSING OFFICER TO GRANT CREDIT IN RESPECT OF THE TDS IN QU ESTION. 7. IN THE RESULT, APPEAL IS ALLOWED IN THE TERMS IN DICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON TODAY ON THE 19 TH DAY OF SEPTEMBER, 2017. SD/- SD/- S S GODARA PRA MOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *BT AHMEDABAD, THE 19 TH DAY OF SEPTEMBER, 2017 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ........18.09.2017...AS PER TWO PAGES MANUSCRIPT OF HONBLE AM ATTACHED........ ............. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 18.09.2017.......... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S.: ........ 19.09.2017............. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: ...19.09.2017. .... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ...... 19.09.2017................... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: .. 8. DATE OF DESPATCH OF THE ORDER: ......