The Executive Engineer Construction Division, Haldwani V. ITO (TDS), Nainital

ITA 2086/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6711 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 05-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: SAINI
• Keywords: Recovery proceedings; TDS; Set aside
• Section: 201(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NOS. 2085 TO 2089(DEL)/2010 ASSESSMENT YEARS: 2005-06 TO 2009-10 THE EXECUTIVE ENGINEER, INCOME-TAX OFFICER, CONSTRUCTION DIVISION, PWD, VS. (TDS), NAINITAL. HALDWANI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.S. SAINI, ADVOCATE RESPONDENT BY : SHRI H.K. LAL, SR. DR ORDER PER BENCH ALL THESE APPEALS OF THE ASSESSEE INVOLVE A COM MON GROUND TO THE EFFECT THAT THE TRIBUNAL MAY SET ASIDE THE ORDE RS OF THE AO AND THE LD. CIT(APPEALS) AND DELETE OR WAIVE THE INTERES T LEVIED BY THE AO. 2. IN THE STATEMENT OF FACTS IT IS MENTIONED THAT THE ASSESSEE IS A STATE GOVERNMENT ORGANISATION AND IT HAS BEEN FILING TDS RETURNS REGULARLY IN RESPECT OF THE TAX DEDUCTED AT SOURCE FROM PAYM ENTS MADE TO CONTRACTORS, EMPLOYEES ETC. THE SAME IS ALSO BEING DEPOSIT ED WITH THE GOVERNMENT. THE AO CHARGED INTEREST FOR LATE DEPOSIT OF TH E TAX. THE SAME WAS CONFIRMED BY THE LD. CIT(APPEALS). THEY FAILED T O APPRECIATE THAT DELAY WAS NEITHER INTENTIONAL NOR DELIBERATE. THE COMP UTATION OF INTEREST IS ALSO ITA NOS. 2085 TO 2089(DEL)/2010 2 WRONG. THE AMOUNT SO DEDUCTED HAS NOT BEEN UTILI ZED FOR ANY OTHER PURPOSE. THEREFORE, THE BALANCE OF CONVENIENCE IS IN FAVOUR OF THE DELETION OF THE INTEREST, MORE SO AS THE ASSESSEE IS A GOVERNMENT ORGANISATION, IT HAS BEEN DEDUCTING TAX FROM PAYMENTS MADE TO THE CONTRACTORS AND REGULARLY DEPOSITING THE SAME TO THE CREDIT OF T HE CENTRAL GOVERNMENT. 3. IN THE COURSE OF HEARING BEFORE US, THE LD. CO UNSEL FOR THE ASSESSEE FURNISHED INTEREST ACTUALLY CHARGEABLE FOR VARIO US YEARS AND INTEREST CHARGED BY THE AO, SHOWING A DIFFERENCE OF ` 6,23,054/-. THIS WORKING IS REPRODUCED BELOW:- ACCOUNTING PERIOD INTEREST U/S 201(1A) BY ITO, HALDWANI. ACTUAL INTEREST U/S 201(1A) AS PER STATEMENT ATTACHED DIFFERENCE (EXCESS INTEREST SHOWN BY ITO, HALDWANI) 2004-2005 145283 61496 83787 2005-2006 175911 27454 148457 2006-2007 323204 143450 179754 2007-2008 141681 23481 118200 2008-2009 94495 1639 92856 TOTAL: 880574 257520 623054 3.1 APART FROM THE RECTIFICATION OF THE CALCULAT ION, IT WAS STRENUOUSLY ARGUED THAT THIS IS A CASE OF GENUINE HARDSH IP AND THE DEFAULT WAS NOT ITA NOS. 2085 TO 2089(DEL)/2010 3 COMMITTED INTENTIONALLY OR MALAFIDELY AS THE AS SESSEE IS THE STATE GOVERNMENT. THEREFORE, IT WAS PRAYED THAT THE I NTEREST CHARGED FOR VARIOUS YEARS MAY BE WAIVED. 3.2 IN REPLY, THE LD. DR SUBMITTED THAT INTERES T CHARGED U/S 201(1A) CANNOT BE WAIVED BY THE TRIBUNAL. HE RELIED ON THE DECISION IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE P. LTD. VS. C IT (2007) 293 ITR 226 (SC). 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. FROM THE CHART SUBMITTED BY THE LD. C OUNSEL IN THE COURSE OF HEARING BEFORE US, IT IS CLEAR THAT THE ASSESS EE COMMITTED DEFAULT U/S 201(1A), MAKING ITSELF LIABLE FOR PAYMENT OF INTE REST AS IS DONE IN THE CASE OF AN ASSESSEE IN DEFAULT. IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE P. LTD., THE TRIBUNAL HELD THE ASSESSEE T O BE ASSESSEE IN DEFAULT. HOWEVER, IT WAS MENTIONED THAT PRADEEP OIL CORPO RATION, THE PAYEE, HAD ALREADY PAID TAXES ON THE AMOUNT RECEIVED FROM THE ASSESSEE AND, THEREFORE, IT COULD NOT BE ASKED TO PAY TAX ONCE MORE. IN THIS CONNECTION, REFERENCE WAS MADE TO THE BOARD CIRCULAR NO. 275 /201/95-IT(B) DATED 29.1.1997. IT WAS HELD THAT THIS CIRCULAR PUT S THE CONTROVERSY TO AN END ITA NOS. 2085 TO 2089(DEL)/2010 4 IN SO FAR AS RECOVERY OF TAX U/S 201(1) IS CONCERNED. THE ASSESSEE HAD PAID INTEREST U/S 201(1A). IN VIEW OF THIS FA CT, THE HONBLE COURT DID NOT THINK IT NECESSARY TO DECIDE AS TO WHETHER THE T RIBUNAL COULD HAVE AT ALL REOPENED THE APPEAL TO RECTIFY THE ERROR APPAR ENT FROM THE RECORD. IT WILL THUS BE SEEN THAT THE LEVY OF INTEREST U/S 201(1A) WAS NOT CHALLENGED IN THAT CASE AND, THEREFORE, THE FACTS DISTINGUI SHABLE. 4.1 THE LD. CIT(APPEALS), BY RELYING ON A NUMB ER OF DECISIONS, HAS HELD THAT THE CHARGING OF INTEREST U/S 201(1A) IS COMPENSATORY IN NATURE AND, THEREFORE, THE SAME HAS TO BE CHARGED WHENE VER DELAY IS NOTICED IN PAYMENT OF THE TAX DEDUCTED AT SOURCE. PARAGRAP H NO. 7 OF HIS ORDER, DEALING WITH THIS ISSUE, IS REPRODUCED BELOW:- 7. THE OTHER CONTENTIONS OF THE LD. AR HAVE ALS O BEEN CAREFULLY PERUSED. UNFORTUNATELY, THE LEVY OF IN TEREST U/S 201(1A) OF THE ACT IS MANDATORY AND THIS POSITI ON HAS BEEN HELD BY SEVERAL HONBLE BENCHES OF VARIOUS INCOME TAX APPELLATE TRIBUNAL. A DECISION TO THAT EFFECT IS ACIT VS. SOHANLAL SHANTILAL & BROS. (2004) 87 TTJ MUM) 264 IS NOTEWORTHY. THE PAYMENT OF INTEREST HAS BEEN HE LD TO BE MANDATORY IN CIT VS. RATHI GUM INDUSTIRES (1995) 213 ITR 98 (RAJ.), CIT VS. ASSAM SMALL INDUSTRIES DEV. CORP N. LTD. (1996) 219 ITR 324 (CAL.). THE HONBLE HIGH COUR T OF BOMBAY HAS GONE TO THE EXTENT OF CLARIFYING TH AT THERE IS NO QUESTION OF THE WAIVER OF SUCH PAYMENT ON THE BA SIS THAT THE DEFAULT WAS NOT INTENTIONAL OR ON ANY OTHER BASIS . THE HONBLE HIGH COURT OF RAJASTHAN WENT ON TO HOLD IN CIT VS. ITA NOS. 2085 TO 2089(DEL)/2010 5 RATHI GUM INDUSTRIES (1995) 213 ITR 98 THAT INTE REST WAS PAYABLE EVEN IF PAYMENT OF TAX WAS MADE SUBSEQUEN TLY. SINCE A LARGE NUMBER OF RULINGS HAVE CATEGORICALLY HE LD THAT INTEREST U/S 201(1A) OF THE ACT WAS COMPENSATORY AND MANDATORY, THE LD. ASSESSING OFFICER WAS FULLY JU STIFIED IN LEVYING INTEREST IN THE INSTANT CASE OF THE APPEL LANT. THE CHARGING OF INTEREST U/S 201(1A) OF THE ACT IS, T HEREFORE, UPHELD. THE LD. AR IS ENTITLED TO MAKE AN APPLIC ATION U/S 154 OF THE ACT FOR CORRECTING THE PERIOD OF DEFAULT, IF THERE WAS ANY. 4.2 THE LD. COUNSEL COULD NOT IN ANY MANNER DISPLA CE THIS FINDING OF THE LD. CIT(APPEALS). ACCORDINGLY, IT IS HELD THAT TH E INTEREST WAS RIGHTLY CHARGED, BEING COMPENSATORY AND MANDATORY IN NATU RE. HOWEVER, THE MATTER REGARDING COMPUTATION OF CORRECT AMOUNT OF THE INTEREST FOR VARIOUS YEARS IS RESTORED TO THE FILE OF THE AO, WHO SHALL RECOMPUTE THE SAME AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HE ARD. 5. IN THE RESULT, THE APPEALS ARE TREATED AS PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26 NOVEMBER, 2010. SD/- SD/- (C.L. SETHI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 26TH NOVEMBER, 2010. SP SATIA ITA NOS. 2085 TO 2089(DEL)/2010 6 COPY OF THE ORDER FORWARDED TO: ITO, (TDS), NAINITAL. THE EXECUTIVE ENGINEER, CONSTRUCTION DIVISION, HALD WANI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.