The General Manager, Sundergarh V. ITO, Rourkela

ITA 28/CTK/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52384 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 27-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-01-2010
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: S RAYS DEY ARS
• Keywords: Salary income; Principle of natural justice; Bonafide belief; Wholly owned subsidiary; Assessment record
• Section: 201(1)

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 28,29,30 AND 249/CTK/2010 (ASSESSMENT YEAR S 2006 - 07, 2007 - 08, 2008 - 09 AND 2009 - 10) THE GENERAL MANAGER, M/S.MAHANADI COAL FIELDS LTD., BASUNDHARA GARJAN BAHAL AREA, BASUNDHARA, DIST.SNDERGARH 770 076 PAN: BBNBO 0457 C VERSUS INCOME - TAX OFFICER, TDS, ROURKELA. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: S/ SHRI S.RAY/S.DEY , ARS FOR THE RESPONDENT SHRI A.BHATTACHARJEE, DR ORDER PER BENCH : ALL THESE APPEALS ARE FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDERS OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE RESPECTIVE AYS 2006 - 07, 2007 - 08, 2008 - 09 AND 2009 - 10 IN THE CASE OF THE ASSESSEE. 2. IN ALL THESE APPEALS, THE ASSESSEE RAISED THE FOLLOWING GROUNDS. 1) CHALLENGING THE TREATMENT OF THE ASSESSEE AS AN ASSESSEE IN DEFAULT IN RESPECT OF ALLEGED SHORT DEDUCTION OF TAX FROM SALARY OF THE EMPLOYEES. 2) THE OR DERS PASSED BY THE LOWER AUTHORITIES ARE NOT SUSTAINABLE AS THEY HAVE FAILED TO EXAMINE THE POINT OUT THAT WHETHER TAX HAS ALREADY RECOVERED FROM ANY OF THE EMPLOYEES MENTIONED IN THE LIST. 3) C HALLENGING THE INTEREST LEVIED U/S.201(1A) OF THE I.T.ACT,1961 . 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUES RAISED BY THE ASSESSEE AND THEIR LEGAL IMPLICATIONS. 4. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE SUBMISSIONS OF BOTH THE PARTIE S, THE UNDISPUTED FACTS RELATING TO THE ISSUES ARE THAT THE ASSESSEE IS A ITA NO.28,29,30 AND 249/CTK/2010 2 WHOLLY OWNED SUBSIDIARY OF COAL INDIA LIMITED, A FULLY OWNED GOVERNMENT OF INDIA . THE ASSESSEE IS ENGAGED IN MINING, PROCESSING AND SALE OF COAL IN THE STATE OF O RISSA AS WELL AS IN THE COURSE OF INTER STATE SALE AND EXPORT SALE. THE HEAD OFFICE OF THE ASSESSEE IS SITUATED AT JAGRITIVIHAR, BURLA IN THE DISTRICT OF SAMBALPUR, ORISSA AND ALL THE MINES AND COALFIELDS ARE GEOGRAPHICALLY SPREADING IN THE DISTRICT OF JHARSUGUDA, SUNDARGARH , ANGUL, DHENKANAL WITHIN THE STATE OF O RISSA . THE ASSESSEE PROVIDES RESIDENTIAL ACCOMMODATION TO ITS EMPLOYEES AT MINING SITES EITHER AT CONCESSIONAL RATES OR AT FREE OF COST DEPENDING ON THE LOCATION OF THE MINING SITES. WHILE CALCULATING ESTIMATED SALAR Y AND PERQUISITES OF THE EMPLOYEES FOR TDS PURPOSE, THE ASSESSEE CONSIDER THE VALUE OF RESIDENTIAL ACCOMMODATION PROVIDED TO ITS EMPLOYEES AT MINING SITES AS P ER PROVISION OF INCOME TAX ACT, 1961 AND CORRESPONDING RULES. THE ASSESSEE HAS PROVIDED RENT FREE ACCOMMODATION TO ITS EMPLOYEES LOCATED IN BASUNDHARA GARJAN BAHAL AREA, AND AS A MATTER OF PRACTICE DOES NOT CONSIDER THE SAID AS PERQUISITES UNDER THE BONAFIDE BELIEF, THAT BASUNDHARA GAIJAN BAHAL AREA IS NOT ONLY GEOGRAPHICA11Y SITUATED IN A REMOTE ARE A BUT ALSO QUALIFY AS REMOTE AREA AS PER RULE 3 (1) PROVISO (II) OF THE INCOME TAX RULE 1962 READ WITH EXPLANATION V OF THE SAID RULE. THE ITO(TDS) HAD UNDERTAKEN A TDS INSPECTION UNDER CHAP TER XVIIB OF THE INCOME TAX ACT, 1961 IN THE OFFICE OF THE GEN ERAL MANAGER OF THE ASSESSEE AT BASUNDHARA GARJAN BAHAL AREA, BASUNDHARA IN THE DISTRICT OF SUNDARGARH ON DIFFERENT DATES AND SAID TO HAVE FOUND THAT THERE WAS SHORT DEDUCTION OF INCOME TAX FROM THE ESTIMATED SALARY OF THE EMPLOYEES POSTED AT BASUNDHARA GA RJAN BAHAL AREA, DUE TO THE FACT THAT TAXABLE VALUE OF CONCESSIONAL RESIDENTIAL ACCOMMODATION HAVE NOT BEEN TREATED AS A TAXABLE PERQUISITE AS PER SECT ION 17(2)(II) OF INCOME TAX ACT, 1961 READ WITH R UL E 3(1) PROVISO (II) AND CLAUSE - V OF EXPLANATION TO THE SAID R ULES AND HENCE ITA NO.28,29,30 AND 249/CTK/2010 3 NEITHER INCLUDED NOR CONSIDERED IN THE TOTAL TAXABLE SALARY INCOME OF THE EMPLOYEES FOR THE PURPOSE OF TDS UNDER SE CTION 192 OF THE INCOME TAX ACT, 1961 . NOTICE U/S.17(2)(II) OF THE ACT WAS ISSUED TO THE ASSESSEE ASKING THE DETAILS R EGARDING (I) TOTAL AMOUNT OF HOUSE PERQUISITE VALUE FOR ASSESSMENT YEAR UNDER CONSIDERATION, (II) T OTAL AMOUNT OF TDS UNDER SECTION 192 WERE TO BE DEDUCTIBLE ON THE HOUSE PERQUISITE VALUE FOR THE PERIODS UNDER CONSIDERATION, (III) T HE LIST OF EMPLOYEES TO WHOM CONCESSIONAL ACCOMMODATIONS HAVE BEEN PROVIDED ALONG WITH DESIGNATION, PERIOD OF OCCUPATION ETC. FOR PERIOD UNDER CONSIDERATION, AND (IV) C OPIES OF SALARY CERTIFICATES IN FORM NO.16 IN RESPECT OF EMPLOYEES STATED IN THIRD ITEM OF THE SAID LETTER FOR T HE PERIOD UNDER CONSIDERATION. THE ASSESSEE FURNISHED THE DETAILS AS REQUIRED BY THE ASSESSING OFFICER ON SUBSEQUENT DATES FURNISHING L IST OF EMPLOYEES TO WHOM, CONCESSIONAL A CCOMMODATION HAVE BEEN PROVIDED, FORM NO. 16 IN SOFT COPY FOR THE PERIOD UNDER CO NSIDERATION. THE ASSESSING OFFICER AFTER VERIFICATION OF THE DOCUMENTS FILED BY THE ASSESSEE THE ITO(TDS) HAS SERVED A SHOW CAUSE NOTICE UNDER 201(1) OF THE INCOME TAX ACT, 1961 BEARING MEMO NO. 846 DATED 2 1.01.2009 TO THE ASSESSEE ASKING AS TO WHY DEMAND S OF TAX NOT DEDUC TED TO THE TUNE OF 9,60,446 AS CALCULATED AND COMPUTED IN ANNEXURE - B ENCLOSED WITH THE SHOW CAUSE NOTICE ALONG WITH SIMPLE INTEREST @ 1% PER MONTH OR PART MONTH ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACTUAL LY PAID SHOULD NOT BE RAISED AGAINST U/S. 201(1) OF THE INCOME T AX A C, 1961 . THE ASSESSEE THROUGH ITS AUTHORISED REPRESENTATIVE APPEARED BEFORE THE ITO(TDS) ON THE DATE OF HEARING AND FILED AN ELABORATE WRITTEN S UBMISSION S THEREBY CLARIFYING THAT BOTH FAC TUALLY AND LEGALLY, THE ASSESSEE SHOULD NOT BE CONSIDERED AS AN ASSESSEE IN DEFAULT AS PER PROVISIONS OF SECTION 201 (1) OF THE INCOME TAX ACT , 1961. HOWEVER, THE ASSESSING OFFICER ITA NO.28,29,30 AND 249/CTK/2010 4 BY MISINTERPRETING THE CLAUSE (V) OF THE EXPLANATION TO THE RU LE 3(1) OF THE INCOME TAX RULES, 1962 R.W.S. 17(2)(II) OF THE I.T.ACT,1961 PASSED ORDERS U/S.201(1) AND U/S.201(1A) FOR THE RELEVANT PERIOD UNDER CONSIDERATION. AGGRIEVED BY THESE ORDERS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND THE LEARNED CIT(A) AFTER HEAR ING THE ASSESSEE AND CONSIDERING THE MATERIAL AVAILABLE ON ASSESSMENT RECORDS CONFIRMED THE ORDERS OF THE ITO(TDS). HENCE, THESE APPEALS ARE FILED BY THE ASSESSEE BEFORE THE TRIBUNAL. 5. DURING THE COURSE OF HEARING,THE LEARNED AR OF THE ASSESSEE HAS VEHEM ENTLY ARGUED THAT THE AREAS WHERE THE ASSESSEE HAS PROVIDED HOUSING ACCOMMODATION TO ITS EMPLOYEES ARE IN REMOTE AREA AS DEFINED IN CLAUSE (V) OF THE EXPLANATION TO RULE 3 OF THE INCOME - TAX RULES,1962. THEREFOER THE ACT OF THE ASSESSEE NOT DEDUCTING THE TDS IS NOT AT ALL INCORRECT AS THE ASSESSEE IS UNDER IMPRESSION THAT THE AREA IN WHICH THE ASSESSEE HAS PROVIDED HOUSING ACCOMMODATION TO ITS EMPLOYEES FALLS WITHIN REMOTE AREA AS DEFINED IN CLAUSE (V) OF THE EXPLANATION TO RULE 3 OF THE INCOME - TAX RUL ES,1961. BUT THIS PLEA OF THE ASSESSEE THOUGH RAISED CATEGORICALLY BEFORE THE LOWER AUTHORITIES WAS NOT ACCEPTED IN ITS RIGHT PERCEPTIVE AND THE DEPARTMENTAL AUTHORITIES BENT UPON TO MAKE THE ASSESSEE AS ASSESSEE IN DEFAULT AND CONSEQUENTLY LEVIED INTERE ST U/S.201(1A) OF THEI.T.ACT. HE FURTHER SUBMITTED THAT WHEN THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT THE TAX AT SOURCE AS THE AREAS ARE THE REMOTE AREA AS MENTIONED IN CLAUSE (V) OF EXPLANATION TO RULE 3 OF THE I.T.RULES,1962, THE AS SESSEE COULD NOT BE TERMED AS ASSESSEE IN DEFAULT AND CONSEQUENTLY NEITHER THE TAX LEVIED OR INTEREST LEVIED IS FASTENED IN THE ASSESSEE. THEREFORE, HE CONTENDED THAT THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW ARE NOT SUSTAINABLE FOR LEGAL SCRUTINY REQ UIRED TO BE SET ASIDE BY ALLOWING THE APPEALS OF THE ASSESSEE. ITA NO.28,29,30 AND 249/CTK/2010 5 6. CONTRARY TO THIS, THE LEARNED DR VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF THE LEARNED CIT(A) AND SOUGHT FOR DISMISSAL OF THE APPEALS OF THE ASSESSEE BY UPHOLDING THE SAME. HE ALSO POINTED OUT THAT THE ASSESSEE HAS NOT AT ALL VALUED THE PERQUISITES I.E., TO BE ADDED TO THE SALARIES TO WHOM IT PROVIDES EXEMPTION THEREBY THERE IS NO DEDUCTION OF TDS MADE BY THE ASSESSEE AS REQUIRED U/S.192 OF THE I.T.ACT. THEREFORE, THE FINDINGS OF THE LOWER AUTHORITIES THAT THE ASSESSEE IN DEFAULT IS CORRECT AND CONSEQUENTLY LIABLE TO PAY INTEREST U/S.201(1A) OF THE I.T.ACT. 7. ON CAREFUL PERUSAL OF THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES AND ANALYZING THE SAME IN THE LIGHT OF SUBMISSIONS OF BOTH THE PARTIES AND THE AUTHORITIES RELIED UPON BY THEM RESPECTIVELY, IT IS FOUND THAT THE FACTS RELATING TO THE ISSUES ARE NOT FULLY BROUGHT OUT BY THE DEPARTMENTAL AUTHORITIES INSOFAR AS THERE IS NO RECORDING OF FINDING BY THE AUTHORITIES TO THE EFFECT AS T O WHETHER THE EMPLOYEES CONCERNED ARE HAVING ASSESSABLE INCOME IN THEIR HANDS AND ALSO THAT WHETHER THEY HAVE PAID THE TAX ON THEIR INCOMES R ECEIVED FROM THE ASSESSEE, IF SO, WHEN AND WHAT AMOUNTS. THEREFORE, THE DEPARTMENTAL AUTHORITIES HAVE ONLY COMPUTED TH E DEMAND AGAINST THE ASSESSEE ONLY ON ASSUMED FIGURES IN A WAY THE ASSESSMENT MADE BY THE AUTHORITIES BELOW ARE ONLY ON PRESUMPTION AND ASSUMPTION BUT NOT ON ANY CONCRETE EVIDENCE MADE OUT ON RECORD. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THESE ISSU ES ARE JUST TO BE RESTORED TO THE FILE OF THE ITO(TDS) FOR DE NOVO CONSIDERATION AND REACHING TO A CONCLUSION WHETHER THE EMPLOYEES HAVE RECEIVED SALARY WHICH ARE TAXABLE IN THEIR HANDS AND IF SO WHETHER THEY HAVE PAID ANY TAX IN THEIR INDIVIDUAL ASSE SSMENTS AND FOR WHAT PERIODS AND WHAT IS THE AMOUNT. THE ITO(TDS) IS ALSO DIRECTED TO ASCERTAIN WHETHER ANY PERQUISITE IS GIVEN BY THE ASSESSEE TO THE EMPLOYEES MORE SO IN THE LIGHT OF REMOTE ITA NO.28,29,30 AND 249/CTK/2010 6 AREA AS DEFINED IN CLAUSE (V) OF THE EXPLANATION TO RULE 3 OF THEI.T.RULES,1962 AND THEN PASS NECESSARY CONSEQUENTIAL ORDER AS PER LAW OF COURSE STRICTLY FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. 8. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPEN COURT ON DT. 27. 7.2011 SD/ - SD/ - (K.K.GUPTA) ACCOUNTANT MEMBER (K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 5.8.2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1 . THE APPELLANT: THE GENERAL MANAGER, M/S.MAHANADI COAL FIELDS LTD., BASUNDHARA GARJAN BAHAL AREA, BASUNDHARA, DIST.SNDERGARH 770 076 2. THE RESPONDENT: INCOME - TAX OFFICER, TDS, ROURKELA. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.