Accounts Officer, Etawah V. ACIT(TDS)- 1, Agra

ITA 372/AGR/2013

• Counselvise Citation: 37220314 RSA 2013
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANURADHA
• Assessee Lawyers: J L VERMA; ANIL VERMA S
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NOS.372, 373 & 374/AGRA/2013 ASSESSMENT YEARS: 2008-09, 2009-10 & 2010-11 ACCOUNTS OFFICER, VS. A.C.I.T (TDS), BHARAT SANCHAR NIGAM LIMITED, AGRA. O/O. THE TDM, ETAWAH. (PAN AABCB 5576 B). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.L. VERMA & SHRI ANIL VERMA, ADVOCATES RESPONDENT BY : SMT. ANURADHA, JR. D.R. DATE OF HEARING : 26.02.2014 DATE OF PRONOUNCEMENT : 26.02.2014 ORDER PER PRAMOD KUMAR, ACCOUNTANT MEMBER: THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE CONSOLIDATED ORDER DATED 22.08.2013 PASSED BY THE L D. CIT(A)-II, AGRA IN THE MATTER OF DEMANDS RAISED UNDER SECTION 201/201(1A) READ WITH SECTION 194H OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEARS 2008 -09, 2009-10 & 2010-11. AS THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON AND THE GRIEVANCES ARISED ON A COMMON SET OF MATERIAL FACTS, WE DEEM I T PROPER TO DISPOSE OF ALL THE THREE APPEALS BY WAY OF THIS CONSOLIDATED ORDER. ITA NOS.372, 373 & 374/AGRA/2013 A.YS. 2008-09, 2009-10 & 2010-11 2 2. THE APPEALS ARE TIME BARRED BY 55 DAYS BUT THE A SSESSEE HAS MOVED A PETITION SEEKING CONDONATION OF DELAY. HAVING PERUSED THE P ETITION AND HAVING HEARD LD. DEPARTMENTAL REPRESENTATIVE ON THE SAME, WE DEEM IT FIT AND PROPER TO CONDONE THE DELAY AND PROCEED TO TAKE UP THE APPEALS ON MERITS. ACCORDINGLY, WE ADMIT THE APPEALS FOR CONSIDERATION ON MERITS. 3. TO ADJUDICATE ON THESE APPEALS, ONLY FEW MATERIA L FACTS NEED TO BE TAKEN NOTE OF. THE A.O. (TDS) HAS RAISED THE DEMANDS ON THE A SSESSEE, A GOVERNMENT UNDERTAKING, ON ACCOUNT OF ASSESSEES NOT HAVING DE DUCTED TAX AT SOURCE IN RESPECT OF DISCOUNT OF RECHARGE VOUCHERS ALLOWED TO THE FRA NCHISEES. THE A.O. WAS OF THE VIEW THAT THE ASSESSEE WAS UNDER AN OBLIGATION TO D EDUCT TAX AT SOURCE UNDER SECTION 194H OF THE ACT IN RESPECT OF THE DISCOUNT SO ALLOWED TO THE FRANCHISEES. WHEN ASSESSEE CARRIED THE GRIEVANCE IN APPEAL BEFOR E THE LD. CIT(A), THE LD. CIT(A) ALSO CONFIRMED THE DEMANDS SO RAISED UNDER S ECTION 201/201(1A) READ WITH SECTION 194H OF THE INCOME TAX ACT, 1961. THE ASSE SSEE WAS NOT SATISFIED AND IS IN APPEAL BEFORE US. DURING THE COURSE OF HEARING BEFORE US, IT WAS NOTICED THAT THERE IS NO FINDING BY THE A.O. TO THE EFFECT THAT THE RECIPIENT OF THE MONEY I.E. FRANCHISEES HAVE NOT PAID THE TAXES ON INCOME EMBED DED IN THE AMOUNTS IN QUESTION. IN THIS BACKGROUND, WE ARE OF THE CONSID ERED VIEW THAT THE MATTER DESERVES TO BE SENT BACK TO THE FILE OF A.O. FOR RE CONSIDERATION IN THE LIGHT OF ITA NOS.372, 373 & 374/AGRA/2013 A.YS. 2008-09, 2009-10 & 2010-11 3 FOLLOWING OBSERVATIONS MADE BY THE CO-ORDINATE BENC H IN DUE DEFERENCE TO HONBLE ALLAHABAD HIGH COURTS JUDGEMENT IN THE CAS E OF JAGRAN PRAKASHAN LIMITED VS. DCIT (2012) 21 TAXMAN.COM 489 (ALL), IN THE CASE OF ICICI BANK LIMITED VS. DCIT, 156 TTJ 569:- 6. IT IS, HOWEVER, IMPORTANT TO BEAR IN MIND THE S ETTLED LEGAL POSITION THAT A SHORT DEDUCTION OF TAX AT SOURCE, B Y ITSELF DOES NOT RESULT IN A LEGALLY SUSTAINABLE DEMAND U/S 201(1) A ND U/S 201(1A). AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF HINDUS TAN COCA COLA BEVERAGE PVT. LTD. VS. CIT (293 ITR 226), THE TAXES CANNOT BE RECOVERED ONCE AGAIN FROM THE ASSESSEE IN A SITUATI ON IN WHICH THE RECIPIENT OF INCOME HAS PAID DUE TAXES ON INCOME EM BEDDED IN THE PAYMENTS FROM WHICH TAX WITHHOLDING REQUIREMENTS WE RE NOT FULLY OR PARTLY, COMPLIED WITH. HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE OF JAGRAN PRAKASHAN LTD VS DCIT [(2012) 21 TAXMANN. COM 489 ALL] ALSO HAS, INTER ALIA, OBSERVED AS FOLLOWS: ..IT IS CLEAR THAT DEDUCTOR CANNOT BE TREATED AN ASSESSEE IN DEFAULT TILL IT IS FOUND THAT ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY. IN THE PRESENT CASE, THE INCOME TAX AUTHORITIES HAD NOT ADVERTED TO THE EXPLANATION TO SECTION 191 NOR HAD APPLIED THEIR MIND AS TO WHETHER THE ASSESS EE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY. THUS, TO DECLARE A DEDUCTOR, WHO FAILED TO DEDUCT THE TAX AT SOURCE AS AN ASSESS EE IN DEFAULT, CONDITION PRECEDENT IS THAT ASSESSEE HAS A LSO FAILED TO PAY TAX DIRECTLY. THE FACT THAT ASSESSEE HAS FAILED TO PAY TAX DIRECTLY IS THUS, FOUNDATIONAL AND JURISDICTIONAL F ACT AND ONLY AFTER FINDING THAT ASSESSEE HAS FAILED TO PAY TAX D IRECTLY, DEDUCTOR CAN BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX.. 7. IT IS THUS CLEAR THAT THE ONUS IS ON THE REVENU E TO DEMONSTRATE THAT THE TAXES HAVE NOT BEEN RECOVERED FROM THE PER SON WHO HAD THE PRIMARILY LIABILITY TO PAY TAX, AND IT IS ONLY WHEN THE PRIMARY LIABILITY IS NOT DISCHARGED THAT VICARIOUS RECOVERY LIABILITY CAN BE INVOKED. ONCE ALL THE DETAILS OF THE PERSONS TO WHOM PAYMENT S HAVE BEEN MADE ARE ON RECORD, IT IS FOR THE ASSESSING OFFICER, WHO HAS AL L THE POWERS TO REQUISITION THE INFORMATION FROM SUCH PAYERS AND FROM THE INCOME ITA NOS.372, 373 & 374/AGRA/2013 A.YS. 2008-09, 2009-10 & 2010-11 4 TAX AUTHORITIES, TO ASCERTAIN WHETHER OR NOT TAXES HAVE BEEN PAID BY THE PERSONS IN RECEIPT OF THE AMOUNTS FROM WHICH TA XES HAVE NOT BEEN WITHHELD. AS A RESULT OF THE JUDGMENT OF HONBLE AL LAHABAD HIGH COURT IN JAGRAN PRAKASHANS CASE (SUPRA), THERE IS A PARADIGM SHIFT IN THE MANNER IN WHICH RECOVERY PROVISIONS UNDER SE CTION 201(1) CAN BE INVOKED. AS OBSERVED BY THEIR LORDSHIPS, THE PRO VISIONS OF SECTION 201(1) CANNOT BE INVOKED AND THE 'TAX DEDUCTOR CANN OT BE TREATED AN ASSESSEE IN DEFAULT TILL IT IS FOUND THAT ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY' . ONCE THIS FINDING ABOUT THE NO N-PAYMENT OF TAXES BY THE RECIPIENT IS HELD TO A CONDITION PRECEDENT T O INVOKING SECTION 201(1), THE ONUS IS ON THE ASSESSING OFFICER TO DEM ONSTRATE THAT THE CONDITION IS SATISFIED. NO DOUBT THE ASSESSEE HAS T O SUBMIT ALL SUCH INFORMATION ABOUT THE RECIPIENT AS HE IS OBLIGED TO MAINTAIN UNDER THE LAW, ONCE THIS INFORMATION IS SUBMITTED IS FOR THE ASSESSING OFFICER TO ASCERTAIN WHETHER OR NOT THE TAXES HAVE BEEN PAID B Y THE RECIPIENT OF INCOME. THIS APPROACH, IN OUR HUMBLE UNDERSTANDING, IS IN CONSONANCE WITH THE LAW LA ID DOWN BY HONBLE ALLAH ABAD HIGH COURT. 8. IT IS IMPORTANT TO BEAR IN MIND THAT THE LAPSE ON ACCOUNT OF NON- DEDUCTION OF TAX AT SOURCE IS TO BE VISITED WITH TH REE DIFFERENT CONSEQUENCES PENAL PROVISIONS, INTEREST PROVISION S AND RECOVERY PROVISIONS. THE PENAL PROVISIONS IN RESPECT OF SUCH A LAPSE ARE SET OUT IN SECTION 271 C. SO FAR AS PENAL PROVISIONS ARE CO NCERNED, THE PENALTY IS FOR LAPSE ON THE PART OF THE ASSESSEE AN D IT HAS NOTHING TO DO WITH WHETHER OR NOT THE TAXES WERE ULTIMATELY RECOV ERED THROUGH OTHER MEANS. THE PROVISIONS REGARDING INTEREST IN DELAY I N DEPOSITING THE TAXES ARE SET OUT IN SECTION 201(1A). THESE PROVISI ONS PROVIDE THAT FOR ANY DELAY IN RECOVERY OF SUCH TAXES IS TO BE COMPEN SATED BY THE LEVY OF INTEREST. AS FAR AS RECOVERY PROVISIONS ARE CONCERN ED, THESE PROVISIONS ARE SET OUT IN SECTION 201(1) WHICH SEEKS TO MAKE G OOD ANY LOSS TO REVENUE ON ACCOUNT OF LAPSE BY THE ASSESSEE TAX DED UCTOR. HOWEVER, THE QUESTION OF MAKING GOOD THE LOSS OF REVENUE ARI SES ONLY WHEN THERE IS INDEED A LOSS OF REVENUE AND THE LOSS OF R EVENUE CAN BE THERE ONLY WHEN RECIPIENT OF INCOME HAS NOT PAID TAX. THE REFORE, RECOVER Y PROVISIONS UNDER SECTION 201(1) CAN BE INVOKED ONLY WHEN LOSS TO REVENUE IS ESTABLISHED, AND THAT CAN ONLY BE ESTABL ISHED WHEN IT IS DEMONSTRATED THAT THE RECIPIENT OF INCOME HAS NOT P AID DUE TAXES THEREON. IN THE ABSENCE OF THE STATUTORY POWERS TO REQUISITION ANY INFORMATION FROM THE RECIPIENT OF INCOME, THE ASSES SEE IS INDEED NOT ALWAYS ABLE TO OBTAIN THE SAME. THE PROVISIONS TO M AKE GOOD THE SHORT FALL IN COLLECTION OF TAXES MAY THUS END UP BEING I NVOKED EVEN WHEN ITA NOS.372, 373 & 374/AGRA/2013 A.YS. 2008-09, 2009-10 & 2010-11 5 THERE IS NO SHORTFALL IN FACT. ON THE OTHER HAND, O NCE ASSESSEE FURNISHES THE REQUISITE BASIC INFORMATION, THE ASSE SSING OFFICER CAN VERY WELL ASCERTAIN THE RELATED FACTS ABOUT PAYMENT OF TAXES ON INCOME OF THE RECIPIENT DIRECTLY FROM THE RECIPIENTS OF IN COME. I T IS NOT THE REVENUES CASE BEFORE US THAT, ON THE FACTS OF THIS CASE, SUCH AN EXERCISE BY THE ASSESSING OFFICER IS NOT POSSIBLE. IT DOES PUT AN ADDITIONAL BURDEN ON THE ASSESSING OFFICER BEFORE H E CAN INVOKE SECTION 201(1) BUT THAT SHOW HONBLE HIGH COURT HA S VISUALIZED THE SCHEME OF ACT AND THATS HOW, THEREFORE, IT MEETS T HE EN D O F JUSTICE. 9. AS FAR AS LEVY OF INTEREST UNDER SECT ION 201(1 A) IS CONCERNED, THIS INTEREST IS ADMITTEDLY A COMPENSATORY INTEREST IN NATURE AND IT SEEKS TO COMPENSATE THE REVENUE FOR DELAY IN REALIZ ATION OF TAXES. HONBLE BOMBAY HIGH COURT, IN THE CASE OF BENNETT C OLEMAN & CO LTD VS ITO (157 ITR 812) HAS HELD SO. THEREFORE, LE VY OF INTEREST UNDER SECTION 201(1A) IS APPLICABLE WHETHER OR NOT THE ASSESSEE WAS AT FAULT. HOWEVER, SINCE IT IS ONLY COMPENSATORY IN NATURE IT IS APPLICABLE FOR THE PERIOD OF THE DATE ON WHICH TAX WAS REQUIRED TO BE DEDUCTED TILL THE DATE WHEN TAX WAS EVENTUALLY PAID . HOWEVER, IN A CASE IN WHICH THE RECIPIENT OF INCOME HAD NO TAX LI ABILITY EMBEDDED IN SUCH PAYMENTS, THERE WILL OBVIOUSLY BE NO QUESTION OF DELAY IN REALIZATION OF TAXES AND THE PROVISIONS OF SECTION 201(1A) WILL NOT COME INTO PLAY AT ALL. THE COMPUTATION OF INTEREST IS TO BE REDONE IN THE LIGHT OF THIS LEGAL POSITION. 10. THE MATTER THUS STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH T HE LAW AND IN THE LIGHT OF OUR OBSERVATIONS ABOVE. WHILE DOING SO, TH E ASSESSING OFFICER WILL GIVE A DUE AND FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE AND DISPOSE OF THE MATTER BY WAY OF A SPEAKING ORDER. W E DIRECT SO. 4. THE LD. DEPARTMENTAL REPRESENTATIVE DID NOT HAVE MUCH TO SAY BEYOND PLACING HER RELIANCE ON THE ORDERS OF THE AUTHORITI ES BELOW AND CONTENDING THAT ON MERIT OF THE CASE THE ASSESSEE OUGHT TO HAVE DEDUCT ED TAX AT SOURCE. THAT PLEA OF HERS IS NOT RELEVANT IN THE ABOVE CONTEXT IN AS MUC H AS TDS LIABILITY IS ONLY A VICARIOUS LIABILITY. IN THE CIRCUMSTANCES IN WHICH PRINCIPAL LIABILITY IS DISCHARGED, VICARIOUS LIABILITY DOES NOT SURVIVE. IN ANY EVENT , THE ISSUE ALSO SEEMS TO BE ITA NOS.372, 373 & 374/AGRA/2013 A.YS. 2008-09, 2009-10 & 2010-11 6 COVERED, ON MERITS, IN FAVOUR OF THE ASSESSEE BY DE CISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. BHARAT SA NCHAR NIGAM LIMITED (95 DTR 253). DURING THE COURSE OF REMANDED PROCEEDING S THE ASSESSING OFFICER SHALL EXAMINE THIS ASPECT OF THE MATTER AS WELL. 5. IN VIEW OF THE ABOVE DISCUSSION AND ALSO BEARING IN MIND THE ENTIRETY OF THE CASE, WE REMIT THE MATTER TO THE FILE OF A.O. TO AD JUDICATE THE ISSUE DE NOVO IN THE LIGHT OF THE ABOVE DISCUSSION. 6. IN THE RESULT, ALL THE THREE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY, 2014) SD/- SD/- (BHAVNESH SAINI) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 26 TH FEBRUARY, 2014 PBN/* COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY