Block Development Officer, Dhule V. ITO, Dhule

ITA 423/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3185 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 13-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS MANJU AJWANI
• Keywords: Salary income; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 423 TO 425/PN/09 (ASSTT. YEAR 2004-05 TO 20 06-07) BLOCK DEVELOPMENT OFFICER, PANCHAYAT SAMITI , C/O. D.P. LUNAWAL, ADV. NAHAR SHOPPING COMPLEX SAKRI ROAD DHULENSKPO2261A PAN NO. .... APPELLANT VS. ITO,(TDS) WARD 3(2), DHULE . RESPONDENT `````` APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : MRS. MANJU AJWANI ORDER PER D. KARUNAKARA RAO AM THESE THREE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, NASHIK DATED 02/02/2009 FOR A.Y 2004-05 TO 2006-07 RE SPECTIVELY. 2. AT THE VERY OUTSET, LD. COUNSEL FOR THE ASSESSEE M ENTIONED THAT THE CORE ISSUE IN ALL THESE APPEALS RELATED TO WHETHER THE PROV ISIONS OF SEC. 201(1A) ARE ALLOWABLE IN RESPECT OF THE PERSONS RESPONSIBLE AS PER SEC. 201 OF THE ACT, WHEN THE SAID PERSON FAILED TO DEDUCT AND PAY THE TAX AS AND WHEN THE SALARY IS PAID TO THE EMPLOYEES ON MONTHLY BASIS. FURTHER, HE MENTIONED THA T THE SAID ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS SUCH AS- 1. DOLPHIN DRILLING LTD. VS. ACIT (2009) 121 TTJ (DEL) 433 2. THE SECRETARY, BOARD OF SECONDARY EDUCATION, RAJ ASTHAN VS. ITO (2005) 93 TTJ (JP) 256. 3. VINSONS VS. ITO (2004) 83 TTJ (MUMBAI) 594 4. EXECUTIVE ENGINEER, T.L.C DIVISION, A.P STATE EL ECTRICITY BOARD VS. ITO (1987) 28 TTJ (HYD) 580 RELEVANT PARAGRAPHS OF THE ABOVE DECISIONS RELIED UPON BY THE COUNSEL ARE REPRODUCED AS UNDER:- ITA NOS. 423 TO 425/PN/09 A.Y. 2004-05 TO 2006-07 PAGE 2 OF 4 A. PARA 5 OF THE DECISION IN THE CASE OF THE SECRETARY, BOARD OF SECONDARY EDUCATION, RAJASTHAN VS. ITO (2005) 93 TT J (JP) 256. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SUB S. (3) OF S. 192 PROVIDES THAT AT THE TIME OF MAKING ANY DEDUCTION, THE PERSON RESPONSIBLE CAN INCREASE OR REDUCE THE AMOUNT TO BE DEDUCTED UNDER THIS SECTION FOR THE PURPOSE OF A DJUSTING ANY EXCESS OR DEFICIENCY ARISING OUT OF ANY PREVIOUS DEDUCTION OR FAILURE TO DEDUCT DURING THE FINANCIAL YEAR. IN THIS CASE, THE PERSON RESPON SIBLE FOR DEDUCTING THE TAX HAD MADE GOOD THE DEFICIENCY BEFORE CLOSE OF THE FI NANCIAL YEAR. THEREFORE, WE ARE OF THE OPINION THAT THE LEARNED CIT(A) HAD G ROSSLY ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER S. 201(1A) OF THE ACT ON THE RESPONSIBLE PERSON. FOLLOWING THE DECISION OF TRIBUNAL, MUMBAI BENCH H , IN THE CASE OF VINSONS VS. THIRD ITO (SUPRA), WE REVERSE THE ORDER OF THE LEARNED CIT(A). THE AO IS DIRECTED TO DELETE THE INTEREST CHARGED UNDER S.D 2 01(1A) OF THE ACT FOR BOTH THE YEARS. B. PARA 7 OF THE DECISION IN THE CASE OF EXECUTIV E ENGINEER, T.L.C DIVISION, A.P STATE ELECTRICITY BOARD VS. ITO (1987 ) 28 TTJ (HYD) 580 7. HAVING REGARD TO RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER OF THE AAC. T HIS IS A GENUINE CASE IN WHICH THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX FRO M THE SALARY INCOME OF THE EMPLOYEES IN THIS INITIAL STAGES EXCEPT IN THE CASE OF ONE. THE SALARIES OF THE EMPLOYEE EXCEEDED THE NON-TAXABLE LIMIT ON ACCOUNT OF EX GRATIA PAYMENTS, ADDITIONAL DEARNESS ALLOWANCE AND OTHER LUMPSUMS GR ANTED IN THE COURSE OF THE FINANCIAL YEAR. AS SOON AS THE ASSESSEE NOTICED THAT HE IS LIABLE TO DEDUCT AND PAY TAXES, HE HAD TAKEN EVERY EFFORT TO DEDUCT THE AMOUNT AND PAY THE SAME TO THE CREDIT OF THE CENTRAL GOVERNMENT WITHIN THE FINANCIAL YEAR. EVEN THOUGH S. 192(1) STIPULATES DEDUCTION OF INCOME TAX AT THE TIME OF PAYMENT ON THE ESTIMATED INCOME OF THE ASSESSEE UNDER THE H EAD SALARIES, SUB S. (3)F OF S. 192 GIVES A MARGIN FOR THE EMPLOYER TO ADJUST THE TAX DEDUCTIONS IN THE CASE OF SHORT DEDUCTION OR EXCESS DEDUCTION OR IN TH E CASE OF FAILURE TO DEDUCT DURING THE FINANCIAL YEAR. IN THE CASE OF THE ASSES SEE, THE ASSESSEE HAS DEDUCTED TAX WITHIN THE SAID FINANCIAL YEAR AND, HA S PAID THE SAME TO THE CREDIT OF THE CENTRAL GOVERNMENT WITHIN THE SAID FI NANCIAL YEAR, AND THEREFORE, THERE IS NO DEFAULT ON THE PART OF THE ASSESSEE IN TERMS OF S. 192(3) AND ITA NOS. 423 TO 425/PN/09 A.Y. 2004-05 TO 2006-07 PAGE 3 OF 4 UNLESS THERE IS DEFAULT, S. 201(1A) IS NOT APPLICAB LE. THEREFORE, THE INTEREST LEVIED IS CANCELLED. C. PARA 4 OF THE DECISION IN THE CASE VINSONS VS. ITO (2004) 83 TTJ (MUMBAI) 594 ..UNDER THESE CIRCUMSTANCES, CAN IT BE SAID THAT THE EMPLOYER IS A DEFAULTER AND FAILED TO DEDUCT THE TAX, SO AS TO CH ARGE INTEREST AT THE RATE OF 15 PER CENT ON THE ALLEGED SHORT DEDUCTION , I.E., RS. 2,500 PER MONTH? IN OUR CONSIDERED OPINION, THAT COULD NOT HAVE BEEN THE IN TENTION OF THE LEGISLATURE. TO MEET SUCH EVENTUALITIES SUB-S. (3) PROVIDES FOR ADJUSTMENT OF EXCESS OR DEFICIENCY ARISING OUT OF ANY PREVIOUS MONTHS OR FA ILURE TO DEDUCT DURING THE FINANCIAL YEAR. ANY OTHER INTERPRETATION WOULD REND ER S. 192(3) NUGATORY AND AN EMPLOYER WOULD BE PUT TO UNDUE BURDEN OF PAYMENT OF INTEREST FOR NO FAULT OF HIM. FROM THIS ANALYSIS, IT IS APPARENT TH AT ON MERE SHORT DEDUCTION OF TAX AT SOURCE FROM THE SALARIES PAID TO THE EMPL OYEES, S. 201(1A) CANNOT BE INVOKED UNLESS THE TOTAL TAX DEDUCTED BY THE END OF THE YEAR IS LESS THAN THE TAX DEDUCTIBLE ON THE SALARY PAID TO THE EMPLOY EE IN THAT YEAR. IN THE INSTANT CASE, THE ASSESSEE HAS REASONABLY ESTIMATED THE INCOME AND IN VIEW OF THE WORKERS INSISTENCE AND OTHER CIRCUMSTANCES T HERE WAS A SHORT DEDUCTION OF TAX AT THE BEGINNING OF THE FINANCIAL YEAR WHICH IS ADJUSTED IN THE LATER MONTHS. 3. FROM THE ABOVE, IT IS EVIDENT THAT THE EMPLOYER WH EN MAKE PROPER DEDUCTION OF TDS AND MAKE THE PAYMENT TO THE GOVERNMENT DURING THE RELEVANT FINANCIAL YEAR, A BDO CANNOT BE HELD RESPONSIBLE UNDER SECTION 201(1A ) AND THESE PROVISIONS SHOULD NOT TO BE INVOKED. FROM THE DOCUMENTS FILED BEFORE US, WE FIND THAT THE ASSESSEES PERSONS RESPONSIBLE HAVE MADE UP THE SHORT FALL IF ANY BEFORE THE END OF THE RELEVANT FINANCIAL YEARS IE., F.YS 2004-05, 2005 -06 AND 2006-07. THE PERSONS RESPONSIBLE DEDUCTED THE SUMS RS. 3,49,856/-2,60,30 8/- AND 2,30,154/- FOR THE SAID FYS IN THE MONTHS OF MARCH, 2005, 2006 & 2007 RESPECT IVELY AND PAID THE SAME TO THE CREDIT OF THE GOVERNMENT IN THE SAME MONTH ITSELF . THUS, THE ABOVE CITED DECISIONS HAVE DIRECT APPLICATION TO THE FACTS OF TH E CASE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE FOR ALL THE THREE YEARS ARE ALLOWED . 4. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 12 TH NOVEMBER, 2010. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 12 TH NOVEMBER, 2010 R ITA NOS. 423 TO 425/PN/09 A.Y. 2004-05 TO 2006-07 PAGE 4 OF 4 COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ITO, (TDS) WARD 3(2), DHULE 3. CIT(A)-II, NASHIK 4. CIT-I, NASHIK 5. D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE