Branch Manager, Ghaziabad V. ITO, Ghaziabad

ITA 5992/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6714 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-12-2015
• Assessment Year: misc
• Appeal Filed On: 03-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU JA IN; K K JAISWAL
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI A.T. VARKEY, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NOS.5992, 5993 & 5994/DEL./2012 (ASSESSMENT YEARS : 2002-03, 2003-04 & 2004-05) THE BRANCH MANAGER, VS. ITO, (TDS/SURVEY), ALLAHABAD BANK, GHAZIABAD. WRIGHT GANJ, GHAZIABAD. (TAN : MRTA01074D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.P. RASTOGI, ADVOCATE REVENUE BY : SHRI RANU JAIN, CIT DR AND SHRI K.K. JAISWAL, DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THESE ARE THREE APPEALS BY THE ASSESSEE AGAINST A C OMMON ORDER OF THE CIT (APPEALS), GHAZIABAD DATED 13.09.2012 FOR ASSES SMENT YEARS 2002-03, 2003-04 AND 2004-05. 2. THE ASSESSEE RAISES THE VERY INITIATION OF PROCE EDINGS BY THE AO(TDS) U/S 201 AND 201 (1A) OF THE INCOME-TAX ACT, 1961 (H EREINAFTER THE ACT) I.E. AO (TDS) COULD NOT HAVE INITIATED THE PROCEEDINGS U /S 201 & 201(1A) OF THE ACT, WITHOUT SATISFYING HIMSELF AS TO WHETHER THE D EDUCTEE/PAYEE ASSESSEE HAS FAILED TO PAY TAXES DIRECTLY, WHICH HAS BEEN HELD A S FOUNDATIONAL AND ITA NOS.5992, 5993 & 5994/DEL./2012 2 JURISDICTIONAL FACT AND ONLY AFTER FINDING THAT DED UCTEE/PAYEE ASSESSEE HAS FAILED TO PAY TAX DIRECTLY, DEDUCTOR I.E. THE ASSES SEE CAN BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX AND THER E AFTER ONLY NOTICE U/S 201/201(1A) CAN BE ISSUED AND WITHOUT SATISFYING T HIS JURISDICTIONAL FACT BY THE AO(TDS) THE VERY INITIATION OF PROCEEDINGS WOUL D BE WITHOUT JURISDICTION AND ALL SUBSEQUENT ACTION WOULD BE WITHOUT JURISDIC TION AND WOULD BE NULL AND VOID. 3. THOUGH THE IMPUGNED ORDER OF THE AO IS AFTER T HE DIRECTION OF THE ITAT, WE TAKE NOTE THAT THE HONBLE JURISDICTIONAL HIGH COURT (ALLAHABAD HIGH COURT) HAS SETTLED THE LAW, IN RESPECT TO THE ISSUE BEFORE US IN THE CASE OF M/S. JAGRAN PRAKASHAN LTD. VS. DCIT 345 ITR 288 ( ALL.) HELD AS UNDER :- ..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 A UTHORITIES HAD NOT ADVERTED TO THE EXPLANATION TO SECTION 191 NOR HAD APPLIED THEIR MIND AS TO WHETHER THE ASSESSEE HAS ALSO FAIL ED TO PAY SUCH TAX DIRECTLY. THUS, TO DECLARE A DEDUCTOR, WHO FAIL ED TO DEDUCT THE TAX AT SOURCE AS AN ASSESSEE IN DEFAULT, CONDIT ION PRECEDENT IS THAT ASSESSEE HAS ALSO FAILED TO PAY TAX DIRECTLY. THE FACT THAT ASSESSEE HAS FAILED TO PAY TAX DIRECTLY IS THUS, FO UNDATIONAL AND JURISDICTIONAL FACT AND ONLY AFTER FINDING THAT ASS ESSEE HAS FAILED TO PAY TAX DIRECTLY, DEDUCTOR CAN BE DEEMED TO BE A N ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX.. THE LAW IN RESPECT OF INITIATION OF PROCEEDINGS U/S 201/201(1A) HAVE BEEN SETTLED ONLY AFTER THE AFORESAID PRONOUNCEMENT OF T HE ORDER IN YEAR 2012 AND THE ITAT ORDER IN THE FIRST ROUND TO THE AO WAS WAY BACK, SO NOW WE ARE ITA NOS.5992, 5993 & 5994/DEL./2012 3 BOUND TO FOLLOW THE LAW LAID BY THE HONBLE JURISDI CTIONAL HIGH COURT IN M/S. JAGRAN PRAKASHAN LTD. (SUPRA) IN ASSESSEES OWN CASE IN A SIMILAR MATTER THE AGRA BENCH OF THE TRIBUNAL OBSERVED AFTER TAKING NOTE OF THE LAW LAID IN M/S J AGRITI PRAKASHAN LTD (SUPRA) HELD AS UNDER : 6. IT IS THUS CLEAR THAT THE ONUS IS ON THE REVENU E TO DEMONSTRATE THAT THE TAXES HAVE NOT BEEN RECOVERED FROM THE PERSON WHO HAD THE PRIMARILY LIABILITY TO PAY TAX, AND IT IS ONLY WHEN THE PRIMARY LIABILITY IS NOT DISCHARGED THAT V ICARIOUS RECOVERY LIABILITY CAN BE INVOKED. ONCE ALL THE DET AILS OF THE PERSONS TO WHOM PAYMENTS HAVE BEEN MADE ARE ON RECO RD, IT IS FOR THE ASSESSING OFFICER, WHO HAS AL L THE POWERS TO REQUISITION THE INFORMATION FROM SUCH PAYERS AND FR OM THE INCOME TAX AUTHORITIES, TO ASCERTAIN WHETHER OR NOT TAXES HAVE BEEN PAID BY THE PERSONS IN RECEIPT OF THE AMOUNTS FROM WHICH TAXES HAVE NOT BEEN WITHHELD. AS A RESULT OF THE JU DGMENT OF HONBLE ALLAHABAD HIGH COURT IN JAGRAN PRAKASHANS CASE (SUPRA), THERE IS A PARADIGM SHIFT IN THE MANNER IN WHICH RECOVERY PROVISIONS UNDER SECTION 201(1) CAN BE INV OKED. AS OBSERVED BY THEIR LORDSHIPS, THE PROVISIONS OF SECT ION 201(1) CANNOT BE INVOKED AND THE 'TAX DEDUCTOR CANNOT BE T REATED AN ASSESSEE IN DEFAULT TILL IT IS FOUND THAT ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY' . ONCE THIS FINDING ABOUT THE NON- PAYMENT OF TAXES BY THE RECIPIENT IS HELD TO A COND ITION PRECEDENT TO INVOKING SECTION 201(1), THE ONUS IS O N THE ASSESSING OFFICER TO DEMONSTRATE THAT THE CONDITION IS SATISFIED. NO DOUBT THE ASSESSEE HAS TO SUBMIT ALL SUCH INFORM ATION ABOUT THE RECIPIENT AS HE IS OBLIGED TO MAINTAIN UNDER TH E LAW, ONCE THIS INFORMATION IS SUBMIT TED, IT IS FOR THE ASSES SING 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 ALLAHABAD HIGH COURT. FROM A READING OF THE AOS ORDER, IT IS CLEAR THAT AO HAS NOT MADE ANY EXERCISE TO ASCERTAIN WHETHER THE DEDUCTEE / PAYEE ASSESSEE HAS FAILED TO PAY ITA NOS.5992, 5993 & 5994/DEL./2012 4 TAXES DIRECTLY BEFORE INITIATION OF PROCEEDINGS U/S 201/201(1A) OF THE ACT, THUS ASSUMPTION OF JURISDICTION ITSELF STANDS VITIA TED AND ALL SUBSEQUENT PROCEEDINGS ARE NULL IN THE EYES OF LAW. THEREFORE , WE QUASH THE INITIATION OF PROCEEDINGS OF THE AO AT THE OUTSET ITSELF. THE AO OUGHT TO HAVE ASSUMED JURISDICTION ONLY AFTER SATISFYING THE JURISDICTION AL FACT AS LAID BY THE HONBLE JURISDICTIONAL HIGH COURT WHICH AS STATED BEFORE IS OBVIOUSLY ABSENT. SO, WE QUASH THE IMPUGNED ASSESSMENTS ITSELF. 4. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSE SSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 4 TH DAY OF MARCH, 2016. SD/- SD/- (L.P. SAHU) (A.T. VARKEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 4 TH DAY OF MARCH, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), GHAZIABAD. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.