M/s Karnataka Chemist Foundation, Bangalore V. ITO, Bangalore

ITA 608/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1443 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Non-deduction of tax

Judgement Text

ITA.608/BANG/2010 PA GE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A NO.608/BANG/2010 (ASSESSMENT YEAR : 2006-07) M/S. KARNATAKA CHEMIST FOUNDATION, KCDA 3RD FLOOR, LAKSHMI COMPLEX, K.R. ROAD, .. AP PELLANT BANGALORE 560 002 V. INCOME-TAX OFFICER (INTERNATIONAL TAXATION), WARD -1 (2), BANGALORE .. RESPONDENT APPELLANT BY : SHRI. SACHIN KUMAR, CA RESPONDENT BY : SHRI. RONMOY DAS,COMMISSIONER OF I NCOME-TAX-III O R D E R PER DR. O. K. NARAYANAN, VICE PRESIDENT : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVAN T ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(A)-IV, AT BANGALORE, DAT ED.29.03.2010 AND ARISES OUT OF THE ORDER PASSED U/S.201(1A) R.W. S.195 OF THE INCOME-TAX ACT, 1961. 02. THE ASSESSEE HAD PURCHASED A PROPERTY. LATERON IT WAS FOUND THAT THE PROPERTY WAS SOLD BY A NON-RESIDENT INDIAN . THE SALE OF THE ITA.608/BANG/2010 PA GE - 2 PROPERTY HAS GENERATED CAPITAL GAINS IN THE HANDS O F THE SELLER. THEREFORE, THE ASSESSING OFFICER HELD THAT THE ASSE SSEE WAS LIABLE TO DEDUCT TAX AT SOURCE BEFORE MAKING THE PAYMENT OF C ONSIDERATION. 03. BEFORE CONCLUDING THE PROCEEDINGS, THE ASSESSEE COULD SUCCESSFULLY ESTABLISH BEFORE THE ASSESSING AUTHORI TY THAT THE SELLER OF THE PROPERTY HAD ALREADY FILED THE RETURN OF INCOME DECLARING THE LONG- TERM CAPITAL GAINS ACCOUNTABLE IN HER HANDS AND PAI D TAX THEREON. WHEN THIS MATTER WAS THUS EXPLAINED, THE ASSESSING OFFICER DROPPED THE PROPOSAL OF FASTENING THE ENTIRE LIABILITY ON T HE ASSESSEE AND INSTEAD CONFINED THE IMPOSITION TO THE AMOUNT OF INTEREST L EVIABLE U/S.201(1A). HE LEVIED AN INTEREST OF ` .1,55,940/-. THIS ISSUE HAS BEEN CONFIRMED IN FIRST APPEAL. THEREFORE THE SECOND APPEAL BEFORE U S. 04. WE HEARD BOTH SIDES AND CONSIDERED THE ISSUE. THE LEVY OF PENALTY U/S.201(1A) MAY BE MANDATORY BUT THE QUESTI ON TO BE EXAMINED IS WHETHER SUCH LEVY ITSELF IS JUSTIFIED O R NOT. IN THE PRESENT CASE, EVEN THOUGH THE SELLER OF THE PROPERTY WAS AN NRI, THE SELLER WAS PRESENT IN INDIA AT THE TIME OF SALE AND HAD HERSEL F FILED THE RETURN OF INCOME DECLARING THE TAXABLE CAPITAL GAINS. SHE HA S PAID THE TAX DUE AND THE INTEREST LIABILITY THEREON. ACCORDINGLY, T HE ENTIRE DEMAND OF THE REVENUE HAS BEEN SATISFIED BY THE SELLER OF THE PROPERTY HERSELF, ITA.608/BANG/2010 PA GE - 3 WHO SHOULD BE EVEN OTHERWISE ACTUALLY ASSESSED FOR THE CAPITAL GAINS. WHEN THE SELLER HERSELF HAS FILED THE RETURN OF INC OME AND PAID THE TAX AND INTEREST, THE DEFAULT OF NON-DEDUCTION OF TAX B ECOMES ONLY A TECHNICAL DEFECT AND NOT A SUBSTANTIVE CAUSE OF ACT ION. FROM ANOTHER VIEW POINT, ONCE ASSESSMENT IN THE HANDS OF THE SEL LER HERSELF HAS BEEN COMPLETED ON SUBSTANTIVE BASIS, ANY ACTION ON THE A SSESSEE WOULD BE ONLY IN THE NATURE OF A PROTECTIVE ACTION. ONCE TH E SUBSTANTIVE ASSESSMENT HAS REACHED FINALITY, ANY ACTION ON A PR OTECTIVE BASIS CANNOT SURVIVE. 05. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE CANNOT BE CON SIDERED AS AN ASSESSEE IN DEFAULT AND AS SUCH THE ASSESSEE CANNOT BE VISITED WITH LEVY OF INTEREST. ACCORDINGLY, THE ORDER PASSED U/S.201 (1A) IS VACATED AND CONSEQUENTLY THE ORDER OF THE COMMISSIONER OF INCOM E-TAX(A) ALSO STANDS VACATED. THE LEVY OF INTEREST IS DELETED. 06. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT AT THE TIME OF HEARI NG ON THIS DAY, THE 30TH OF MARCH, 2011, AT BANGALORE. SD/- SD/- (P. MADHAVI DEVI) (DR. O. K. NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT ITA.608/BANG/2010 PA GE - 4