ICICI Bank Ltd., Lucknow V. DCIT, Lucknow

ITA 667/LKW/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3325 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-05-2013
• Assessment Year: misc
• Appeal Filed On: 11-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RANU BISWAS
• Section: 201(1)

Judgement Text

I TA NO. 667 /LKW / 201 1 ASSESSMENT YEAR: 2008 - 09 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW A BENCH, LUCKNOW BEFORE SHRI SUNIL K YADAV (JUDICIAL MEMBER), AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NO 667/L KW / 2011 ASSESSMENT YEAR: 2008 - 09 ICICI BANK LTD ..APPELLANT BRANCH GOMTI NAGAR, LUCKNOW - 226010 [PAN:AAACI1195H] VS. DEPUTY COMMISSIONER OF INCOME TAX TDS RANGE, LUCKNOW RESPONDENT APPEARANCES: NONE , FOR THE APPELLANT RANU BISWAS , FOR THE RESPONDENT DATE OF HEARING : MAY 30 , 2013 DATE OF PRONOUNCEME NT : JUNE 06 , 2013 O R D E R PER PRAMOD KUMAR : 1. BY WAY OF THIS APPEAL THE ASSESSEE HAS CHALLENGED CORRECTNESS OF CIT (A)S ORDER DATED 01.08.2011, IN THE MATTER OF DEMAND RAISED U/S 201(1A) R.W.S.194A OF THE INCOME TAX ACT 1961 ON THE FOLLOW ING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. LOWER AUTHORITIES ERRED ON FACTS AND IN LAW IN HOLDING THE APPELLANT LIABLE FOR SHORT DEDUCTION OF TAX AT SOURCE WHILE I TA NO. 667 /LKW / 201 1 ASSESSMENT YEAR: 2008 - 09 PAGE 2 OF 7 MAKING PAYMENT OF INTEREST TO M/S SOFTWARE TECHNOLOGY PA RKS OF INDIA, LUCKNOW, A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. LOWER AUTHORITIES ERRED ON FACTS AND IN LAW IN HOLDING THE APPELLANT LIABLE FOR INTEREST ON LATE DEP OSIT OF THE AMOUNT OF TAX DEDUCTED AT SOURCE WHILE MAKING PAYMENT OF INTEREST TO VARIOUS DEDUCTEES AS PER THE PROVISIONS OF SECTION 194A OF THE INCOME TAX ACT, 1961 READ WITH, RULE 30(1)(B) (I)(1) OF THE INCOME TAX RULES, 1962 RESPECTIVELY. 2. BRIEFLY S TATED THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IT IS A CASE OF SHORT DEDUCTION OF TAX AT SOURCE INASMUCH AS WHILE THE ASSESSEE TAX DEDUCTER HAS DEDUCTED TAX @ 10.3%, THE ASSESSING OFFICER (TDS) WAS OF THE VIEW THAT TAX SHOULD HAVE BEEN DEDUCTED @ 11.33%. AGGRIEVED ASSESSEE TAX DEDUCTER CARRIED THE MATTER IN APPEAL BUT WITHOUT ANY SUCCESS. AS A MATTER OF FACT, THE ASSESSEE HAS CONCEDED THE ISSUE, SO FAR AS THE FACT OF SHORT DEDUCTION OF TAX AT SOURCE WAS CONCERNED, AS EVIDENT FROM FOLLOWING OBSERVATIONS M ADE BY CIT (A): - 3.2 GROUND NO. 2 IS REGARDING SHORT DEDUCTION OF TDS ON PAYMENT OF INTEREST TO SOFTWARE TECHNOLOGY PARKS OF INDIA, A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860. IT IS CONTENDED THAT THE PAN OF THE SOCIETY IS AAATS246 8J AND AS PER THE TDS RATES PREVAILING FOR THE FINANCIAL YEAR 2007 - 08 FOR A SOCIETY, THE RATE APPLICABLE WAS 10.3% WHICH WAS APPLIED CORRECTLY. HOWEVER, IT WAS INFORMED TO THE AUTHORIZED REPRESENTATIVE VIDE ORDER SHEET ENTRY DATED 16.3.2011 THAT GROSS PAYM ENTS TO THE SOCIETY WERE RS.12,64,682/ - AND, FOR THE YEAR UNDER CONSIDERATION, THE TDS MADE WAS ALSO LIABLE TO BE SUBJECTED TO SURCHARGE @ 10%. THE AUTHORIZED REPRESENTATIVE CONCEDED THE SAME DURING THE COURSE OF THE APPEAL ON 30.5.2011. HENCE, AS THE PAYM ENT HAD EXCEEDED RS.10 LAKHS, THE DEDUCTOR WAS LIABLE TO DEDUCT TAX AT SOURCE ALONGWITH SURCHARGE@ 10% WITH THE EFFECTIVE RATE OF TDS BEING @ 11.33%. HENCE, THE SHORT DEDUCTION HAS BEEN CORRECTLY COMPUTED AND GROUND NO. 2 OF THE APPEAL IS REJECTED. 3. TH E ASSESSEE IS IN SECOND APPEAL BEFORE US. I TA NO. 667 /LKW / 201 1 ASSESSMENT YEAR: 2008 - 09 PAGE 3 OF 7 4. NONE APPEARED FOR THE APPELLANT BUT WE HAVE HEARD THE DR, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT AS THE AMOUNT OF I NTEREST PAYMENT EXCEEDED RS.10 LAKHS, THE ASSESSEE WAS REQUIRED TO DEDUCT SURCHARGE @ 10%, IN ADDITION TO THE PRESCRIBED RATE OF TAX, AS WELL. THE APPELLANT DID NOT DISPUTE SO BEFORE ANY OF THE AUTHORITIES BELOW, OR IN THE DOCUMENTS FILED BEFORE US. IN THI S VIEW OF THE MATTER THERE WAS INDEED A SHORT DEDUCTION OF TAX AT SOURCE. TO THAT EXTENT, AUTHORITIES BELOW ARE INDEED CORRECT. 6. IT IS, HOWEVER, IMPORTANT TO BEAR IN MIND THE SETTLED LEGAL POSITION THAT A SHORT DEDUCTION OF TAX AT SOURCE, BY ITSELF DOES NOT RESULT IN A LEGALLY SUSTAINABLE DEMAND U/S 201(1) AND U/S 201(1A). AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE PVT. LTD. VS. CIT (293 ITR 226), THE TAXES CANNOT BE RECOVERED ONCE AGAIN FROM THE ASSESSEE IN A SITUATION IN WHICH THE RECIPIENT OF INCOME HAS PAID DUE TAXES ON INCOME EMBEDDED IN THE PAYMENTS FROM WHICH TAX WITHHOLDING REQUIREMENTS WERE 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 AUTHOR ITIES HAD NOT ADVERTED TO THE EXPLANATION TO SECTION 191 NOR HAD APPLIED THEIR MIND AS TO WHETHER THE ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY. THUS, TO DECLARE A DEDUCTOR, WHO FAILED TO DEDUCT THE TAX AT SOURCE AS AN ASSESSEE IN DEFAULT, CONDITIO N PRECEDENT IS THAT ASSESSEE HAS ALSO FAILED TO PAY TAX DIRECTLY. THE FACT THAT ASSESSEE HAS FAILED TO PAY TAX DIRECTLY IS THUS, I TA NO. 667 /LKW / 201 1 ASSESSMENT YEAR: 2008 - 09 PAGE 4 OF 7 FOUNDATIONAL AND JURISDICTIONAL FACT AND ONLY AFTER FINDING THAT ASSESSEE HAS FAILED TO PAY TAX DIRECTLY, DEDUCTOR CAN BE DEEME D TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX.. 7. IT IS THUS CLEAR THAT THE ONUS IS ON THE REVENUE 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 VICARIOUS RECOVERY LIABILITY CAN BE INVOKED. ONCE ALL THE DETAILS OF THE PERSONS TO WHOM PAYMENTS HAVE BEEN MADE ARE ON RECORD, IT IS FOR THE ASSESSING OFFICER, WHO HAS ALL THE POWERS TO REQUISITION THE INFORMATION FROM SUC H PAYERS AND FROM 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 JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN JAGRAN PRAKASHAN S CASE (SUPRA), THERE IS A PARADIGM SHIFT IN THE MANNER IN WHICH RECOVERY PROVISIONS UNDER SECTION 201(1) CAN BE INVOKED. AS OBSERVED BY THEIR LORDSHIPS, THE PROVISIONS OF SECTION 201(1) CANNOT BE INVOKED AND THE TAX DEDUCTOR CANNOT BE TREATED AN ASSESS EE 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 CONDITION PRECEDENT TO INVOKING SECTION 201(1), THE ONUS IS ON THE ASSESSING OFFICER TO D EMONSTRATE THAT THE CONDITION IS SATISFIED. NO DOUBT THE ASSESSEE HAS TO SUBMIT ALL SUCH INFORMATION ABOUT THE RECIPIENT AS HE IS OBLIGED TO MAINTAIN UNDER THE LAW, ONCE THIS INFORMATION IS SUBMITTED, IT IS FOR THE ASSESSING OFFICER TO ASCERTAIN WHETHER O R NOT THE TAXES HAVE BEEN PAID BY THE RECIPIENT OF INCOME. THIS APPROACH, IN OUR HUMBLE UNDERSTANDING, IS IN CONSONANCE WITH THE LAW LAID DOWN BY HONBLE ALLAHABAD 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 THREE DIFFERENT I TA NO. 667 /LKW / 201 1 ASSESSMENT YEAR: 2008 - 09 PAGE 5 OF 7 CONSEQUENCES PENAL PROVISIONS, INTEREST PROVISIONS 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 CONCERNED, T HE PENALTY IS FOR LAPSE ON THE PART OF THE ASSESSEE AND IT HAS NOTHING TO DO WITH WHETHER OR NOT THE TAXES WERE ULTIMATELY RECOVERED THROUGH OTHER MEANS. THE PROVISIONS REGARDING INTEREST IN DELAY IN DEPOSITING THE TAXES ARE SET OUT IN SECTION 201(1A). TH ESE PROVISIONS PROVIDE THAT FOR ANY DELAY IN RECOVERY OF SUCH TAXES IS TO BE COMPENSATED BY THE LEVY OF INTEREST. AS FAR AS RECOVERY PROVISIONS ARE CONCERNED, THESE PROVISIONS ARE SET OUT IN SECTION 201(1) WHICH SEEKS TO MAKE GOOD ANY LOSS TO REVENUE ON AC COUNT OF LAPSE BY THE ASSESSEE TAX DEDUCTOR. HOWEVER, THE QUESTION OF MAKING GOOD THE LOSS OF REVENUE ARISES ONLY WHEN THERE IS INDEED A LOSS OF REVENUE AND THE LOSS OF REVENUE CAN BE THERE ONLY WHEN RECIPIENT OF INCOME HAS NOT PAID TAX. THEREFORE, RECOVER Y PROVISIONS UNDER SECTION 201(1) CAN BE INVOKED ONLY WHEN LOSS TO REVENUE IS ESTABLISHED, AND THAT CAN ONLY BE ESTABLISHED WHEN IT IS DEMONSTRATED THAT THE RECIPIENT OF INCOME HAS NOT PAID DUE TAXES THEREON. IN THE ABSENCE OF THE STATUTORY POWERS TO REQU ISITION ANY INFORMATION FROM THE RECIPIENT OF INCOME, THE ASSESSEE IS INDEED NOT ALWAYS ABLE TO OBTAIN THE SAME. THE PROVISIONS TO MAKE GOOD THE SHORTFALL IN COLLECTION OF TAXES MAY THUS END UP BEING INVOKED EVEN WHEN THERE IS NO SHORTFALL IN FACT. ON THE OTHER HAND, ONCE ASSESSEE FURNISHES THE REQUISITE BASIC INFORMATION, THE ASSESSING OFFICER CAN VERY WELL ASCERTAIN THE RELATED FACTS ABOUT PAYMENT OF TAXES ON INCOME OF THE RECIPIENT DIRECTLY FROM THE RECIPIENTS OF INCOME. IT IS NOT THE REVENUES CASE BEF ORE 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 HE CAN INVOKE SECTION 201(1) BUT THATS HOW HONBLE HIGH COURT HAS VISUALIZED THE SCHEME OF ACT AND THATS HOW, THEREFORE, IT MEETS THE END OF JUSTICE. I TA NO. 667 /LKW / 201 1 ASSESSMENT YEAR: 2008 - 09 PAGE 6 OF 7 9. AS FAR AS LEVY OF INTEREST UNDER SECTION 201(1A) IS CONCERNED, THIS INTEREST IS ADMITTEDLY A COMPENSATORY INTEREST IN NATURE AND IT SEEKS TO COMPENSATE THE REVENUE FOR DELAY IN REALIZATION OF TAXES. HONBLE BOMBAY HIGH COURT, IN THE CASE OF BENNETT COLEMAN & CO LTD VS ITO (157 ITR 812) HAS HELD SO. THEREFORE, LEVY OF INTEREST UNDER SECTION 201(1A) IS APPLICABLE WHETHER OR NOT THE ASSESSEE WAS AT FAULT. HOWEVER, SINCE IT IS ONLY COMPENSATORY I N 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 LIABILITY EMBEDDED IN SUCH PAYMENTS, THERE WILL OBVIOUS LY 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 TH E ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE LAW AND IN THE LIGHT OF OUR OBSERVATIONS ABOVE. WHILE DOING SO, THE ASSESSING OFFICER WILL GIVE A DUE AND FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE AND DISPOSE OF THE MATTER BY WAY OF A SP EAKING ORDER. WE DIRECT SO. 11. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE . PRONOUNCED IN THE OPEN COURT TODAY ON 6 TH DAY OF JUNE, 2013. SD/XX SD/XX (SUNIL K YADAV ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER LUCKNOW; 6 TH DAY OF JUNE 2013 . I TA NO. 667 /LKW / 201 1 ASSESSMENT YEAR: 2008 - 09 PAGE 7 OF 7 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COM MISSIONER , LUCKNOW 4 . DEPARTMENTAL REPRESENTATIVE, BENCH, LUCKNOW 5 . GUARD FILE TRUE COPY BY ORDER ETC. ASSISTAN T REGISTRAR INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCHES, LUCKNOW