M/s The Asstt. General Manager (PR), Shimla V. ITO (TDS), Shimla

ITA 766/CHANDI/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8702 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-01-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 02-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Principle of natural justice; Bonafide belief; Non-deduction of tax
• Section: 133(6); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NOS. 765 & 766/CHD/2014 ASSESSMENT YEARS: 2011-12 & 2012-13 THE ASSISTANT GENERAL MANAGER(PR), VS THE ITO ( TDS), SHIMLA SHIMLA PAN NO.AAACP0165G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TARUN KUMAR RESPONDENT BY : SHRI S.K.MITTAL DATE OF HEARING : 22.01.2015 DATE OF PRONOUNCEMENT : 28.01.2015 ORDER PER T.R.SOOD, A.M. THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAI NST THE ORDER DATED 23.7.2014 OF CIT(A), SHIMLA. 2. IN BOTH THESE APPEALS IDENTICAL GROUNDS HAVE BEE N RAISED WHICH ARE AS UNDER:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. ASSESSING OFFICER IN PASSING ORDER U/ S 201(1) / (201(IA) OF THE INCOME TAX ACT RAISING A DEMAND OF RS. 20,23,012/- ASSESSMENT YEAR 2011-12) AND RS. 14,68, 355/- (ASSESSMENT YEAR 2012-13). 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN HOLDING THAT THE ASSESSEE FAILE D TO DEDUCT TDS ON THE INTEREST PAYMENT U/S 194A AND IMPUGNED D EMAND HAS 2 BEEN RAISED BY RECORDING INCORRECT FACTS AND FINDIN GS AND BY DISREGARDING THE SUBMISSION OF THE ASSESSEE. 3. THAT IN ANY VIEW OF THE MATTER AND IN ANY CASE, THE IMPUGNED ORDER PASSED BY LD. AO U/S 201(1)/201(1A) IS ILLEGA L, ARBITRARY, AGAINST THE PRINCIPAL OF NATURAL JUSTICE, VOID AUTH ORITIES BELOW INITIO AND THEREFORE DESERVES TO BE QUASHED. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT ASSE SSING OFFICER CALLED FOR INFORMATION U/S 133(6) OF THE INCOME-TAX ACT, 1961 FROM THE PERSON RESPONSIBLE OF THE ASSESSEES BANK. THE INFORMATION SOUGHT WAS WITH PRIOR APPROVAL OF THE CIT (TDS) CHANDIGARH. THE ASSESSEE WAS ASKED TO SUP PLY THE DETAILS OF NAMES & ADDRESSES AND PAN NUMBERS AND AMOUNT OF INTEREST PA ID / CREDITED IN THE NAME OF VARIOUS TRUST / BODIES, FUNDS, BOARDS ETC. OR F DRS WITH THE BANK ON WHICH NO TAX WAS DEDUCTED. FROM THE INFORMATION IT WAS FOUND THAT VARIOUS DEPOSITS HAD BEEN MADE BY HIMACHAL PRADESH STATE ELECTRICITY BOA RD (HPSEB) ON WHICH TAX WAS NOT DEDUCTED. NO SUBMISSIONS WERE MADE BEFORE T HE ASSESSING OFFICER, THEREFORE, ASSESSEE WAS HELD TO BE IN DEFAULT AND L IABILITY WAS DETERMINED U/S 201(1) AND 201(1A) OF THE ACT. 4. ON APPEAL, IT WAS MAINLY STATED THAT HPSEB WAS A GOVERNMENT COMPANY ESTABLISHED BY THE STATE AND 100% SHARES WERE HELD BY THE HIMACHAL PRADESH GOVERNMENT, THEREFORE, PROVISIONS OF SECTION 194A W ERE NOT APPLICABLE BECAUSE OF SPECIFIC EXEMPTION WAS PROVIDED U/S 194A(32)(III )(F). IT WAS FURTHER SUBMITTED THAT IN THE EARLIER PERIOD THE BOARD HAS FURNISHED A CERTIFICATE U/S 197 FOR NON DEDUCTION AND THE BOARD WAS PLEADING THAT T HIS YEAR ALSO THEY WILL OBTAIN THE CERTIFICATE AND THE BANK BELIEVED THE BO ARD THAT TAX WAS NOT DEDUCTIBLE. LATER ON, A CERTIFICATE FROM THE INCOM E TAX OFFICER I.E ACIT (TDS) SHIMLA DATED 28.3.2011 WAS OBTAINED FOR DEDUCTION A T THE RATE OF 1% FOR THE PERIOD 28.5.2010 TO 31.3.2011. THE ASSESSEE INFORM ED THAT BECAUSE OF THIS CERTIFICATE AND REQUEST OF THE BOARD HAD A BONAFIDE BELIEF THAT TAX WAS NOT 3 REQUIRED TO BE DEDUCTED AND, THEREFORE, THE SAME W AS NOT DEDUCTED BUT AFTER THE CERTIFICATE TAX @ 1% WAS DEDUCTED AND DEPOSITED ALS O. THEREFORE, INTEREST SHOULD NOT HAVE BEEN CHARGED. 5. THE LD. CIT(A) DID NOT FIND FORCE IN THESE SUBMI SSIONS AND DECIDED THE ISSUE AGAINST THE ASSESSEE VIDE PARAS 4 TO 4.2, WH ICH IS AS UNDER:- 4. I HAVE GONE THROUGH THE FACTS OF CASE, SUBMISSI ON OF ASSESSEE AND THE CASE LAWS RELIED UPON. THE FACT IS THAT DED UCTEE ASSESSEE IS SEPARATE ENTITY TAXABLE UNDER INCOME TA X ACT, ACT DOES NOT PERMIT THE DEDUCTOR BANK, NOT TO DEDUCT TA X WITHOUT EXPLICIT CERTIFICATE FROM THE ASSESSING OFFICER OF DEDUCTEE TO THE SAME EFFECT. DEDUCTOR CANNOT STEP IN TO THE SHO ES OF I.T. AUTHORITIES, WHO ARE RESPONSIBLE FOR ASCERTAINING T HE TAX LIABILITY OF DEDUCTEE. HOWEVER, THE LIABILITY OF DE DUCTOR TO DEDUCT TAX ARISES AS AND WHEN ANY SUM IS CREDIT TO THE ACCOUNTS OF DEDUCTEE. THE RATIO OF HINDUSTAN COCACO LA BEVERAGES PVT. LTD. NEVER EXEMPTED DEDUCTOR FROM TH E LIABILITY OF DEDUCTING THE TAX RATHER HONBLE SUPRE ME COURT HAS UPHELD THE DECISION OF TRIBUNAL OF TREATING THE APPELLANT ASSESSEE AS ASSESSEE IN DEFAULT FOR FAILURE TO DEDU CT TAX. 4.1 AS FAR AS PROVISIONS OF SECTION 194(F)(III) IS CONCERNED, THE EXEMPTION HAS TO BE GRANTED SPECIFICALLY FOR REASON S TO BE RECORDED IN WRITING, AND HAS TO BE DULY NOTIFIED IN OFFICIAL GAZETTE. IN FACT NO EXEMPTION UNDER THIS SECTION IS DEEMED TO BE GRANTED, AS EACH BODY/INSTITUTION HAS TO APPLY S EPARATELY TO CBDT AND EXEMPTION HAS TO BE NOTIFIED IN OFFICIA L GAZETTE AFTER APPROVAL OF CENTRAL GOVERNMENT. THE CASE LAWS RELIED UPON BY THE APPELLANT FACTUALLY DIFFER FROM THE FAC TS OF THE CASE OF ASSESSEE. 4.2 EVEN AS PER ASSESSEES OWN ADMISSION BANK HAD A CCEPTED THE CERTIFICATE FOR NON DEDUCTION OF TAX AT SOURCE IN T HE PREVIOUS YEAR. HOWEVER, SUBSEQUENTLY FAILED TO DEDUCT TAX WI THOUT THE SUCH CERTIFICATE UNDER SECTION 197 SUBSEQUENTLY. SO THE 4 ARGUMENT OF THE DEDUCTOR THAT FAILURE TO DEDUCT TAX WAS NOT DELIBERATE IS NOT ACCEPTABLE AND ACTION OF A.O. IS UPHELD. 6 BEFORE US, LD. COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE CIT(A). HE ALSO FILED A COPY OF CERTIFIC ATE ISSUED U/S 197. HE FURTHER RELIED ON THE DECISION OF HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT V STATE BANK OF PATIALA IN ITA NO. 17 OF 2014. 7. ON THE OTHER HAND LD. DR STRONGLY SUPPORTED THE IMPUGNED ORDER. HE FURTHER SUBMITTED THAT NO NOTIFICATION WAS ISSUED B Y CENTRAL GOVERNMENT BY WHICH HPSEB HAS BEEN EXEMPTED U/S 194A(3)(III)(F) O F THE ACT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND DO NOT FIND ANY FORCE IN THE SUBMISSIONS OF THE ASSESSEE. FIRST OF ALL WHEN THE INTEREST WAS CREDITED BY THE BANK TO THE HPSEB, VALID CERTIFICAT E WAS NOT AVAILABLE WITH THE ASSESSEES BANK AND, THEREFORE, BANK COULD NOT SIMP LY DEFER THE DEDUCTION OF TAX AND SIMPLY KEEP ON WAITING FOR CERTIFICATE TO BE OB TAINED BY HPSEB WHEN THERE WAS A CLEAR MANDATE OF A STATUTE TO DO A PARTICULAR ACTION THEN THE SAME CANNOT BE POSTPONED SIMPLY BECAUSE THE OTHER PERSON IS MAK ING A REQUEST. 9. WE FURTHER FIND NO FORCE IN THE SUBMISSIONS THAT BOARD WAS EXEMPT FROM DEDUCTION IN VIEW OF SECTION 194A(3)(III)(F) OF THE ACT. THIS PROVISION READ AS UNDER:- 194A (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF INTEREST OTHER THAN INCOME [BY WAY OF INTERE ST ON SECURITIES], SHALL AT THE TIME OF CREDIT OF SUCH INCOME TO THE A CCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUES OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE. (3) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT A PPLY .- . 5 ..(F) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY 3 OR CLASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES] WHICH THE CEN TRAL GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITI NG, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE. 10. THE ABOVE CLEARLY SHOWS THAT ONLY THOSE ASSOCIA TIONS OR BODIES TO BE COVERED BY THE EXCEPTION WHICH HAVE BEEN NOTIFIED B Y THE CENTRAL GOVERNMENT. THE ASSESSEE HAS NOT FILED ANY NOTIFICATION SHOWING THAT HPSEB WAS NOTIFIED BY THE CENTRAL GOVERNMENT UNDER THE ABOVE PROVISION AN D WE FURTHER FIND THAT DECISION OF HON'BLE HIMACHAL PRADESH HIGH COURT IS NOT APPLICABLE BECAUSE IN THAT CASE IT WAS NOTICED BY THE TRIBUNAL THAT M/S B IOTECH BIOBUSINESS AND HP SITEG FROM WHOM THE TAX WAS REQUIRED TO BE DEDUCTED WAS A SOCIETY WHOLLY FINANCED BY THE GOVT. OF INDIA AND A GENERAL NOTIFI CATION WAS ISSUED BY THE CENTRAL GOVERNMENT WHICH HAS BEEN NOTED BY THE TRIB UNAL AS WELL AS THE HON'BLE HIGH COURT AT PARA 7 WHICH IS AS UNDER:- 7. EVIDENTLY, AS NOTICED BY THE APPELLATE AUTHORITY, BY VIRTUE OF ITS POWER, IN TERMS OF SECTION 194A, CENT RAL GOVERNMENT HAS ISSUED NOTIFICATION COVERING ANY UN DERTAKING OR BODY INCLUDING A SOCIETY REGISTERED UNDER THE SO CIETIES REGISTRATION ACT, 1860 (XXI OF 1860) FINANCED WHOLL Y BY THE GOVERNMENT 11. OTHERWISE ALSO, THIS THEORY OF APPLICATION OF S ECTION 194A(3)(III)(F) IS TOTALLY CONTRADICTED BY THE HPSEB ITSELF. ON THE ON E HAND IT CLAIMS THAT IT IS COVERED BY THE EXCEPTION AND NO TAX IS REQUIRED TO BE DEDUCTED. ON THE OTHER HAND HPSEB APPROACHES THE ACIT (TDS) WITH A REQUEST FOR LOWER DEDUCTION AND ULTIMATELY A CERTIFICATE IS ISSUED THAT TAX SHOULD BE DEDUCTED AT A RATE OF 1%. IF THE HPSEB WAS REALLY COVERED BY THIS EXCEPTION OF 1 94A(3)(III)(F) THEN ASSESSEE SHOULD HAVE ASKED FOR NIL DEDUCTION CERTIFICATE OR CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE RELEVANT FORUM. THER EFORE, IN OUR OPINION THE ASSESSEE BANK WAS REQUIRED TO DEDUCT TAX. SINCE ASS ESSEE HAS LATER ON DEDUCTED 6 THE TAX AT 1% WHICH WAS ALSO APPROVED BY THE INCOME TAX AUTHORITIES, IN OUR OPINION, THERE CANNOT BE ANY DEFAULT FOR DEDUCTION OF TAX ON THE PART OF THE BANK. HOWEVER, AT THE SAME TIME SINCE TAX HAS BEEN DEDUCT ED LATE, THE ASSESSEE IS DEFINITELY LIABLE TO PAY INTEREST U/S 201(1A). SI MPLY BECAUSE ASSESSEE WAS UNDER SOME BONAFIDE BELIEF THAT TAX WAS NOT REQUIRE D TO BE DEDUCTED, CANNOT BE A REASON FOR NOT CHARGING THE INTEREST. THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMAND THE MATTER BACK TO THE FILE OF AS SESSING OFFICER WITH A DIRECTION TO ASSESSING OFFICER TO CHARGE INTEREST U /S 201A ON THE BASIS OF 1% DEDUCTION. 12. IN THE RESULT, APPEALS ARE PARTLY ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28.01.2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH JANUARY,2015 RKK COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR