Income Tax Officer (International Taxation), Nellore V. Badri Manjula , Nellore

ITA 780/Hyd/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3978 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Period of limitation; Time period of passing order; TDS
• Section: 201(1); 195; 250; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A’ Bench, Hyderabad Before Shri Rama Kanta Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member & & O R D E R Per Shri Rama Kanta Panda, A.M. ITA No.780/Hyd/2020 filed by the revenue and ITA No. 126/Hyd/2021 filed by the assessee are cross appeals and are ITA No.125/Hyd/2021 Assessment Year: 2009-10 Badri Hari Babu 15/342, Subedarpet Andra Pradesh Nellore-524 001 PAN : ABVPB0412B Vs. ITO(International Taxation) Nellore (Appellant) (Respondent) ITA No.126/Hyd/2021 Assessment Year: 2009-10 Smt. Badri Manjula 15/342, Subedarpet Andra Pradesh Nellore-524 001 PAN : AHLPB0822F Vs. ITO(International Taxation) Nellore (Appellant) (Respondent) ITA No.780/Hyd/2020 Assessment Year: 2009-10 ITO(International Taxation) Nellore Vs. Smt. Badri Manjula 15/342, Subedarpet Andra Pradesh Nellore-524 001 PAN : AHLPB0822F (Appellant) (Respondent) Assessee by: None Revenue by : Shri K.P.R.R.Murthy, Sr.AR Date of hearing: 12.09.2022 Date of pronouncement: 23.09.2022 2 ITA Nos.125,126/Hyd/21 & 780/Hyd/2020 directed against the order dated 11.09.2020 of Learned Commissioner of Income tax (Appeals)-10, Hyderabad relating to AY 2009-10. ITA No.125/Hyd/2021 filed by the assessee is directed against the order dated 11.09.2020 of Learned Commissioner of Income tax (Appeals)-10, Hyderabad relating to AY 2009-10. For the sake of convenience, all these appeals were heard together and are being disposed-of by this common order. 2. Despite service of notice through RPAD fixing case for hearing on 12.09.2022 (acknowledgment placed on record), none appeared on behalf of the assessee. It was seen from the order sheet entries that on earlier so many occasions, no one was appearing on behalf of the assessee for which the case was getting adjourned from time to time, the details of which are as under:- Dates of Hearing Appeared on behalf of the assessee 10.08.2021 None 13.10.2021 None 13.12.2021 None 24.01.2022 None 06.06.2022 None 13.07.2022 None 10.08.2022 None 12.09.2022 None We, therefore, deem it proper to decide the appeals on the basis of material available on record and after hearing the ld. DR. 2.1 There is a delay of ‘104’ days in filing of this appeal by the assessee, for which assessee has filed a condonation application along with an affidavit explaining the reasons for such delay, which is due to the COVID-19 pandemic. After considering the 3 ITA Nos.125,126/Hyd/21 & 780/Hyd/2020 contents of the condonation application and after hearing the ld. DR, the delay in filing of this appeal by the assessee is condoned and the appeal is admitted for adjudication. ITA NO.780/HYD/2020 for AY 2009-10 ( by Revenue) ITA NO.126/HYD/2021 for AY 2009-10 (by Assessee) 3. Facts of the case, in brief, are that during the course of proceedings u/s. 201(1)/201(1A) of the I.T.Act, the AO observed that the assessee has purchased 0.68 acrs of land from four Non Resident Indians for a total consideration of Rs.2,00,76,000/-. In this transaction, Smt. V.Krupamayi Reddy has acted as GPA agent to her two sons and one daughter. Since, the assessee did not deduct tax at source while making the payments to the Non- Residents, the AO issued a show cause notice u/s. 201(1) of the I.T.Act asking the assessee to explain as to why he should not be treated as an assessee in default in respect of tax not deducted at source as mandated by the provisions of section 195 of the I.T.Act. The assessee explained that he was not aware of the provisions of section 195 of the I.T.Act, hence he has not deducted any tax on the payments made to the NRI’s. The explanation of the assessee was not accepted by the AO and therefore, he considered the assessee to be an assessee in default to the extent of capital gains arising on sale of immovable property for a consideration of Rs.2,00,76,000/- paid to the non- resident. Since, the payment of sale consideration of Rs.2,00,76,000/- paid to Smt. Vuchuru Krupamayi Reddy, a non resident is chargeable to tax in India and since the assessee has failed to discharge his obligation to deduct tax at source as stipulated u/s. 195 of the I.T.Act, the AO invoking the provisions of section 201(1) of the I.T.Act held the assessee, Smt. Badri Manjula, Nellore as deemed to be an assessee in default in respect of tax not deducted at source in respect of payment of Rs.2,00,76,000/-. He noted that 100% share of the Non Resident 4 ITA Nos.125,126/Hyd/21 & 780/Hyd/2020 in the sale of the property was chargeable to tax in India as per the provisions of section 45(1) of the I.T.Act. He noted that the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages (P) Ltd vs. CIT reported in 293 ITR 226 has held that liability to pay interest u/s. 201(1A) till the date of payment of tax by deductee assessee remains unaltered. Accordingly, the AO also levied the interest u/s. 201(1A) of the I.T.Act. 4. Before the ld.CIT(A), the assessee made elaborate submissions based on which the ld. CIT(A) called for a remand report from the AO. After considering the remand report of the AO and rejoinder of the assessee to such remand report, he held that since the language of section 195(1) for deduction of income tax by the payer is clear and unambiguous and casts an obligation to deduct appropriate tax at the rates in force, therefore, the assessee though a resident, clearly comes under the purview of this section and by virtue of non deduction of tax, has committed a default and hence is liable for tax u/s. 201(1) and also interest u/s. 201(1A) of the I.T.Act. 4.1 He, however accepted the additional grounds raised by the assessee and held that by the Finance Act, 2012, a proviso to Sub-section (1) was introduced whereby if it is proved that the assessee/payee who received the income has paid the tax, then the assessee who failed to deduct tax at source will not be deemed to be an assessee in default.(But this proviso speaks with respect to resident only). He, therefore directed the AO to make due verification of taxes paid by the payee and calculate the levy of tax u/s. 201(1) and levy of interest u/s. 201(1A) 5. Aggrieved with such order of the ld.CIT(A) giving part relief, the revenue as well as the assessee are in appeal before the Tribunal by raising the following grounds: 5 ITA Nos.125,126/Hyd/21 & 780/Hyd/2020 ITA No.126/Hyd/2021 for AY 2009-10 ( by Assessee) 1. That on the facts and circumstances of the case and in law, the order passed by the Commissioner of Income-tax (Appeals) - 10, Hyderabad ("Id. CIT(A)") dated 11.09.2020 under section 250 of the Income-tax Act ("the Act") is erroneous and bad in law to the extent it confirmed the order dated 31.03.2016 passed by the Income Tax officer (International Taxation) Nellore, ("ld. AO") of levying interest u/s 201 (1 A) and 220(2) of the Act. 2. The Ld. CIT(A) ought to have appreciated the fact that the assessment is barred by limitation and void-ab-initio as the order was passed beyond the limitation period specified under section 201 (3) of the Income Tax Act, 1961. 3. On the facts and circumstances of the case, the Id. CIT(A) ought to have deleted the addition on account of interest u/s 201(1A) of the Act of Rs. 5,51,841 and 220(2) of the Act of Rs. 6,56,434 4. The Ld. CIT(A) ought to have appreciated the fact that Income Tax Officer (International Taxation) is without jurisdiction and as such the order is liable to be quashed. 5. On the facts and circumstances of the case, the Ld. CIT(A) ought to have appreciated the fact interest u/s 201 is compensatory in nature and once the assessment is completed in case of recipient by assessing income and tax along with interest under sections 234A, 2348 and 234C as the case may be, the department is compensated with the interest loss and in these circumstances levy of interest u/s 201 (1 A) of the Act in the hands of the appellant would mean to double taxation which is not permitted by law. 6. The Ld. CIT(A) ought to have appreciated the fact that once income has been assessed in the hands of the recipient, the deductor is absolved of his responsibility under the Act regarding the deduction of tax at source and the failure to do so, interest ought to be deleted as assessee is not in default. 7. The Ld. CIT(A) ought to have appreciated the fact that once the entire dues are collected from recipient, there would remain no amounts payable to the Government and therefore the appellant would be no longer be an assessee in default. 8. The CIT(A) ought to have directed the AO not to impute interest as the appellant has a reasonable and bonafide cause to believe that the land is agricultural and therefore not taxable under the Act. ITA No.780/Hyd/2020 for AY 2009-10 ( by Revenue) 1. The order of the CIT (A) is contrary to the law and facts of the case and, therefore. liable to be quashed. 6 ITA Nos.125,126/Hyd/21 & 780/Hyd/2020 2. The CIT (A) grossly erred in directing the Assessing Officer to recompute the tax/demand u/s.201(1) of the Act and interest u/s 201(1A) of the Act, after verification of taxes raid by the payee/non- resident seller. 3. The CIT(A) erred in placing reliance on the amended provisions of Section 201(1) of the Act, so as to treat the assessee "as an assessee not in default", but, ignoring the fact that the said amended provision i.e., first proviso to Section 201(1) of the Act was inserted in the statute book by the Finance Act, 2012 w.e.f. 01-07-2012 and therefore, the same is not applicable to the impugned A.Y.2009-10. 4. Without prejudice to the ground No.3, the CIT(A) has failed to appreciate the fact that the first proviso to Section 201(1) of the Act is applicable only in respect of resident payees and non-resident payees are consciously and intentionally excluded by the legislature from the ambit of such benefit of treating the assessee” as an assessee not in default.” 5. The CIT(A) ought to have followed the settled position of law that the provisions of statute as on the date of default committed by the assessee would apply and, therefore, liability u/s. 201(1) of the Act arises immediately upon such default and shall be computed with reference to the law as it then stood. 6. We have heard the ld. DR and perused the record. It is an admitted fact that the assessee during the year under consideration has purchased 0.68 acres land from four non- resident Indians for total consideration of Rs.2,00,76,000/-. Smt. V.Krupamayi Reddy has acted as the GPA agent to her two sons and one daughter and the assessee while making the payment has not deducted the TDS for which the AO held the assessee to be an assessee in default and accordingly invoking the provisions of section 195 of the I.T.Act levied interest u/s. 201and 201(1A) of the I.T.Act. We find in appeal, although the ld.CIT(A) held that assessee comes under the purview of section 195(1) by virtue of non deduction of tax and therefore has committed a default and hence is liable for tax u/s. 201(1) and interest u/s. 201(1A), however, he held that if the assessee proves that the payee who received the income has paid the tax, then the assessee, who failed to deduct tax at source will not be deemed to be an assessee in default. While doing so, he was conscious enough to 7 ITA Nos.125,126/Hyd/21 & 780/Hyd/2020 hold that the proviso speaks with respect to resident only. The relevant observation of the ld.CIT(A) in para 11 to 11.3 of the order reads as under:- 11. Now, the only grounds which need to be adjudicated are the fourth ground of appeal which is as under:- “any other ground that may be urged at the time of hearing” and also 3.4 of Additional Ground of appeal no.3 which is as under: “The ld. AO ought to have considered that the liability to make TDS is only a vicarious liability, which ceases to exist once the primary liability has been discharged” 11.1 during the course of the appeal proceedings, the appellant has produced the assessment order from ITO(IT) and also 26AS of the land seller. 11.2 By Finance Act, 2012, a proviso to Sub-section(1) was introduced whereby if it is proved that the assessee/payer who received the income has paid tax, then the assessee who failed to deduct tax at source will not be deemed to be an assessee in default. (but this proviso speaks with respect to resident only. 11.3 With respect to the above, the AO may after due verification of taxes paid by the payee (non-resident seller), may calculate levy of tax u/s. 201(1) and levy of interest u/s. 201(1A) accordingly. 7. In our opinion, the order of the ld.CIT(A) is not justified under the facts and circumstances of the case. We find the provisions of section 201(1) was amended to treat the assessee as an assessee not in default w.e.f. 01.07.2012 and therefore, the same is not applicable to the impugned assessment year i.e.AY 2009- 10. Further, the first proviso to section 201(1) reads as under:- 201. (1) Where any person, including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee— (i) has furnished his return of income under section 139; 8 ITA Nos.125,126/Hyd/21 & 780/Hyd/2020 (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed 57 : As per the said provision, the word “payee” was substituted for “resident” by the Finance (No.2)Act, 2019 w.e.f. 01.09.2019. Therefore, prior to the amendment, the first proviso to section 201(1) of the Act is applicable only in respect of resident payee and not non-resident payee. Therefore, the ld.CIT(A) despite knowing the fact that the language of section 195(1) for deduction of tax by the payer is clear and unambiguous, gave relief to the assessee by relying on amendment to the proviso to section 201(1) inserted in the statute book by the Finance Act, 2012 w.e.f. 01.07.2012. In our opinion, the said amendment is not applicable to the impugned assessment year. Under these circumstances, we are of the considered opinion that the ld.CIT(A), instead of following the settle position of law that the provisions of statute as on the date of default committed by the assessee would apply and therefore liability u/s. 201(1) of the Act arises upon such default, directed the AO to make due verification of taxes paid by the payee and to calculate levy of tax u/s. 201(1) and levy of interest u/s. 201(1A) is not correct. We, therefore, reverse the order of the ld.CIT(A) on this issue and the grounds raised by the revenue are allowed. In view of our above discussion, the grounds raised by the assessee are dismissed. ITA No. 125/Hyd/2021 for AY 2009-10 (by Assessee) 8. The grounds raised by the assessee are as under:- 1. That on the facts and circumstances of the case and in law, the order passed by the Commissioner of Income-tax (Appeals) - 10, Hyderabad ("Id. CIT(A)") dated 11.09.2020 under section 250 of the Income-tax Act ("the Act") is erroneous and bad in law to the extent it confirmed the order dated 31.03.2016 passed by the Income Tax officer (International 9 ITA Nos.125,126/Hyd/21 & 780/Hyd/2020 Taxation) Nellore, ("ld. AO") of levying interest u/s 201 (1 A) and 220(2) of the Act. 2. The Ld. CIT(A) ought to have appreciated the fact that the assessment is barred by limitation and void-ab-initio as the order was passed beyond the limitation period specified under section 201 (3) of the Income Tax Act, 1961. 3. On the facts and circumstances of the case, the Id. CIT(A) ought to have deleted the addition on account of interest u/s 201(1A) of the Act of Rs. 80,912 and 220(2) of the Act of Rs. 96,248 4. The Ld. CIT(A) ought to have appreciated the fact that Income Tax Officer (International Taxation) is without jurisdiction and as such the order is liable to be quashed. 5. On the facts and circumstances of the case, the Ld. CIT(A) ought to have appreciated the fact interest u/s 201 is compensatory in nature and once the assessment is completed in case of recipient by assessing income and tax along with interest under sections 234A, 2348 and 234C as the case may be, the department is compensated with the interest loss and in these circumstances levy of interest u/s 201 (1 A) of the Act in the hands of the appellant would mean to double taxation which is not permitted by law. 6. The Ld. CIT(A) ought to have appreciated the fact that once income has been assessed in the hands of the recipient, the deductor is absolved of his responsibility under the Act regarding the deduction of tax at source and the failure to do so, interest ought to be deleted as assessee is not in default. 7. The Ld. CIT(A) ought to have appreciated the fact that once the entire dues are collected from recipient, there would remain no amounts payable to the Government and therefore the appellant would be no longer be an assessee in default. 8. The CIT(A) ought to have directed the AO not to impute interest as the appellant has a reasonable and bonafide cause to believe that the land is agricultural and therefore not taxable under the Act. 9. After hearing both the sides, we find the grounds raised by the assessee are identical to the grounds raised in ITA No.126/Hyd/2021 for AY 2009-10. We have already decided the issue and the grounds raised by the assessee have been dismissed. Following similar reasonings, the grounds raised by the assessee are dismissed. 10 ITA Nos.125,126/Hyd/21 & 780/Hyd/2020 10. In the result, the appeal filed by the revenue is allowed and the appeals filed by the respective assessees are dismissed. Order pronounced in the Open Court on 23 rd September, 2022. Sd/- Sd/- (LALIET KUMAR) JUDICIAL MEMBER (RAMA KANTA PANDA) ACCOUNTANT MEMBER Hyderabad, dated 23 rd September, 2022. Thirumalesh/sps Copy to: S.No Addresses 1 Badri Hari Babu 15/342, Subedarpet Andra Pradesh Nellore-524 001 2 Smt. Badri Manjula 15/342, Subedarpet Andra Pradesh Nellore-524 001 3 ITO(International Taxation) Nellore 4 CIT(A)-10, Hyderabad 5 CIT(IT & TP), Hyderabad 6 CIT(IT)(SZ), Bangaluru 7 DR, ITAT Hyderabad Benches 8 Guard File By Order