2012 (3) TMI 445 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are related to the deletion of demand u/s 201(1) and 201(1A) of the Income Tax Act, 1961, due to short deduction of tax from payments made to parties for contract work, based on certificates u/s 197 issued in the name of the assessee's registered office in Mumbai instead of the office making the payment in Bahadurgarh.

Issue 1: Short deduction of tax
The Assessing Officer noted during survey operations that TDS was not made on payments for contract work. The assessee claimed to have received lower deduction tax certificates issued by IT authorities and followed them while deducting TDS. However, the certificates were issued in the name of the assessee's head office in Mumbai, not the office in Bahadurgarh. The Assessing Officer raised a demand of Rs. 67,38,214 including interest u/s 201(1) and 201(1A) of the Act.

Issue 2: Validity of certificates u/s 197
Before the Ld. Commissioner of Income Tax (Appeals), the assessee argued that they deducted TDS based on certificates u/s 197 issued by the authorities, even though the certificates were in the name of the head office in Mumbai. The Ld. Authorised Representative contended that the assessee cannot be treated as an assessee in default as TDS was deducted as per the certificates issued u/s 197 and paid to the government. Referring to a Supreme Court judgment, it was argued that once deductees have paid tax, recovery cannot be made from the deductor.

Judgment:
The Ld. Commissioner of Income Tax (Appeals) held that the action of the assessee in resorting to lower/non-deduction of TDS based on certificates issued u/s 197 in the name of the assessee's head office in Mumbai was justified. Since the genuineness of the certificates was not in doubt, there was no justification to hold the assessee as an assessee in default. The Ld. Commissioner of Income Tax (Appeals) deleted the demand raised by the Assessing Officer. The Appellate Tribunal upheld this decision, stating that the genuineness of the certificates was not in question, and the order of the Ld. Commissioner of Income Tax (Appeals) did not require any interference.

Conclusion:
The appeal filed by the Revenue was dismissed, and the order in favor of the assessee was upheld by the Appellate Tribunal.