2012 (8) TMI 778 - HC - Income Tax

Assessee in default for non-compliance with Section-194H - imposed a TDS liability on Commission or brokerage - Held that - The use of the expressions discretion and subject to such conditions as he may think fit to impose in the circumstances of the case imply that AO is under a duty to apply his mind and after taking into account the necessary and appropriate circumstances, pass the most suitable order as may be warranted on the facts before him. The Instructions relied upon only reinforce the element of discretion; by no means can it be construed as limiting the choice of the AO who may have a greater latitude in taking into account other circumstances depending on the facts of the given case. It is a cardinal principle of construction that when a legislation confers power, its amplitude cannot be cut down by instructions or rules or regulations made by subordinate authorities. Instructions and Rules can only supplement but can never supplant or limit the width of the statutory powers - In this case, the AO as is evident from a reading of the impugned order has not applied his mind at all to the facts much less considered what are the circumstances which either justify the grant of relief or its refusal. Furthermore, even the petitioner does not appear to have been given any opportunity to make even a briefest submission in support of its case - writ petion allowed - in favour of assessee.

Summary

Issues:
Challenge to order by Assessing Officer under Article-226 - Violation of principles of natural justice in rejection of stay application under Section 220(6) of Income Tax Act.

Analysis:
The petitioner, a telecom products trading company, challenged an order by the Assessing Officer (AO) under Article-226, questioning a TDS liability imposed under Section 194H of the Income Tax Act. The AO had conducted a survey and issued a show cause notice to the petitioner, ultimately imposing a TDS liability and demanding payment for defaults. The petitioner appealed to the CIT (A) and moved for a stay under Section 220(6) during the appeal proceedings. However, the AO, without a hearing, rejected the stay application, prompting the petitioner to challenge the order for violating principles of natural justice and lacking application of mind.

The petitioner argued that Section 220(6) requires the AO to exercise discretion and consider various elements before passing an order, citing a Division Bench ruling for a composite order dealing with prima facie case existence. The Revenue contended that the administrative Commissioner can be approached for suspension of default demand, referring to instructions and Circulars emphasizing the AO's discretionary power under Section 220(6).

The Court emphasized that the AO must apply his mind and consider relevant circumstances before passing an order under Section 220(6), highlighting that instructions cannot limit statutory powers. The Court referred to a previous ruling, setting aside the impugned order for not considering the petitioner's submissions and the existence of a prima facie case. Consequently, the Court set aside the AO's order and directed the petitioner to appear before the Assistant Commissioner for a reconsideration of the application after due consideration of submissions.

In conclusion, the Court allowed the Writ Petition, emphasizing the need for a comprehensive order under Section 220(6) and ensuring the AO considers all relevant factors before making a decision on stay applications, thus upholding principles of natural justice and fair procedure in tax matters.