2016 (1) TMI 742 - AT - Income Tax

TDS u/s 194H - non-deduction of tax at source u/s. 194H on trade discount allowed to prepaid distributors - denial of opportunity of hearing in violation of the principles of natural justice as objected by assessee - Held that - One of the pillars of principles of natural justice is audi alteram partem i.e. no one should be condemned unheard. The principles of natural justice are firmly grounded in Article 14 and 21 of the Constitution of India. The principles have to be mandatorily applied irrespective of the fact as to whether there is any statutory provision or not. In the present case, we find that the assessee was not afforded any opportunity, much less the sufficient opportunity to give reply to the show cause notice. As has been pointed out by the ld. AR, the show cause notice was issued and served on Sunday i.e. weekly holiday, directing the assessee to appear the very next day. The Hon ble Supreme Court of India has time and again emphasized that the principles of natural justice have to be adhered while discharging administrative, quasi-judicial or judicial functions. In the instant case, from the facts on record it is evident that the Commissioner of Income Tax (TDS) has in a hurriedly manner without affording opportunity of hearing to the assessee has passed the impugned orders by violating the principle of audi alteram partem. Thus, the impugned order is liable to be set aside on this ground alone. - Decided in favour of assessee.

Summary

Issues involved:
Appeal against orders of Commissioner of Income Tax (TDS) under section 263 for assessment years 2009-10 and 2010-11.

Analysis:
1. The appeals were filed against the orders of the Commissioner of Income Tax (TDS) under section 263 of the Income Tax Act, 1961 for the assessment years 2009-10 and 2010-11. The orders were dated 31-03-2014.

2. The case involved a Telecom Services Provider where a survey was conducted for TDS verification, resulting in demands raised for non-deduction of tax at source under sections 201(1) and 201(1A) of the Act. The Commissioner initiated revision proceedings under section 263 on the ground of non-deduction of TDS on roaming charges, which were considered as fee for technical services. The Commissioner set aside the earlier orders and directed reassessment after considering the roaming charges issue.

3. The appellant argued that the Commissioner erred in assuming jurisdiction under section 263 as the issue had been decided in their favor previously. They also highlighted procedural irregularities, such as lack of proper notice and violation of principles of natural justice during the proceedings.

4. The appellant contended that separate orders could have been issued for different defaults of non-deduction of TDS, and the issue of roaming charges was not part of the original show cause notice. Case laws were cited to support the argument of violation of natural justice and lack of merit in the impugned orders.

5. The Tribunal found that the orders were passed in violation of principles of natural justice as the appellant was not given a proper opportunity to be heard. It emphasized the importance of adhering to natural justice principles, even in administrative functions. Citing relevant case law, the Tribunal concluded that the hurried manner in which the orders were passed without affording a fair hearing rendered them liable to be set aside.

6. The Tribunal also noted that the issue of TDS on roaming charges had been previously decided in favor of the appellant by a Co-ordinate Bench of the Tribunal. The decision in the appellant's own case for the assessment year 2006-07 supported their argument that the issue had already been adjudicated in their favor.

7. Consequently, the Tribunal set aside the impugned orders and allowed the appeals of the assessee for both assessment years. The decision was pronounced on October 14, 2015.