2016 (9) TMI 204 - AT - Income Tax

Default on the part of the assessee to collect tax - licensee on the income from parking lots - Held that - It is apparent that only one month time was granted to the assessee to furnish the relevant details and evidence to show that the licensees have paid the tax on the income from parking lots. It is pertinent to note that except one year i.e. A.Y. 2012-13, all other five assessment years are past period and since the earlier year licensee at relevant point of time might have left and discontinued to operate the parking lots therefore, it was very difficult for the assessee to collect the information and evidence from those licensees within such short period allowed by the Assessing Officer. Having regard to the facts and circumstances of the case, where relevant details of the payment of tax by the licensee pertains to the earlier five years, we are of the view that the assessee was not given sufficient time to do the needful. Accordingly, in the interest of justice we set aside the impugned orders of the authorities below and direct the Assessing Officer to give one more opportunity to the assessee to furnish the relevant details and evidence of payment of tax by the licensee and thereafter reconsider the matter afresh.

Summary

Issues Involved:
1. Primary liability of payment of income tax as per section 191.
2. Treatment of the appellant as an assessee in default under section 201(1) and proviso to section 201(1).
3. Opportunity to produce copies of returns filed by the licensee.
4. Consideration of facts regarding the licensee's tax payments.
5. Provisions of section 206C as "machinery provisions".
6. Limitation period for declaring an assessee in default under section 201.
7. Assessment proceedings under section 206C and requirement for notice under section 148.
8. Appeal fee under section 253(6)(d).
9. Limitation for filing appeal under section 253(3).
10. Interim relief and stay of recovery.

Detailed Analysis:

1. Primary Liability of Payment of Income Tax:
The appellant argued that the primary liability for payment of income tax lies with the assessee to whom the income belongs, as per the explanation to section 191. The appellant contended that the Income Tax Officer (TDS) Hubli erred in confirming the order without considering this provision.

2. Treatment as Assessee in Default:
The appellant challenged the justification of treating them as an assessee in default solely for failing to deduct tax at source. They emphasized that both conditions under section 201(1) and its proviso must be met: failure to withhold tax and the recipient's failure to pay the tax directly.

3. Opportunity to Produce Returns:
The appellant claimed they were not given a reasonable opportunity to produce copies of returns filed by the licensees. They also argued that some copies of the Return of Income filed by the licensees were not considered by the Respondent.

4. Consideration of Facts:
The appellant highlighted several points:
- Some licensees filed their Return of Income acknowledging receipts from parking lots, which the department accepted, thus ceasing the appellant's default status.
- The onus is on the revenue to show that taxes were not recovered from the licensees.
- Section 206C(6A) is similar to section 201, and no "assessee" can be considered in default without a demand notice under section 156.
- The appellant cannot be treated as in default until it is found that the licensee failed to pay tax directly.
- Adequate opportunity to furnish an accountant's certificate was not provided, violating natural justice principles.
- Sub-section 6 and 6A make liability absolute on the deductor without providing for notices, assessment, or collection procedures.
- Invoking sections 206C(6) and 206C(6A) erroneously overrides the charging section 4 of the Income Tax Act.

5. Provisions of Section 206C:
The appellant argued that section 206C is merely a "machinery provision" and demanding tax from the licensor for failure to collect from the licensee is erroneous.

6. Limitation Period:
The appellant contended that section 201 does not prescribe a limitation period for declaring an assessee in default. They argued that the statutory authority must exercise jurisdiction within a reasonable period if no limitation is prescribed.

7. Assessment Proceedings:
The appellant argued that proceedings under section 206C are assessment proceedings, and for reassessment, the Assessing Officer should record reasons and issue notice under section 148.

8. Appeal Fee:
The appellant paid the appeal fee of ?500 as per section 253(6)(d) since the subject matter of the appeal did not fall under clauses (a), (b), or (c) of the section.

9. Limitation for Filing Appeal:
The appellant received the order on 5-10-2015 and filed the appeal within the prescribed 60 days, on or before 4.12.2015.

10. Interim Relief:
The appellant requested interim relief, arguing that without it, they would face irreparable hardship. They sought a stay on the recovery operation until the appeal's disposal and requested an order for waiver of pre-deposit.

Judgment:
The Tribunal noted that a spot verification was conducted on 16.01.2013, revealing that the assessee did not collect tax at source on parking lot lease charges. The Assessing Officer issued a letter requesting details, and upon finding no tax collected, passed an order under section 206C, holding the assessee in default and computing tax liability and interest.

The Tribunal found that the assessee was not given sufficient time to gather information about tax payments by licensees, especially for the earlier five years. Therefore, the Tribunal set aside the impugned orders and directed the Assessing Officer to provide another opportunity for the assessee to furnish relevant details and evidence of tax payments by the licensees.

Conclusion:
The appeals were allowed for statistical purposes, and the Assessing Officer was instructed to reconsider the matter afresh after giving the assessee a fair opportunity to present necessary details. The order was pronounced on 29th July 2016.