2016 (10) TMI 850 - AT - Income Tax

Short deduction of tds - Demand of the differential TDS @20% - incorrect pan number furnished - Held that - Primary onus is on the person entitled to receive income on which tax is deductible at source to furnish his PAN and in case such PAN is invalid or does not belong to the said person by virtue of deeming fiction, it has been stated that he has not furnished his PAN to the deductor. In such a scenario, the onus shifts on the person responsible for deducting the tax that he shall deduct the tax at the rate specified in the relevant provisions of the Act or at the rate of 20% whichever is higher. In the instant case the PAN number of Shri Lala Ram was found to be incorrect by the AO hence the AO applied the rate of 20% as against rate of 2% provided under section 194C of the IT Act. The assessee has mentioned that they have tried to contact Shri Lala Ram but he could not provide his correct PAN No. and that s why the assessee could not file the correction statement. In our view even though the primary onus is on Shri Lala Ram to furnish his correct PAN number to the assessee, what is equally important is that the assessee should verify at the time of making payments or at the time of credit in his books of accounts where Shri Lala Ram has submitted his correct PAN number. In the instant case, the assessee has failed to discharge its obligation to verify the correct PAN and it is only at the time of processing of the TDS return that the department has noticed the submission of incorrect PAN number and thereafter raised the impunged demand. What is important is that the exercise to file TDS returns should be such that it contains correct and accurate data and it is only then that the processing of such data has can happen properly and credit can be given to the income recipient. Given the non-obstante nature of provisions as contained in section 206AA(1) of the Act which overrides section 194C of the Act, we do not see any infirmity in the order of the AO in raising demand of the differential tax that the assessee should have deducted by virtue of submission of incorrect PAN by Shri Lala Ram. At the same time, the assessee shall be at liberty to recover the said amount from Shri Lala Ram. With the above observations the ground taken by the assessee is disposed off. - Decided against assessee

Summary

Issues involved:
1. Appeal against penalty order u/s 154 r.w.s. 201(1)/201(1A) dated 18.04.2012.
2. Sustaining demand of ?1,75,677/- on account of short deduction of TDS and interest thereon raised by the AO u/s 201(1) and 201(1A).

Detailed Analysis:
Issue 1:
The appeal was filed against the penalty order u/s 154 r.w.s. 201(1)/201(1A) dated 18.04.2012. Ground No.1 was not pressed during the hearing and hence dismissed. Regarding Ground No.2, the appellant had filed a TDS return for the 4th Quarter of F.Y. 2010-11 with wrongly mentioned PANs. The AO raised a demand due to this mistake, which the appellant partially corrected. The remaining demand was disputed, claiming correct PANs were mentioned. The CIT(A) confirmed the demand on account of short deduction of tax and interest. The appellant argued that the default was technical, beyond their control, and no deliberate defiance of the law was established. The appellant had deposited the tax deducted at source within the stipulated time, and the demand was raised due to wrong PANs provided by recipients. The appellant contended that no penalty should be imposed for a technical breach.

Issue 2:
The demand of ?1,75,677/- on account of short deduction of TDS and interest was sustained by the CIT(A), with a portion disputed by the appellant. The appellant claimed correct PANs were mentioned for certain deductees, supported by information downloaded from the CPC portal. The AO was directed to verify these facts, and if correct PANs were mentioned, the demand was to be reduced/deleted. The appellant argued that the onus was on the recipient to provide the correct PAN and that the demand was raised without establishing a reasonable cause for the default. The AO applied a higher TDS rate due to incorrect PANs, as per section 206AA, and the appellant's failure to verify correct PANs was noted. The AO's demand was upheld, emphasizing the importance of accurate data in TDS returns and the non-obstante nature of section 206AA(1) of the Act.

In conclusion, the appeal filed by the assessee was dismissed, and the order was pronounced on 14/09/2016.