2017 (9) TMI 652 - AT - Income Tax

Short deduction of TDS - demand u/s 201(1) and interest chargeable u/s 201(1A) - Seeking relief on the ground that No revenue loss to the government - TDS deducted applying the rate u/s 194C instead of Section 194LA - TDS deducted on the original compensation / enhanced compensation paid to the land owners - bona fide error - Held that - Admittedly the LAO has not deducted appropriate tax at source on the amounts paid to the agriculturists and the only argument advanced before the tax authorities was that there is no revenue loss to the Government and hence the DDO should not be treated as an assessee in default. No further material was brought before us to contradict the findings and conclusions of the Ld CIT (A) with regard to the application of provisions of section 201(1) and 201(1A) of the Act. In fact the case of the assessee is that it was a bona fide error on the part of the LAO. Equity and taxation are strangers and there cannot be any laxity even if it is on account of a bonafide errors. Under these circumstances, the Ld CIT (A) expressed his inability to accord any relief, beyond the relief accorded in the form of recalculation of the penalty as well as the interest payable u/s 201(1) and 201(1A) of the Act. We are therefore of the opinion that the orders passed by the Ld CIT (A) do not call for any interference. Appeals by the asssessee / LAO are dismissed.

Summary

Issues Involved:
1. Rejection of appellant’s claim for relief from TDS short deduction for non-filers of income tax returns.
2. Calculation and remittance of TDS as per the provisions of the Income Tax Act.
3. Applicability of interest under section 201(1A) for short deduction of TDS.

Detailed Analysis:

Issue 1: Rejection of appellant’s claim for relief from TDS short deduction for non-filers of income tax returns
The appellant argued that the Hon’ble Commissioner of Income Tax Appeals should not have rejected their claim for relief from TDS short deduction concerning non-filers of income tax returns. They contended that there was no revenue loss as the non-filers were mainly agriculturists/agricultural laborers unaware of income tax proceedings. The appellant requested relief of ?7,04,742/- from the TDS short deduction demand and consequential relief in interest under section 201(1A).

Issue 2: Calculation and remittance of TDS as per the provisions of the Income Tax Act
The appellant, a Special Deputy Collector for Land Acquisition, was responsible for deducting tax at source when paying compensation for land acquisition. During survey proceedings, it was found that the appellant did not follow TDS provisions properly. The discrepancies included:
- Incorrectly exempting payments below ?1 lakh from TDS, contrary to section 194-LA.
- Applying varying TDS rates (5%-7%) instead of the uniform 10% rate specified in the Act.
- Mistakenly applying TDS rates prescribed for contract works under section 194C instead of 10% under section 194-LA.

The appellant explained that most recipients were agriculturists with no other income source, making tax recovery from them nearly impossible. Despite these explanations, the Assessing Officer noted short deductions and non-remittance of TDS, leading to a demand for short deduction and interest under sections 201(1) and 201(1A).

Issue 3: Applicability of interest under section 201(1A) for short deduction of TDS
The appellant argued before the Ld. CIT(A) that the short deduction was due to a misconception by the incumbent officer and that the beneficiaries were mainly agriculturists exempt from income tax. They claimed that the TDS already deducted was refunded by the Income Tax Department in most cases. The appellant also contended that the year of actual disbursement should be considered for tax deductibility, not the year when funds were deposited with the judge.

The Ld. CIT(A) observed that the LAO did not deduct tax properly on compensation payments, incorrectly exempting amounts below ?1 lakh. After reappraising the facts, the Ld. CIT(A) made modifications to the TDS Officer's orders, recalculating the short deduction and interest. The Ld. CIT(A) directed the Assessing Officer to recalculate interest from the date of issue of Demand Draft for compensation by the Court to the date of payment by the assessee. The decision of the Apex Court in Hindustan Coca Cola Beverage Private Limited vs. CIT was applied, stating that since tax was already collected, TDS need not be deducted again, subject to document verification.

Conclusion:
The appeals were dismissed as the Tribunal found no grounds to interfere with the Ld. CIT(A)’s orders. The Tribunal upheld the application of sections 201(1) and 201(1A), emphasizing that equity and taxation are strangers, and no relief could be granted beyond recalculating the penalty and interest. The appellant's arguments of no revenue loss and bona fide errors were insufficient to overturn the findings.