2023 (11) TMI 398 - HC - Income Tax

Seeking a lower deduction of tax certificate ( LDC ) - Seeking a lower deduction of tax certificate ( LDC ) - LDC was grated for TDS @ 0.5% instead of @ 0.01% as sought - Rate of deduction of Tax Deducted at Source ( TDS ) is 1% (one per cent) u/s 194O - HELD THAT - DCIT(TDS)/Respondent No. 1 set forth no reasons whatsoever as to why the Petitioners request that TDS should be deducted at a rate of 0.01% (zero point zero one per cent) ought not to be accepted. Further, at the request made, Learned Standing Counsel, an opportunity was granted to the Respondents to file a counter-affidavit in the matter which would furnish reasons as regards the conclusion arrived at in the Impugned Order. However, this Court specifically observed therein that the Impugned Order must stand on its own legs, and accordingly, the reasons furnished by way of a counter-affidavit could not be supplanted into the Impugned Order. This Court is of the considered opinion that the principle enunciated in Mohinder Singh Gill 1977 (12) TMI 138 - SUPREME COURT is applicable to the case herein. wherein the Supreme Court rejected the notation of supplementing reasons in relation to an executive order by way of an affidavit. Therefore this Court must consider whether the Impugned Order read with the Impugned Letter, is a speaking and well-reasoned order so as to satisfy the mandate of Rule 28AA of the IT Rules, devoid of the reasons furnished by the Respondents before this Court vide its counter affidavit. As perused the Impugned Order read with the Impugned Letter and we find that the reasons furnished by the Respondent No. 1 qua the Application i.e., as to why the Petitioners request that TDS should not be deducted at a rate of 0.01% (zero point zero one per cent), hinges on broad generalizations in relation to the propriety of projected estimations of revenue and tax liability, and accordingly has been has been issued mechanically reflecting non-application of mind. Accordingly, following Camions Logistics Solutions (P) Ltd. 2020 (12) TMI 1084 - DELHI HIGH COURT this Court find that the Impugned Order read with the Impugned Letter suffers from non-application of mind which would certainly result in grave prejudice to the Petitioner. WP allowed.

Summary

Issues Involved:
1. Challenge to certificate issued by Deputy Commissioner of Income Tax under Section 197 of the Income Tax Act.
2. Petitioner seeking lower deduction of tax certificate under Section 194O of the IT Act for Financial Year 2023-2024.
3. Allegation of mechanical issuance of certificate without following the mandate of Rule 28AA of the IT Rules.
4. Lack of reasons provided for rejecting the application seeking a lower deduction of tax certificate.
5. Dispute over the reliability of projected accounts and history of TDS default by the Petitioner.
6. Examination of whether the Impugned Order is a speaking and well-reasoned order satisfying the mandate of Rule 28AA of the IT Rules.

Details of the judgment:
1. The Petitioner, a company engaged in retail trade through e-commerce platforms, challenged a certificate issued by the Deputy Commissioner of Income Tax under Section 197 of the Income Tax Act. The Petitioner sought a lower deduction of tax certificate under Section 194O for the financial year 2023-2024.
2. The Petitioner filed an application seeking a lower deduction of tax certificate and responded to queries raised by the Respondent regarding business activities, financial statements, and tax liabilities.
3. The Petitioner argued that the Impugned Actions were issued mechanically without following Rule 28AA of the IT Rules. The Petitioner contended that the Impugned Order lacked reasons for rejecting the application.
4. The Respondent argued that the issuance of a lower deduction of tax certificate is not a matter of right and the onus to justify the relief falls on the Petitioner. Concerns were raised about the reliability of projected accounts and the history of TDS default by the Petitioner.
5. The Court observed that the Impugned Order did not provide reasons for rejecting the Petitioner's request for a lower deduction of tax rate. The Court granted an opportunity for the Respondents to provide reasons but emphasized that the Impugned Order must stand on its own legs.
6. Referring to a Supreme Court decision, the Court held that the Impugned Order lacked reasoning and was issued mechanically, causing prejudice to the Petitioner. The Court set aside the Impugned Actions and remanded the matter back to the Respondent for a fresh determination in accordance with the law.