2024 (3) TMI 545 - AT - Income Tax

Rectification u/s 154 - non deduction of TDS u/s 194I - treating assessee-in-default u/sec. 201 r.w.s. 201(1A) for the purpose of recovering the corresponding TDS, involving varying sums, in all these assessment years - HELD THAT - TDS recoveries pertain to assessee s payments of licence-fee of various CT and X-ray machines which have been treated as rental in nature attracting sec. 194I - AO had duly passed his sec. 201(1) r.w.s. 201(1A) order(s) on 28.01.2016 not holding the assessee as the assessee-in-default in the lead assessment year 2009- 2010. This followed former round of sec. 154 rectification which stood concluded in assessee s favour on 28.03.2018. AO thereafter took-up yet another sec. 154 rectification in the impugned second round dated 29.11.2019 that the assessee s foregoing payments duly attracted TDS deduction u/sec. 194I of the Act whose non-compliance would liable it to be treated as the assessee-in-default. We are of the view in this clinching factual backdrop that such a course of rectification of the issue involving detailed enquiries would hardly be available to the AO since as per hon ble apex court s landmark decision in TS Balram, ITO vs. Volkart Bros. 1971 (8) TMI 3 - SUPREME COURT . We thus conclude that the learned lower authorities have erred in law and on facts in treating the assessee as the assessee-in-default in sec. 201 r.w.s. 201(1A), by way of sec. 154 rectification in question. The same is held as not sustainable in law in all these assessment years since involving identical facts.

Summary

Issues involved: Delay in filing appeals due to health complications and technical objections by the Revenue, challenge to rectification proceedings treating assessee as "assessee-in-default" for TDS recovery under sec. 154.

Delay in filing appeals: The assessee's seven appeals for assessment years 2009-2010 to 2015-2016 faced a delay of 547 days, attributed to health complications and lack of communication. The Revenue objected to the delay, claiming the assessee failed to provide a reasonable cause. However, the Tribunal condoned the delay based on the assessee's submissions and medical records, citing the principle of substantial justice from the case of Collector, Land Acquisition vs. MST Katiji [1987] 167 ITR 471 (SC).

Challenge to rectification proceedings: The main grievance of the assessee was regarding the lower authorities' action under sec. 154 rectification, treating the assessee as an "assessee-in-default" for TDS recovery under sec. 201 r.w.s. 201(1A) of the Income Tax Act. The TDS recoveries in question related to payments of licence fees for CT and X-ray machines, treated as rental income under sec. 194I of the Act. The Assessing Officer had initially passed orders not holding the assessee as the assessee-in-default, followed by a sec. 154 rectification in favor of the assessee. However, a subsequent rectification attempted to treat the assessee as the assessee-in-default, which the Tribunal found to be erroneous in law and on facts. The Tribunal concluded that the rectification was not sustainable and ordered in favor of the assessee in all assessment years.

Outcome: The Tribunal allowed the assessee's seven appeals, rejecting the applicability of sec. 154 rectification and holding the lower authorities' actions as not sustainable in law. The other contentions of the assessee were considered academic in light of the decision on the rectification issue.