2006 (7) TMI 249 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner (Appeals) under section 248 of the Income-tax Act, 1961.
2. Validity of an appeal against a chartered accountant's certificate under CBDT Circulars.
3. Procedural requirements for determining withholding tax liability under section 195.
4. Role of the Assessing Officer (TDS) in determining tax deduction at source.

Detailed Analysis:

1. Jurisdiction of the Commissioner (Appeals) under section 248 of the Income-tax Act, 1961:
The primary issue was whether the Commissioner (Appeals) had the jurisdiction to entertain an appeal under section 248 of the Income-tax Act, 1961, against a chartered accountant's certificate. The Tribunal observed that the Commissioner (Appeals) adjudicated the correctness of certificates issued by a firm of chartered accountants, which certified certain rates at which taxes were required to be deducted at source from remittances made by the assessee-tax deductor. The Tribunal concluded that the Commissioner (Appeals) acted contrary to the scheme of the Income-tax Act by admitting an appeal against such a certificate.

2. Validity of an appeal against a chartered accountant's certificate under CBDT Circulars:
The Tribunal noted that the revised scheme under CBDT Circular No. 759, dated 18-11-1997, and Circular No. 10/2002, dated 9-10-2002, allowed an assessee to obtain a chartered accountant's certificate for determining withholding tax liability instead of obtaining a 'No Objection Certificate' from the Assessing Officer. However, the Tribunal emphasized that the certificates issued by chartered accountants do not impose any tax deduction liability on the assessee-tax deductors. Consequently, an appeal against such a certificate is not maintainable as it does not give rise to a cause of action for appeal.

3. Procedural requirements for determining withholding tax liability under section 195:
The Tribunal highlighted the procedural shift from obtaining a 'No Objection Certificate' from the Assessing Officer to relying on a chartered accountant's certificate for determining withholding tax liability. The revised scheme aimed to simplify the process and reduce delays in remittances. However, the Tribunal clarified that the new scheme does not replace the requirements under section 195(2) of the Act but supplements them. The assessee must still ensure compliance with the tax deduction requirements and is liable for any shortfall or non-deduction of tax.

4. Role of the Assessing Officer (TDS) in determining tax deduction at source:
The Tribunal underscored the importance of the Assessing Officer (TDS) in determining the withholding tax liability. It stated that the legal remedies for denying liability to deduct tax at source could only arise from the opinion of the Assessing Officer (TDS) or other appropriate legal authority. The Tribunal concluded that the Commissioner (Appeals) erred in entertaining the appeal without the matter being considered by the Assessing Officer (TDS). The proper course of action for the assessee-tax deductor was to approach the Assessing Officer (TDS) for determination of withholding tax liability and follow the grievance redressal mechanism if aggrieved by the Assessing Officer's stand.

Conclusion:
The Tribunal dismissed the appeals, holding that the Commissioner (Appeals) should have rejected the appeals as non-maintainable and directed the assessee to approach the Assessing Officer (TDS) for determination of withholding tax liability. The Tribunal also directed the Assessing Officer to dispose of the matter within a reasonable time if the assessee chose to take up the matter.