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2006 (7) TMI 251 - AT - Income TaxNon deduction of TDS u/s 192 - Valuation of the perquisites - Salaries and other amenities or perquisites granted to the employees - Survey conducted - Assessee in default u/s 201(1) - charging the interest u/s 201(1A) - Whether the orders passed by the Assessing Officer for the financial years 1995-96 to 1997-98 (assessment years 1996-97 to 1998-99) have become time-barred - Applicability of rule 3 - HELD THAT - In our view, merely because a survey was conducted by the department, the orders passed by the Assessing Officer after the expiry of the period of limitation, cannot be validated. All the material facts were already available with the department as the assessee bank has consistently, followed the same method over a period of almost 50 years. The details relating to TDS in respect of employees have to be filed by the employer every year in the prescribed form as required u/s 206 of the Act. Thus, for each financial year the prescribed return of TDS has to be filed by the tax deductor within the prescribed time-limit. The Assessing Officer was free to scrutinize these annual returns and to raise any queries if he had any doubt about the proper deduction of tax on the part of the assessee. In our view, the survey conducted on 11-12-2001 will not alter the legal position with regard to the time limit for passing of orders u/s 201(1) and 201(1A). Whether section 201(1) and 201(1A) have any applicability in case of short deduction of tax - HELD THAT - We are unable to accept the arguments raised by the learned counsel for assessee. The Legislature has amended the relevant sections and the amended provisions have been consciously made effective with retrospective effect from 1-4-1962 i.e., right from the commencement of the Income-tax Act, 1961. In our view, whatever may be consequences, the law laid down by the Legislature has to be given effect. We, therefore, hold that for the assessment years under appeal short deduction of tax at source would also attract the provisions of section 201(1) and 201(1A). Applicability of rule 3 - There is no dispute about the proposition of the learned DR that rule 3 of the IT Rules is mandatory. However, the applicability of rule 3 would arise only when there is a perquisite u/s 17(2) of the Act and the value of such perquisite is, therefore, required to be determined. In the present case, it cannot be said that any benefit or amenity was granted or provided by the assessee bank at concessional rate. Therefore, there would be no perquisite as defined u/s 17(2)(iii). When there is no perquisite, the question of valuation of such perquisite cannot arise under rule 3. Other amenities in the form of reimbursement of wages to casual labourer and reimbursement of cleansing material - In our view, the assessee bank has taken precautions before such reimbursement was granted to the employees. Under the Rules framed, the aforesaid reimbursement is for proper maintenance and upkeep of the residential accommodation, furniture, fixture and other appliances, which are owned by the assessee-bank. In our view with regard to allotment of the furniture and reimbursement of expenditure as mentioned above, the assessee bank was clearly under a bona fide belief that it was properly complying with the provisions of section 192. There is no sufficient material or evidence to show that the assessee-bank had not acted under a bona fide belief and therefore, we hold that the assessee-bank cannot be treated to be an assessee in default u/s 201(1) and interest cannot be charged u/s 201(1A). We, therefore, reverse the orders of the respective CIT(A)'s for the assessment years under appeal and quash the orders of the Assessing Officer treating the assessee to be an assessee in default u/s 201(1) and charging the interest u/s 201(1A). In the result, all the appeals of the assessee are treated as partly allowed.
Issues Involved:
1. Limitation of time for passing orders under section 201(1) and 201(1A). 2. Applicability of section 201(1) and 201(1A) in cases of short deduction of tax. 3. Bona fide estimate and honest belief in tax deduction. 4. Determination of perquisites under section 17(2) and rule 3 of Income-tax Rules. 5. Reimbursement of daily wages and cleansing material as perquisites. Issue-wise Detailed Analysis: 1. Limitation of Time for Passing Orders Under Section 201(1) and 201(1A): The assessee argued that the orders for financial years 1995-96 to 1997-98 were barred by limitation as they were passed after four years from the end of the relevant financial years. The Tribunal agreed, citing the ITAT Mumbai Bench decision in the case of Wockhardt Life Sciences Ltd., which held that orders under section 201(1) and 201(1A) passed beyond four years are time-barred. The survey conducted on 11-12-2001 did not alter this legal position as the details were already available with the department. The Tribunal quashed the orders for these years on the ground of being time-barred. 2. Applicability of Section 201(1) and 201(1A) in Cases of Short Deduction of Tax: The Tribunal acknowledged the retrospective amendment of section 201(1) and 201(1A) by the Finance Act, 2001, effective from 1-4-1962, which brought short deduction of tax within their ambit. Despite the assessee's argument that they could not be held liable for deductions made before the amendment, the Tribunal held that the law as amended must be applied, making the sections applicable for short deductions during the assessment years under appeal. 3. Bona Fide Estimate and Honest Belief in Tax Deduction: The assessee contended that they had deducted tax based on a bona fide and honest estimate, as required under section 192, and thus should not be considered in default under section 201(1) and 201(1A). The Tribunal supported this view, referencing judicial pronouncements that an employer must act honestly and fairly in estimating tax liability. The Tribunal found no evidence of mala fide action by the assessee bank, thus ruling that the bank could not be treated as an assessee in default. 4. Determination of Perquisites Under Section 17(2) and Rule 3 of Income-tax Rules: The Tribunal examined whether the provision of furniture and appliances at standard rent constituted a perquisite under section 17(2)(iii). Citing the Hon'ble Calcutta High Court's decisions, the Tribunal concluded that if a uniform standard rent is charged without discrimination, it does not constitute a perquisite. Consequently, rule 3 of the Income-tax Rules, which mandates valuation of perquisites, was not applicable as there was no perquisite to value. The Tribunal held that the assessee bank's practice did not result in any taxable perquisite. 5. Reimbursement of Daily Wages and Cleansing Material as Perquisites: The Tribunal considered the reimbursement of daily wages for casual labor and cleansing material. It was found that these reimbursements were for the maintenance and upkeep of the bank's residential accommodation and fixtures, not personal benefits to employees. The bank had taken adequate precautions to ensure proper use of these reimbursements. The Tribunal ruled that these reimbursements did not constitute perquisites and supported the assessee's bona fide belief that no tax deduction at source was required for these items. Conclusion: The Tribunal ruled in favor of the assessee on all counts, quashing the orders under section 201(1) and 201(1A) for the financial years 1995-96 to 1997-98 as time-barred and holding that the assessee bank acted under a bona fide belief regarding tax deductions. The appeals were treated as partly allowed.
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