2019 (11) TMI 939 - HC - Income Tax

Application for Nil rate of tax deduction certificates u/s 197 - assessee-in-default u/s 201(1) and 201(1A) - HELD THAT - It is not disputed before us that the impugned Certificates had been issued by the Respondent No.2 Dy. Commissioner of Income Tax, after having obtained an approval for issuance of the same at lower rates and not at Nil rates after obtaining approval from the Commissioner of Income Tax. In these circumstances, the application for revision u/s 264 of the Act would be in the nature of an Appeal from Caesar to Caesar. As the basis of the impugned Certificates dated 10th September, 2019 being the orders dated 9th September, 2019 of the Income Tax Officer, have been set aside, the impugned Certificates and the order sheet which gives basis of working out the deduction in the impugned Certificates are also set aside. The Petitioner s application dated 14th August, 2019 is restored to the AO for fresh consideration and passing of the order on the same, after following the principle of natural justice, within a period of two weeks from the date this order is uploaded on the High Court web site. In the meantime, the Petitioner s client/ customers would continue to deduct tax in terms of the Certificate issued on 4th June, 2019 (which was set aside in TLG INDIA PRIVATE LIMITED VERSUS DCIT 2019 (8) TMI 303 - BOMBAY HIGH COURT will be the rate which will apply. However, it is made clear that if, the Income Tax Officer comes to the conclusion that the Petitioner is liable to pay tax under Sections 201 201(1A) of the Act in respect of the show cause notice. In the above eventuality, the Respondent No.2 herein would be entitled to cancel/substitute the Certificates issued under Section 197 of the Act within two weeks of this order being uploaded on the website of this Court.

Summary

Issues:
Challenge to Certificates issued under Section 197 of the Income Tax Act, 1961 for determining tax deduction at source rates. Outstanding tax liability for Assessment Years 2017-18, 2018-19, and 2019-20. Petitioner's application for 'Nil' rate of tax deduction certificates. Alternative remedy under Section 264 of the Act. Approval for issuance of certificates at lower rates.

Analysis:

1. The petition challenges Certificates dated 10th September, 2019 issued under Section 197 of the Income Tax Act, determining tax deduction at source rates for different sections of the Act. The basis for rejecting the petitioner's application for 'Nil' rate certificates was an outstanding tax liability of approximately ?94 Crores for Assessment Years 2017-18, 2018-19, and 2019-20, where the petitioner was held as an assessee-in-default under Sections 201(1) and 201(1A) of the Act by orders dated 9th September, 2019.

2. A separate Writ Petition challenged the orders holding the petitioner liable for the tax liability, and this petition was allowed, setting aside the orders dated 9th September, 2019. Consequently, the impugned Certificates dated 10th September, 2019 were required to be set aside due to the annulment of the earlier orders.

3. The Revenue suggested availing the alternative remedy under Section 264 of the Act, but the court rejected this, as the basis of the impugned Certificates had already been set aside. It was noted that the impugned Certificates were issued at lower rates without approval for 'Nil' rates from the Commissioner of Income Tax, making a revision under Section 264 futile.

4. The court emphasized that the impugned Certificates and the basis for their issuance were set aside, restoring the petitioner's application for fresh consideration by the Assessing Officer. The petitioner's clients/customers were instructed to continue deducting tax at the rate from a previous Certificate until a new decision was made.

5. It was clarified that if the Income Tax Officer found the petitioner liable to pay tax under Sections 201 and 201(1A) of the Act, the Certificates issued under Section 197 could be cancelled or substituted within two weeks of the court's order.

6. Ultimately, the petition was allowed, setting aside the impugned Certificates and the order sheet dated 9th September, 2019, based on the annulment of the earlier orders holding the petitioner liable for the tax liability.