2022 (4) TMI 549 - AT - Income Tax

TDS u/s 194C - Addition u/s 201/201(1A) - TDS not deducted from the payments made to contractors under various schemes - payments made to contractors as below the taxable limits - HELD THAT - We find from the records submitted by the assessee and the payments made to contractors are below the taxable limits and there is no requirement of PAN and consequently, no deduction of tax is envisaged u/s 194C. The proviso clearly states that nothing contained in subsection (5A)and (5B) shall be applied to a person whose total income is not chargeable to income tax and who does not obtain PAN under any provision of the Act. The very intent of section 201(1A) makes it conditional for every person who wish to have a transaction invariably to have PAN, is contrary to provisions of 139(5A) which was introduced by the legislature. The persons whose income is below the taxable limits need not have PAN, nor they need not furnish any income declaration return is not disputed. We also note that in terms of section 139A(5A) of the Act, every person receiving any sum or income or amount from which tax has been deducted under the provisions of Chapter XVIIB, shall intimate his permanent account number to the person responsible for deducting such tax under that Chapter. However the second Proviso exempts certain categories of persons from the applicability of section 139(5A) 139(5B). We also find from the records that the assessee has segregated the contractual payments more than ₹ 5,00,000/- and less than ₹ 5,00,000/- and submitted a statement before us. CIT(A), in his findings also has observed that where the receipts are more than ₹ 5,00,000/-, the contractors have submitted their returns disclosing the receipts and paid the taxes on the same and hence, it cannot be taxed in the hands of the assessee. We also find from the RTI application filed by the assessee that the judgement of Hon ble High Court of Karnataka in the case of Smt.A.Kowsalya Bai 2012 (6) TMI 451 - KARNATAKA HIGH COURT has not been challenged before higher forum. We, therefore, find no infirmity in the order passed by the Ld.CIT(A) and no interference is required. In the result, appeal of the revenue is dismissed.

Summary

Issues:
- Appeal against the order of Commissioner of Income Tax (Appeals) regarding TDS deductions on payments to contractors under various schemes.
- Interpretation of provisions under sections 201(1) and 201(1A) of the Income Tax Act, 1961.
- Consideration of tax liability based on the total payments made to contractors.
- Assessment of the necessity of PAN for tax deductions.
- Exemption from PAN requirement for individuals below taxable limits.
- Application of relevant case laws and legal provisions in determining tax liability.

Analysis:
1. The appeals were filed by the revenue challenging the CIT(A)'s order regarding TDS deductions on payments made to contractors under various schemes. The AO found the assessee in default for not deducting TDS on contract payments and demanded the short deduction along with penal interest. The CIT(A) allowed the appeal, emphasizing that tax liability did not arise due to the nature of payments and the recipients' compliance with tax obligations.

2. The dispute revolved around the interpretation of sections 201(1) and 201(1A) of the Income Tax Act. The revenue contended that the CIT(A) did not provide specific findings on these sections. The argument focused on the necessity of PAN as per section 139(5)(a) and (c) and the consequences of non-deduction or non-payment of tax as per section 201(1) of the Act.

3. The CIT(A) based the decision on the total payments made to contractors and the compliance of recipients with tax obligations. The argument highlighted that for payments below taxable limits, PAN and tax deductions were not mandatory. The judgment referred to relevant legal provisions and case laws, including the exemption for individuals not required to obtain PAN under the Act.

4. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee's segregation of payments based on amounts and recipients' tax compliance justified the absence of tax liability. The judgment cited the exemption for individuals below taxable limits from PAN requirements and noted the non-challenge of relevant legal precedents. The Tribunal found no reason to interfere with the CIT(A)'s order, dismissing the revenue's appeal.

5. The cross objections filed by the assessee were deemed infructuous as the revenue's appeals were dismissed. Consequently, both the revenue's appeals and the assessee's cross objections were dismissed in the final order pronounced on April 8, 2022.