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TMI Blog2012 (5) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment orders dated 28.3.2012 (Financial Year 2009-10) and 29.3.2012 (Financial Year 2008-09) were passed fastening liability of Rs.13,15,31,472 and Rs.3,26,82,953 respectively, which orders were also challenged in this writ petition by means of an amendment application, which was allowed on 18.4.2012. 2. The brief facts giving rise to this writ petition are; the petitioner is engaged in the business of printing and publishing newspapers 'Dainik Jagaran' and 'I-next' from different centres across the country. The registered office of the petitioner's company is situate at Kanpur Nagar. The major source of revenue of the petitioner is generated from advertisements published in the said newspapers. The petitioner is also member of Indian Newspaper Society (hereinafter referred to as INS). The petitioner has been giving 15% trade discount to accredited advertising agency and trade discount of 10% to 15% to non-accredited advertising agency as per Rules and Regulations of INS for last several years. On 15.3.2012, the respondent conducted a survey under section 133A of the Act at the premises of the petitioner at Kanpur Nagar and recorded statement of General Manager Taxation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner challenging the notice contended that notices do not furnish any jurisdiction to the authority to proceed under section 201 of the Income Tax Act. as no TDS. was deductible on 15% trade discount. He submits that the trade discount can not be treated as commission so as to liable for any deduction. He has placed reliance on the decision of Delhi High Court passed in the case of I.T.A. No. 1264 of 2007,Commissioner of Income Tax Vs. Living Media India Limited filed as Annexure No. 1 to the writ petition at page 33. He has submitted that there is no material with the respondent to proceed under section 201 of the Income Tax Act. Shri Govind Krishna, learned counsel appearing for the respondent submits that by notice impugned only informations have been called from the petitioner and there is no lack of jurisdiction in the authority to proceed. He further submits that at this state, the writ petition be not entertained. Learned counsel for the petitioner further placed reliance on the decision of Supreme Court passed in the case of Siemens Ltd. Vs. State of Maharashtra and others reported in (2006)12 Supreme Court Cases 33. Be that as it may, in view of the fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner filed an application for amendment of the writ petition praying for adding paragraphs, grounds and reliefs in the writ petition for challenging the assessment orders dated 28.3.2012 and 29.3.2012. The amendment application was allowed by this Court on 18.4.2012 and the petitioner was permitted to challenge the assessment orders in this writ petition. Counter affidavit has also been filed by the Department to the writ petition and amended pleadings to which rejoinder affidavit has also been filed. Following are the reliefs which have been claimed in the writ petition including the reliefs prayed for by means of amendment application : "i) a suitable writ, order or direction in the nature of Certiorari calling for the records of the case and to quash the impugned notices dated 19.03.2012 and 21.03.2012 issued by the respondent (Annexures-4 and 5 to this writ petition). ii) a suitable writ, order or direction in the nature of Certiorari calling for the records of the case and to quash the impugned order dated 28.03.2012 along with the notice of demand dated 28.03.2012 (Annexure-6 to this writ petition) and the impugned order dated 29.3.2012 along with the notice of demand date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 194J. 7. Learned Counsel for the petitioner submits that the petitioner being a member of INS is required to pay trade discount of 15% according to the rules of INS. The advertising agency which are accredited by INS are also bound to follow the rules and under the terms of agreement entered with the advertising agency and INS under which it is obligatory for the news agency to give 15% trade discount and as per Rules of INS and terms of agreement entered between INS and advertising agency, the advertising agency acts as agent of the advertiser. The advertising agency carry on business of advertising and is not an agent appointed by the petitioner. No agreement with any advertising agency has been entered into by the petitioner nor there is any other relevant factor on the basis of which it can be said that the advertising agency is agent of the petitioner. It is submitted that the Rules of INS, as well as terms and conditions as mentioned above, clearly prove that advertising agency is not an agent of the petitioner and the jurisdictional facts as required under section 194H being not present, the entire proceedings are without jurisdiction. Learned Counsel for the petitioner f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n [2010] 325 ITR 205 Commissioner of Income Tax Vs. Director Prasar Bharti, is not applicable in the present case and although distinguishing facts were submitted in writing by the petitioner but still the said judgment has been relied and the judgment of the Delhi High Court which was directly applicable has been brushed aside on the flimsy ground that judgment of the Kerala High Court is recent in point of time. Learned Counsel for the petitioner further submitted that the assessment orders dated 28.3.2012 and 29.3.2012 and the demand raised for tax which according to the respondents ought to have been deducted at source is wholly without jurisdiction. 8. It is further submitted that under sections 201 and 201(1A), in a case where tax is not deducted at source, the only proceedings which can be initiated are proceedings for realisation of interest and penalty and the liability to pay tax cannot be fastened on deductor. As per Section 191 read with Section 4 of the Act, such tax has to be directly paid by the assessee i.e. advertising agency and the assessment orders dated 28.3.2012 and 29.3.2012 demanding payment of tax are wholly without jurisdiction. The petitioner could not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 1,80,000 items is nothing but denial of adequate opportunity to the petitioner. The compilation of the said data was a herculean task and the request by the petitioner to grant reasonable time, was denied. Had the petitioner been given adequate opportunity, it would have established that tax on the income of 15% trade discount, has already been paid and there was no occasion to impose liability upon the petitioner but the respondent rushed through the proceedings which was completed within ten days from issue of notice. 11.Sri Govind Krishna, learned counsel for the Department refuting the submissions of learned Counsel for the petitioner, contended that the petitioner is not entitled to invoke the jurisdiction of this Court under Article 226 of the Constitution of India since the assessment order has already been passed and the petitioner be relegated to avail the alternative remedy of statutory appeal as provided under the Act. He submits that the judgment of the Kerala High Court in Prasar Bharti's case is fully applicable and there is no lack of the jurisdiction in the authorities in initiating the proceedings under sections 201 and 201 (1A) of the Act. He submits that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the deductor, who fails to deduct the tax at source, is an assessee in default and apart from interest and penalty, the tax which was not deducted can very well be recovered from the deductor. He submits that if there is any mistake in the order of the assessment, it is open for the petitioner to invoke section 154 of the Act for correction of mistake, if any. 12.Learned Counsel for the petitioner replying the objections of learned Counsel for the respondent regarding relegating the petitioner to statutory appeal, submitted that the present is not a case where the petitioner be denied relief under Article 226 of the Constitution of India. It is submitted that when the Income Tax authorities assumed jurisdiction without there being jurisdictional facts available for initiating the proceedings under section 201/201(1A), the notice initiating the proceeding can very well be challenged through writ proceedings. It is further submitted that by the order impugned huge liability has been imposed on the petitioner and apart from assessment order, proceedings under section 147 of the Act have also been initiated. The notice under section 147 has been issued for several assessment years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade discount allowed by the petitioner to advertising agencies is payment of commission within the meaning of Section 194H Explanation (i). 6. Whether the Judgement of the Kerala High Court in 325 ITR 205 was attracted in the present case or the judgment of the Delhi High Court in ITA 1264/07, The Commissioner of Income Tax Vs. Living Media India Ltd. decided on 6.5.2008 was applicable? 7. Whether against a deductor who fails to deduct the tax at source, the liability of payment of tax can also be fastened against the deductor under section 201 apart from liability of interest and penalty? 8. Whether with regard to tax which was required to be deducted at source, the liability is of the assessee with regard to whose income the tax was required to be deducted at source or the liability is of deductor for payment of tax which could not be deducted? 9. Whether according to Section 191 read with Section 201, a deductor, who fails to deduct tax at source can be deemed to be an assessee in default without adverting to the issue and recording a finding that assessee who is liable to pay tax directly had not paid tax? 10.Whether the assessing authority has taken into consideration a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vertising agency, having failed to deduct the tax on the said payment is liable to pay interest and tax. The proceedings are founded on Section 194H of the Act. Section 194H of the Act is quoted below:- "194H. Commission or brokerage. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001 to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent. Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amount of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed five thousand rupees. Provided further that an individual or Hindu undivided family, whose total sales, gross receipts or turnover from the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... professional services). 21. The Condition Nos. (2) and (3) , which are interrelated, are being taken first. The Condition Nos.2 and 3 contemplate that person receiving payment should be acting on behalf of another person i.e. he must be agent of the principal and secondly payment should be for the services rendered by the agent. Thus the test is as to whether person receiving commission is agent of the principal and he is receiving commission in lieu of services. The above are jurisdictional facts which have to be found out in the proceeding to be taken under Section 201/201(1A) of the Act. What are the jurisdictional facts and what is the scope of entertaining such challenge in proceeding under Article 226 of the Constitution of India needs to be first examined before proceeding further to examine the facts of the present case. 22. The Apex Court in the case of Calcutta Discount Co. Ltd. vs. Income Tax Officer reported in 1961(41) ITR 191 had occasion to consider the aforesaid issue in context of the provisions of Income Tax Act, 1922. It is useful to note the facts of the said case in some detail. The appellant in the aforesaid case was assessed to income tax for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot there before the Income Tax Officer, hence he had no jurisdiction to issue notice. In this context following was held by the Apex Court:- "It must therefore be held that the Incometax Officer who issued the notices had not before him any non-disclosure of a material fact and so he could have no material before him for believing that there had been any material nondisclosure by reason of which an underassessment had taken place." 24. It is relevant to note that before the Apex Court also counsel for the department contended that company would have sufficient opportunity to raise the question before the Income Tax Officer and in the event it is unsuccessful there is appellate jurisdiction under Section 66(2) of the Income Tax Act, 1922, hence the High Court ought not to have entertained the writ petition. Repelling the said submission, following was laid down by the Apex Court:- "Mr. Sastri mentioned more than once the fact that the company would have sufficient opportunity to raise this question, viz., whether the Income-tax Officer had reason to believe that under assessment had resulted from nondisclosure of material facts, before the Incometax Officer himself in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong. No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly The question whether the jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of certiorari. If the High Court comes to the conclusion, as the learned single Judge has done in this case, that the Income-tax Officer had clutched at the jurisdiction by deciding a jurisdictional fact erroneously, then the assesses was entitled for the writ of certiorari prayed for by him. It is incomprehensible to think that a quasijudicial authority like the Income-tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen. In our opinion the Appellate Bench is wholly wrong in opining that the Income-tax Officer can "decide either way"." 26. The Apex Court in the said case held that it is incomprehensible that a quasi-judicial authority like the Income Tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose levy on a citizen. 27. The Apex Court in the case of Shrisht Dhawan (Smt.) vs. M/s Shaw Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phs 6, 8 and 9:- "6. A writ petition was filed by the appellant herein questioning the said purported notice. By reason of the impugned order, the High Court refused to exercise its jurisdiction under Article 226 of the Constitution of India stating: "Challenge is to a show cause notice issued by the Corporation demanding certain payment of cess on the value of goods imported from Aurangabad and Daman. Petitioners may file their reply to the show cause notice and produce the relevant documents within two weeks. In case the order is adverse to the petitioner no recovery shall be made for a period of four weeks from the date of service of the order on the petitioner." 8. The question as to whether jurisdictional fact existed for issuance of the said notice order passed by the respondent was in question in the said writ petition. 9. Although ordinarily a writ court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause unless the same inter alia appears to have been without jurisdiction as has been held by this Court in some decisions including State of Uttar Pradesh v. Brahm Datt Sharma and Anr. AIR 1987 SC 943, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up its mind whether to act or not and can give a ruling on the preliminary or collateral issue; but that ruling is not conclusive". 76. The existence of jurisdictional fact is thus sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction. 77. In Raja Anand Brahma Shah v. State of U.P. & Ors., AIR 1967 SC 1081 : (1967) 1 SCR 362, sub-section (1) of Section 17 of the Land Acquisition Act, 1894 enabled the State Government to empower Collector to take possession of 'any waste or arable land' needed for public purpose even in absence of award. The possession of the land belonged to the appellant had been taken away in the purported exercise of power under Section 17(1) of the Act. The appellant objected against the action inter alia contending that the land was mainly used for ploughing and for raising crops and was not 'waste land', unfit for cultivation or habitation. It was urged that since the jurisdiction of the authority depended upon a preliminary finding of fact that the land was 'waste land', the High Court was entitled in a proceeding for a certiorari to determine whether or not the finding of fact was correct. 78. Upholding the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a quasijudicial authority like the Income-tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen." (emphasis supplied) 84. From the above decisions, it is clear that existence of 'jurisdictional fact' is sine qua non for the exercise of power. If the jurisdictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of 'jurisdictional fact', it can decide the 'fact in issue' or 'adjudicatory fact'. A wrong decision on 'fact in issue' or on 'adjudicatory fact' would not make the decision of the authority without jurisdiction or vulnerable provided essential or fundamental fact as to existence of jurisdiction is present. 85. In our opinion, the submission of Mr. Salve is well founded and deserves to be accepted that "concession" under clause (ii) of sub-section (2) of Section 17 of the Act is a 'jurisdictional fact'. It is only when there is a 'concession' in the matter of rent respecting any accommodation provided by an employer to his employee that the mode, method or manner as to how such concession can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices rendered by them to the petitioner and payment of trade discount to the advertising agency is nothing but commission in lieu of services rendered. We now proceed to examine as to what are the tests for finding out relationship of principal and agent. 33. Section 182 of the Indian Contract Act, 1872, which defines "Agent" and "Principal", is quoted below:- "182."Agent" and "principal" defined.-An "agent" is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the "principal". 34. The rule as to agency is expressed in maxim "qui facit per alium, facit per se". It is founded on a contract, express or implied, by which one of the parties confides to the other, the management of some business to be transacted in his name or on his account and by which the other assumes to do the business and renders an account of it. A Division Bench of this Court had occasion to consider Section 182 of the Indian Contract Act in the case of Loon Karan Sohan Lal vs. Firm John and Co. and others reported in A.I.R. 1967 Alld. 308. Following was laid down in paragraphs 5 and 6:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice Corp. 26 Wash 2d 660, 175 P2d 658. The law in India is the same. It has been held in several decisions that the fact that the parties have called their relationship an agency is not conclusive, if the incidence of this relationship, as disclosed by evidence does not justify a finding of agency, and that the court must examine the true nature of the relationship and the functions and responsibilities of the alleged agent: Banaras Bank v. Ram Prasad, AIR 1930 All 573, Phool Chand v. Agarwal B. M. Co., AIR 1938 Lah 814; Suryaprakasaraya v. Matheson's Coffee Works, (1913) 14 Mad L. T. 249. What is the real nature of the relationship created between the plaintiff and the Government of Assam under the socalled agreement of agency Ex. C-1. Before analysing this agreement, it is necessary to state the essential characteristic of an agency in law. Section 182 of the Contract Act defines an agent as "a person employed to do any act for another or to represent another in dealings with third person." The section defines a principal as "the person for whom such act is done or who is so represented." According to this definition, an agent never acts on his own behalf but always on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act Act. 27. For creating a contract of agency, in view of Section 185 of the Indian Contract Act, even passing of the consideration is not necessary. The consideration, however, so far as the employers are concerned as evidenced by the Scheme, was to project their better image before the employees. 28. It is well-settled that for the purpose of determining the legal nature of the relationship between the alleged principal and agent, the use of or omission of the word "agent" is not conclusive. If the employee had reason to believe that his employer was acting on behalf of the Corporation, a contract of agency may be inferred." 37. Now after having taken note of the propositions as laid down in the aforesaid judgments regarding tests to be applied for finding out as to whether particular relationship is of a principal and agent or not, we proceed to look into the relevant facts and materials which have been brought on the record to examine the above question. 38. As noted above, the assessment order has already been passed by the assessing authority holding that relationship between the petitioner and advertising agency is that of principal and agent and the relevant materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apex trade body for governing newspaper publishers also govern newspaper relations with advertising agencies. Since, assessee is a part of INS it is implied that it also has a contract/agreement with the advertising agent though it may not be codified agreement between the assessee and the advertising agency. 30. In order to satisfy the requirements of principal-agent relationship, certain condition laid down in explanation (I) to section 194H are required to be fulfilled: 1. There should be payment received or receivable directly or indirectly. 2. It should be received or receivable by a person acting on or behalf of another person. 3. The payment should be received or receivable for: (a) Services rendered (not being professional services) or (b) For any services in the course of buying or selling of goods or (c) In relation to any transaction relating to any asset, valuable articles or thing not being securities. All these three conditions are fulfilled in the instant case:- 1. In the Jagran Prakashan Ltd. case the advertising agent is receiving payment indirectly under the name of "discount". This discount is nothing but an amount deducted from the gross amount receivab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment between the Jagran Prakashan Ltd. and the advertising agencies via Indian Newspaper Society (INS) or otherwise. B. There is a principal-agent relationship between the Jagran Prakashan Ltd. and the advertising agencies and the advertising agencies act on behalf and as per the requirement of the Jagran Prakashan Ltd. C. There is payment from the Jagran Prakashan Ltd. to advertising agencies in the name of so called 'discount'. The source of this discount is nothing but the ad revenue generated by the Jagran Prakash Ltd. D. This payment from Jagran Prakashan Ltd. to the advertising agencies is entirely for the services of advertisement procurement by the advertising agencies. E. That the Jagran Prakashan Ltd. visa- vis INS and AAAI have devised a cosmetic and artificial methodology to circumvent the clear provisions of section 194H." 41. The petitioner is member of Indian Newspapers Society (INS) by whom the advertising agencies are granted accreditation. According to the Rules of INS the advertising agencies while being granted accreditation are required to enter into an agreement. The department submits that since the petitioner is bound by Rules of INS by whom the accredi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not the proprietor/partners/salaried employees of any advertiser or publisher of a newspaper or an advertising medium. (c) Any of its Directors, Proprietor, Partners or Chief Executives do not hold any share or equity in any publication or any other form of advertising media and have no connection financially or otherwise, with any publication or with any firm of advertising media such as outdoor, hoardings, cinemas, radio, etc. or with any advertiser except as an advertising agent. Such persons can hold a small number of shares in public limited client companies." 43. When Rule 10, as quoted above, clearly provides that advertising agency is free from control or interference from any business or person who owns or controls newspaper, the newspaper agency cannot be treated to be principal and advertising agency as agent. 44. Rule 32, which provides for payment of trade discount has been referred by the department, is to the followign effect:- "32. Payment of Trade Discount. As and from the date of accreditation as above, the accredited advertising agency shall be entitled to receive from the members of the Society the maximum and minimum Trade Discount of 15% in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working for the advertisers/clients. Column 26 of the form of application is as follows:- "Attach a list of the names and addresses of clients whose advertisement is handled by you and products/services as advertised along with letters of appointment issued by the clients as also with other documentary evidence." 48. The most important material is format of contract between the advertising agency and the INS, which is in Appendix-III to the Rules. The contents of first paragraph of the contract clearly indicates that object is to secure the best advertising service for the advertiser. Thus the accreditation of advertising agency is for the object of providing better service to the advertiser and it is not engaged as agent of the newspaper agency and advertising agency, in fact, is running its advertising business and while conducting the said business it acts on behalf of their client i.e. advertiser. The first paragraph of the agreement is as follows:- "(1) BY THE SOCIETY: 'That the Society accredits the Agency and includes its name in the list of accredited agents published from time to time." 49. Clause 2 of the agreement clearly indicates that advertising agency wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clearly indicates that advertising agencies are rendering service to the advertisers/customers and they are accredited by the society not as an agent of newspaper agency but to provide service to the advertisers/its clients. The aforesaid is clear from the following part of the Rules. 53. A bare reading of Rule 20 indicates that advertising agencies are rendering service to the advertisers i.e. their clients. Rule 20 of the Rules is quoted below:- "20. No Rebating. The Trade Discount allowed to the agency by the members shall be retained in full by the agency and shall not be shared or rebated to any other person, firm or company, directly or indirectly except: When an agency rebates full Trade Discount to its clients and is paid a service fee for its services provided that the amount of the service fee so received shall not be less than 15%, such service fee being levied on the gross and not on the net amount." 55. Column 26 of the application form, as quoted above, which require the advertising agencies to submit the list of names and addresses of clients whose advertisement is handled by them with the letters of appointment issued by the clients (advertisers) clearly mean t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xists on the basis of which any inference can be drawn that advertising agencies are agent of the petitioners and further advertising agencies render any service to the newspaper. The above two foundational facts being non existent, the proceedings under Section 201/201(1A) of the Act were clearly not permissible. 57. Now comes another factor (first factor) which is required to be established for applicability of Section 194H of the Act i.e. as to whether any payment was made to the advertising agency as commission. The case of the petitioner throughout has been that petitioner has been paying a trade discount at the rate of 15% as per Rule 32 of the Rules. The sample bills, which were collected by the department at the time of survey and are part of the assessment order, mention the total amount paid to advertising agency and the discount provided for and the net bill amount. The petitioner's case is that trade discount has been provided by the petitioner throughout as a part of trade practice. The trade discount is claimed to be given in normal business practice which has been recognised in several cases. Reliance has been placed on the judgment of the Apex Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y arrived at the premises of the dealer and this again would show that the dealers acted as principal to principal in purchasing the mopeds from the appellants. The dealers were also liable under Clause 6 of the agreement to maintain adequate organisation for sale and service of the mopeds including service stations, repair shops, spare parts. salesmen etc. and the mechanics were also to be trained at the cost of the dealers. The relationship between the appellants and the dealers was clearly on principal to principal basis and in the circumstances it is difficult to see how the amount of Rs. 11 , 145 and 165 allowed to the dealers. in respect of different varieties of mopeds could be regarded as anything other than trade discount. The appellants charged to the dealer the price of the mopeds sold to them less the amount of Rs. 110, Rs. 145 and Rs. 165 in respect of different varieties of mopeds. These amounts allowed to the dealers were clearly trade discount liable to be deducted from the price charged to the dealers for the mopeds. purpose of arriving at the exciseable value of the moped." 58. Another judgment relied by the petitioner is in the case of Commissioner of Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the company may issue the sale invoice in dealer's favour. In such event, terms of cash discount/interest free period and interest recoverable shall start from the date of sale invoice itself. xx xx xx 13. That the dealer shall keep with the company a security deposit of Rs.50,000/- as security which shall carry on interest of 15% per annum which will be payable yearly. xx xx xx xx xx xx 16. If at any time this agreement is terminated in accordance with the conditions of this agreement, the accounts shall be finalised and settled within one week from the date of its termination. 9. A bare perusal of the above-noted clauses clearly shows that the agreement entered into between the respondent and dealers was on 'principal to principal basis' and it was an absolute sale made by the respondent in favour of the dealers. The dealer is required to make full payment of the cotton yarn purchased by him forthwith and he is given half percent cash discount if the payment is made within one day, 0.25 per cent if the payment is made within four days and if the payment is not made within seven days then from 8th day onwards the dealer becomes liable to pay interest on the delayed paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court along with the letter dated 14th August, 2008 of the Indian Newspaper Society as Annexure-1 to the writ petition. The Indian Newspaper Society has issued the letter dated 14th August, 2008 on the reference "TDS on advertising agency trade discounts under Section 194H of the Income Tax Act". Following was circulated to all the members of the Indian Newspaper Society:- "Re: TDS on advertising agency trade discounts under Section 194H of the Income Tax Act. Several of our member publications have reported having received a demand for depositing TDS against the trade discounts permitted by them to advertising agencies from whom member publications received advertising releases. In this connection, we are enclosing copies of the following Court orders in the case of Living Media Ltd vs Asstt. Commissioner of Income Tax Circle 50(1), New Delhi. 1. Order No.I.T.A.No.3807/Del/2005 by the Appellate Tribunal Delhi Bench H, New Delhi, which held that the advertising agency was not an agent of the assessee and the amount deducted out of the gross payment received by the agency from the advertiser cannot be treated as payment of commission by the assessee to agency. Thus it was held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be classified as commission. The payment may be called a trade discount or may be described as a concession but since Rule 32 of the INS Rules described it as a trade discount, we have to proceed on that basis and by merely describing the trade discount as commission, the Revenue cannot seek to invoke the provisions of Section 194H of the Act. 9. There is a concurrent finding of the CIT (A) as well as the Tribunal that the contract was a principal to principal contract and in terms of that contract what was given by the Assessee to the advertising agency was trade discount as per Rule 32 of the INS Rules. 10. Under the circumstances, we are of the view that the Tribunal was not in error in coming to the conclusion that commission was not paid by the Assessee to the advertising agency and therefore, the provisions of Section 194H of the Act could not be invoked by the Revenue." 61. It is relevant to note that the Income Tax Department filed Special Leave to Appeal (Civil) No.3433 of 2009 against the judgment of the Delhi High Court dated 6th May, 2008 which special leave to appeal was dismissed by the Apex Court vide its order dated 11th December, 2009. The petitioner has rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two types, the unregistered agencies which are not entitled to any credit facility and the other type are registered agencies which are given accredition and credit facility with Doordarshan. In other words, while the first category will be able to telecast advertisment programmes canvassed from customers only on advance payment, the other category can have telecast done before making payments. Advertisement charges are based on air-time used for telecasting advertisement material. Rates are also varying depending upon the time of advertisment. However, these matters have no relevance for the purpose of deciding this case because the issue involved is whether the commission paid at the rate of 15% by the respondent on advertisement charges remitted by the advertising agencies is subject to tax deduction at source as commission under Section 194H of the Act. From the above it is very clear that parties have understood their relationship as Principal and Agent and what is paid to the agent by Doordarshan is 15% of advertisement charges collected and remitted to it by the agent which is in the form of commission payable to the Agent by Doordarshan. Counsel for the respondent refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct tax at source under Section 194H of the Act. In this context, it is pertinent to refer to clause 2(e) of Annexure A agreement which is extracted hereunder: (e) The Agency shall retain in full all discount earned as an advertising agency and that it will at no time pay or otherwise allow directly or indirectly any part of such discount or remuneration to any person, advertiser or representative of any advertiser for whom it may be acting or has acted as an advertising agency. Agency agrees to pay the TDS/Income Tax liability as applicable under the Income Tax Law on the discount retained by him. For this purpose agency agrees to make payment to Doordarshan Commercial Service by means of cheque/demand draft for the TDS on 15% discount retained by them. This cheque/demand draft will be drawn separately and should not be included in the telecast fee/advertisement charges. It is very clear from the above provision that the advertising agency clearly understood the agreement as an agency arrangement and the commission payable by the respondent to such agency is subject to tax deduction at source under the Income Tax Act and so much so the provision in the agreement was for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person : Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under subsection (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act." 66. Interpreting the similar provisions of the Income Tax Act, 1922, the Federal Court in 15 ITR 302 Chatturam Vs. Commissioner of Income Tax held that section imposes income tax upon a person in respect of his income. While interpreting Sections 3,4 and 22 of Income Tax Act, 1922 following was laid down by the Federal Court: " The liability to pay tax is founded on Sections 3 and 4 of the Income Tax Act, which are the charging sections. Section 22 etc. are the machinery sections to determine the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a year. The word 'income', ordinarily in normal sense, connotes any earning or profit or gain periodically, regularly or even daily in whatever manner and from whatever source. Thus it is a word of very wide import. Clause (24) of Section 2 of the Act is legislative recognition of its elasticity. Its scope has been widened from time to time by extending it to varied nature of income. Even before it was defined as including profits, gains, dividends and contributions received by a trust it was held to be a word, 'of broadest connotation' which could not be 'understood in restricted or technical sense'. The wide meaning of the word was explained by this Court in Raghuvanshi Mills Ltd., Bombay v. Commissioner of Income Tax, Bombay City MANU/ SC/0043/1952 : [1952]22ITR484(SC) and it was emphasised that the expression, 'from whatever source derived' widened the net. But exigibility to tax is not the same as liability to pay tax. The former depends on charge created by the Act and latter on computation in accordance with the provisions in the Act and the rules." 68. Chapter XVII of the Act deals with collection and recovery of tax. Section 190 provides for deduction at source and adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. (1A) Without prejudice to the provisions of subsection (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,- (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 4 as noted above, provides that charge of the income tax shall be on the income of a person. Sub-section (2) of Section 190 clearly mandates that despite of mode and manner of collection and recovery of tax i.e. by deduction or collection at source as envisaged under section 190 (1), the charge of payment of income tax is on a person, whose income is to be taxed. 74. Section 191 provides that in the case of income in respect of which provision is not made under this Chapter for deducting income tax at source and where income tax has not been deducted in accordance with the provision of this chapter, income tax shall be payable by the assessee direct. Thus, both the conditions i.e. (i) in the case of income in respect of which provision is not made under chapter XVII for deducting income tax at the time of payment and (ii) in case where income tax has not been deducted in accordance with the provisions of Chapter XVII, the Income tax is payable by the assessee direct. Section 191 thus re-enforces that primarily the liability of payment of income tax is on the person, whose income is to be taxed as delineated under sub-section (1) of section 4 and sub-section (2) of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act form one single integral inseparable code. It is useful to quote paragraphs 16,17 and 18: " 16. The fact that the Revenue has not obtained any information per se cannot be a ground to construe Section 195 widely so as to require deduction of TAS even in a case where an amount paid is not chargeable to tax in India at all. We cannot read Section 195, as suggested by the Department, namely, that the moment there is remittance the obligation to deduct TAS arises. If we were to accept such a contention it would mean that on mere payment income would be said to arise or accrue in India. Therefore, as stated earlier, if the contention of the Department was accepted it would mean obliteration of the expression "sum chargeable under the provisions of the Act" from Section 195(1). While interpreting a Section one has to give weightage to every word used in that section. While interpreting the provisions of the Income Tax Act one cannot read the charging Sections of that Act dehors the machinery Sections. The Act is to be read as an integrated code. 17. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of C.I.T. Vs. Eli Lilly &Co. (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the "appropriate proportion of such sum so chargeable" where a proportion of the sum so chargeable is liable to tax." 77. Sri Govind Krishna, learned counsel for the Department relied on judgment of the apex Court on statutory interpretation namely; AIR 1972 S.C. 2319 Azam Jha Bahadur Vs. Expenditure Tax Officer for the proposition that logic or reason cannot be of much avail in interpreting a tax statute. There cannot be any dispute to the proposition as laid down by the apex Court in the aforesaid case. 78. While interpreting the provisions of charging section of the Income Tax Act and the machinery part both have to be treated as integrated code as held by the apex Court in GE India Technology Centre Private Limited Vs. Commissioner of Income Tax (supra). Sri Govind Krishna further relied on the judgment of the apex Court in Civil Appeal No. 1507 of 2007 of 2007 M/s Sharma Transports Vs. The State of Maharashtra decided on 2.8.2011 for the proposition that if a particular method is prescribed for doing a certain thing by the Statute, it rules out any other method. For the same proposition reliance has been placed on the judgment of the apex Court in Dr. Ram Deen Mau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s due on its income received from the appellant and had received refund from the tax department. The Tribunal came to the right conclusion that the tax once again could not be recovered from the appellant (deductor- assessee) since the tax has already been paid by the recipient of income. 7. The High Court interfered with the order passed by the Tribunal on the ground that the order dated 12.7.2002 of the Income-Tax Appellate Tribunal has attained its finality since the appeal filed against the same by the appellant was dismissed by the High Court on 21.5.2004; the point based on Ground No. 7 was not taken up in the appeal preferred by the appellant in the High Court. The High Court further held that the Income-tax Appellate Tribunal's order dated 12.7.2002 got itself merged into the order passed by it on 21.5.2004 dismissing the appeal of the appellant herein. The High Court came to the conclusion that the Tribunal could not have reopened the matter for any further hearing. 8. We have already noticed that the order passed by the Tribunal to reopen the matter for further hearing as regards ground No. 7 has attained its finality. In the circumstances, the High Court could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Rs. 10,49,60,865 and adding the interest on the said short deductions total amount directed to be recovered has been arrived at Rs. 13,57,31,472 similarly with regard to the financial year 2008-09 total amount on which tax was required to be deducted at source under section 194H has been determined as Rs. 2,40,31,583 and after adding interest recovery has been issued for Rs. 3,26,82,953. The challenge is that there is no liability of deductor to pay the tax not deducted from assessee and it is the assessee, who is liable to pay the said tax on the aforesaid income and liability, if any, of the deductor is of interest and penalty. 82. Section 201 (1) provides that where any person who is required to deduct tax at source does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, then such person, shall without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax. 83. Section 201 (1A) contains a specific provision for payment of simple interest by any such person who does not deduct whole or any part of the tax or after deducting fails to pay the tax. Subsection (2) of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals with the general provision for the collection and recovery of tax. Section 190(1) of the Act provides that notwithstanding the fact that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction at source or by advance payment in accordance with the provisions of this Chapter. Section 191 of the Act provides that in the case of income in respect of which a provision is not made under this Chapter for deducting income tax at the time of payment and, in any case, where income tax has not been deducted in accordance with the provisions of this Chapter, income tax shall be payable by the Assessee directly. xxxxx Section 201 of the Act provides the consequences of failure to deduct the tax at source or failure to pay the tax deducted to the Government. If the person responsible to deduct the tax at source fails to deduct the whole or any part of the tax or after deducting fails to pay the tax as required under the Act, the person responsible would be treated as an Assessee in default in respect of the tax. Section 201(1A) of the Act provides that without prejudice to the provision of Sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be deducted at source is not liable to pay advance tax under Section 208 of the Act and consequently is not liable to pay interest under Section 234B of the Act. The contention of the Appellant that it is open to the department to proceed against the employer or against the employee for the recovery of interest is patently misconceived and, in any case, would not make the Assessee jointly and severally liable to pay interest on the amount of tax which was not deducted at source on the income by the employer." 85. The Full Bench of Uttarakhand High Court had clearly laid down that in event the tax at source is not deducted, the liability of the deductor is to pay interest. 86. The similar view was been taken by the Gujrat High Court in (1999) 235 ITR 433 Commissioner of Income Tax Vs. Ranoli Investment P. Ltd. And others, while considering the provisions of Sections 201, 190,191 and other provisions of the Act. Following was laid down in the aforesaid judgment: "The consequences of failure to deduct the tax at source or failure to pay the tax deducted to the Government, are provided for in s. 201 of the Act as per which, if no deduction is made or if the deducted amount is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the business of trading in alcoholic liquor, forest produce, scrap, etc." Section 206C (6) is as follows: "206C (6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3)." 88. From the above provision, it is thus, clear that wherever the liability to pay tax was fastened on the person who failed to deduct the tax at source a are specific provision was made for that purpose. 89. In view of the foregoing discussions, we are of the considered opinion that in a case where tax has not been deducted at source, the short deducted tax cannot be realised from the deductor and the liability to pay such tax shall continue to be with the assessee direct, whose income is to be charged and a person who fails to deduct the tax at source, at best is liable for interest and penalty only. The above issues thus, are decided in favour of the petitioner. 90. Now comes issue no. 10 which is in two parts; (i) whether the assessing authority has taken into considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct by assuming/deeming the existence of the jurisdictional facts necessary for the applicability of the provision." 91. Paragraph 32-O has been replied in counter affidavit in paragraph 40, which is quoted below" "40. That with regard to the contents of para 32 O of the affidavit filed in the amendment application it is submitted that it refers to the CBDT circular dated 08.08.1995. The order dated 28.03.2012 and 29.03.2012 has made reference to the recent stand of the CBDT on page no. 15&16. The remaining allegation has been suitably replied in the above preceding paragraph need not to be repeated here again." 92. Paragraph 40 of the counter affidavit does not deny the issuance of the Circular dated 8.8.1995 and the clarification issued by the Central Board of Direct Taxes on 12.9.1995 but nothing has been said as to why the said clarification be not be applicable. The assessing authority in its assessment order has not adverted to the aforesaid circular dated 8.8.1995 and its clarification dated 12.9.1995, which was the most relevant material while deciding the issues. Thus, the assessing authority has not applied its mind to a relevant material i.e. the clarification issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase of an article in which there is no agreement between the seller and the buyer. The board found that the INS granted accreditation to the advertising agencies and usually the newspapers would enter into an agreement with the agencies. Hence, the newspapers and the agencies were not acting independently and the agency was in fact an agent of the newspaper and was being paid a commission for the services rendered," an official said. It was also observed by the board that the agency did not book ad space from the newspapers and sell the space, in turn, to the advertisers, the officials said. "The model used by the newspapers is that the agency informs the newspapers about the advertisement and then the paper slots the advertisement. Hence, once again, the agency is merely being paid for the services it renders, which is why such payment is liable to TDS," the official added." 95. Learned Counsel for the petitioner is right in his submission that reliance on the said article published in a newspaper was an irrelevant material. The assessing authority from the aforesaid article has relied on the opinion of CBDT as disclosed in the said article to the effect that members of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless when there is an alternative remedy available judicial prudence demands that the court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act." 97. There cannot be any dispute to the proposition as laid down by the apex Court in the aforesaid case. In the aforesaid case, the rights were already adjudicated in the suit which was decreed. In the said circumstances, the apex court observed that petition under article 227 ought not to have been entertained and the guarantor should have been relegated to take recourse to the appeal. The present is a case where the proceedings have been challenged on the ground that there was no jurisdictional facts on the basis of which the income tax authorities could have assumed juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f principles of natural justice in the proceedings undertaken by the respondents. Learned Counsel for the petitioner submits that the respondent did not provide adequate opportunity to the petitioner to place relevant materials and have denied reasonable time to bring the details, which were asked for from the petitioner. It is submitted that notice was issued on 19.3.2012 and within ten days opportunity, hearing and proceedings were concluded and completed. Whereas, the petitioner was required to give details pertaining to each and every payments made to advertising agencies during the relevant period which were in numbers more than 1,80,000. The petitioner submits that there are various centres spread throughout the country which have separate offices and the petitioner having not maintained any detail of the TDS discount account, which is being given to the advertising agencies, the informations were required to be compiled and it was a herculean task requiring atleast one month's time. In 2004 (266) ITR 283 V.K. Packaging Industries Vs. Tax Recovery Officer and others, a Division Bench has made following observation: "Before parting with the case we would like to state that we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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