9911796707
TMI Blog2012 (7) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... ities below erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence on this ground alone the order requires to be cancelled. 4. That the order u/s 201(1) & 201(1A) has been passed without considering the principles settled by the Honourable High Court of Karnataka. 5. That the Learned CIT(A)/AO erred in holding the assessee in default u/s 201(1) of the Act. 6. That the demand raised u/s 201(1) of the Act of Rs. 74,94,21,701/- is hereby disputed. 7. That the interest levied u/s 201(1A) of the Act of Rs. 28,70,53,151/- is hereby disputed. 8. That the Learned CIT(A) erred in not vacating the order passed by the AO u/s 201(1)and 201(1A) as it is non speaking, silent and no reasons have been given as to how the default has been determined. 9. That an order u/s 201(1) of the Act can be passed for any failure on the part of the appellant to deduct and pay and not otherwise. The Learned CIT(A)/AO erred in passing an order overlooking and without considering the TDS paid. 10. The Learned AO erred in overlooking the order of ITAT wherein the reason for delay has been held to be reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its part regarding non-payment of TDS amount to the Government account for the reason that there have been financial constraints because of loss in the airline industry. The AO observed that the failure to pay the TDS after deducting attracts the provisions of section 201(1)(b) of the Act and that as per section 201(1A) of the Act without prejudice to the provisions of sub-section (1) of section 201 of the Act, if any such person, Principal Officer or Company as is referred to in that sub-section responsible for deducting/collecting tax at source does not deduct/collect tax at source wholly or partly under sections 192 to 196C and 206C is liable to pay interest @ 1% per month (or part thereof) from the date on which such tax was deductible/collectible to the date on which the tax is actually paid. He also pointed out that those provisions has been amended w.e.f. 01.04.2010. The AO on the basis of the details furnished by the assessee worked out the tax and interest payable at Q 74,94,21,761 and Q 28,70,53,151 respectively vide order dated 30.12.2011 passed u/s. 201(1) & 201(1A) of the Act. 7. The assessee carried the matter to the ld. CIT(Appeals) and the arguments made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) and submitted that though the assessee had claimed that substantial sums had been credited to the Government account, no documentary evidence in support of the claim was furnished before the AO. 9. The ld. CIT(A) after considering the above submissions confirmed the action of the AO by observing in para 6 of the impugned order as under:- "6. On careful consideration of the arguments made on behalf of the appellant and on behalf of the Department I noticed that the appellant never denied the fact that taxes have been deducted from the salaries paid to its employees. Therefore, the argument of the appellant that the taxes should be collected from the deductees is not acceptable. What the appellant withholding is not its funds but the amount which belong to the Government of India as per law. Therefore, the appellant can not say that financial crunch is the reason for not remitting the TDS made to the Government Account. The appellant had no right to withhold the tax deducted from its employees without paying it to the Government Account. Because of this action of the appellant the deductees are not in a position to claim the credit for tax deducted in their cases. Inview ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prepare such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorized by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed. Step -3 Section 200A(1) where a statement of tax deduction at source has been made by a person deducting any sum (hereafter referred to in this section as deductor) under section 200, such statement shall be processed in the following manner, namely: (a) The sums deductible under this Chapter shall be computed after making the following adjustments, namely: (i) Any arithmetical error in the statement; or (ii) An incorrect claim, apparent from any information in the statement; (b) The interest, if any, shall be computed on the basis of the sums deductible as computed in the statement; (c) The sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of amount computed under clause (b) against any amount paid under section 200 and section 201, and any amount paid otherwise by way of tax or interest; (d) An intimation shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for adjustment of taxes, however in the present case the AO without considering this fact that the recipient has already paid the taxes, declared the assessee as an "assessee in default", therefore, the action of the AO was against the provisions of law. It was accordingly submitted that the order passed by the AO without providing due and proper opportunity of being heard was not sustainable and the ld. CIT(A) without considering the facts of the present case in right perspective confirmed the action of the AO in an arbitrary manner, therefore the impugned order passed by him is not sustainable. Reliance was placed on the following case laws:- (i) CIT v. Intel Tech India Pvt. Ltd. (2011) 55 DTR (Kar) 173 (ii) Childrens Education Society v. DCIT (1999) 319 ITR 409 (Kar) (iii) Mittal Steel Ltd. v. ACIT (1985) 240 ITR 707 (Kar) (iv) CWT v. Kanthilal Manilal - 152 ITR 447 (SC) (v) CIT v. Khemchand Ramdas (1938) 6 ITR 414 (PC) 13. In his rival submissions, the ld. CIT(DR) submitted that the tax deduction at source is a method of collecting taxes on behalf of the Government at the time of payment or credit and the Act casts a legal responsibility on the deductor to deduct tax on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c., despite at least 8 letters issued by the AO after the survey on 18.03.2011, when the default was detected by the AO and admitted by the assessee. It was contended that since the tax has been deducted as per the provisions of Chapter XVII-B of the Act, so there was no ground for any grievance or any reason for appeal, when the amounts of deducted tax, nature of payments and the period/month/quarter when the tax was deducted from eligible payments were given/provided by the assessee itself to the AO. 15. It was contended that for the year under consideration the due date of filing the return u/s. 206(1) of the Act had already been expired, therefore, there was no basis of appeal against the order u/s. 201(1) and 201(1A) of the Act, as such, the filing of appeal was merely a dilatory and deflectory tactics of the assessee to stall the recovery of tax deducted, but not paid. It was further contended that continuous and habitual default in payments of TDS amounts deducted as per law over a long period of time cannot be turned into a virtue by claiming that in the absence of return u/s. 206(1) of the Act, the Assessing Officer's order was without basis or was non-speaking. It was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xes deductible/non-deductible and to furnish the details of tax deducted/not deducted and paid/not paid to Govt. account. However, the assessee for reasons becoming obvious to the AO on 21.12.2012, chose not to respond to such requests of the AO and thereby foregone the opportunity to explain, furnish details and reconciliations, if any existed for more than 9 month, before the orders u/s. 201(1)/201(1A) of the Act were passed, after issue of show cause notices dated 21.12.2011 based on admitted and accepted particulars of tax deducted, but not paid. It was contended that in the context of notice u/s. 201(1) of the Act, it had been judicially held that where after several requests to furnish relevant details/ documents by the AO, there is suppression of material documents, an adverse inference must be drawn against the party, who has suppressed the facts and that the notice u/s. 201(1) of the Act cannot be considered as extraneous or erroneous merely because the relevant material documents have not been furnished by the assessee. Reliance was placed on the following case laws:- (i) Vodafone International Holdings B.V. (2009) 311 ITR 46 (Bom) (ii) Jindal Thermal Power Co. Ltd. (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the AO's letter u/s. 133(6) of the Act dated 10.10.2011 and merely vague, evasive, misdirecting and misleading reply was offered. It was stated that no effort whatever was required for payment of deducted tax to Government account if the conscience was clean and intention was not to use funds as working capital. It was further stated that the thinking of the assessee was skewed and absurd which was based on the fallacious presumption that deducted TDS was one of the source of working capital and that the revenue department should/must step into the shoes of any other lender. It was accordingly submitted that there had been no lack of opportunity at all and the AO had gone out of way to uphold the tenets of natural justice and one can bring horse to the water, but cannot force it to drink. 18. It was further stated that in the cases relied by the ld. counsel for the assessee, the facts are different and the ratio of those decisions cannot be applied to the assessee's case. It was stated that in the case of M/s. Mittal Steel Ltd. 240 ITR 207 relied by the ld. counsel for the assessee, the Hon'ble High Court of Karnataka held that merely because no process or procedure has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing order and no reason has been given as to how the default has been determined, the ld. CIT(DR) submitted that the said ground is not only frivolous but also ridiculous, particularly when the assessee's appeal before the ld. CIT(A) was not maintainable in the first place as the admitted liability towards the deducted tax u/s. 200 of the Act was not paid and there was no grievance of the assessee arising from the non-payment of deducted tax. Therefore the order of the ld. CIT(A) was right in holding that there was no merit in the assessee's appeal. 23. As regards to the CBDT Circular No.275/201/95-IT(B), it was submitted that the said Circular is not applicable to the facts of the assessee's case, particularly when section 191 of the Act has no role in case where tax has been deducted by the assessee. It was also stated that for payment of deducted tax, notice of demand u/s. 156 was not required at all because recovery of deducted tax remaining unpaid u/s. 200 of the Act can be made without the order u/s. 201(1) or notice u/s. 156 of the Act. Reliance was placed on the decision of the ITAT Delhi Bench in the case of Catmoss Retail Ltd. (supra). 24. As regards to the challenge to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith section 200(3) of the Act, but for default of sections 200(1) and 200(2) of the Act in terms of non-payment of deducted tax. The ld. CIT(DR) accordingly submitted that there are no inconsistencies, infirmity or illegality in the orders of the AO or the ld. CIT(A), therefore, the assessee's appeals and grounds are without factual and legal merit and hence not sustainable and may be dismissed. 25. We have considered the rival submissions of both the parties and carefully gone through the material available on record. In the present case, it is an admitted fact that a survey u/s. 133A of the Act was conducted in the assessee's premises on 18.03.2011 and during the course of said survey, certain documents relating to the tax deducted at source were found. On the basis of those documents, the AO held the assessee in default u/s. 201(1) of the Act and also levied interest u/s. 201(1A) of the Act. 26. As regards to the contention of the ld. counsel for the assessee that the order passed by the AO was without jurisdiction because as per the provisions contained in sub-section (3) of section 200 of the Act, the authorized person is DGIT(Systems)/NSDL, it is relevant to discuss the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that such person, without good and sufficient reasons, has failed to deduct and pay such tax." 29. From the above provisions, it is clear that this section is penal in nature and provides that the person who does not deduct 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. Now the question arises as to whether the person is to be deemed to be assessee in default in all circumstances or some liberty is given to the said person in the Act itself. The processing of the statements of tax deducted at source is prescribed in section 200A(1) of the Act which reads as under:- 200A. (1) Where a statement of tax deduction at source has been made by a person deducting any sum (hereafter referred to in this section as deductor) under section 200, such statement shall be processed in the following manner, namely:- (a) the sums deductible under this Chapter shall be computed after making the following adjustments, namely:- (i) any arithmetical error in the statement; or (ii) an incorrect cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment has to be made only at the end of the year and for that purpose every statement/detail relating to the earlier excess or short deduction is required. 31. In the present case, the contention of the ld. counsel for the assessee was that the recipient paid the tax, but no credit has been given. When during the course of hearing a question was asked to the ld. counsel for the assessee whether the details were provided for such adjustment, it was stated that sufficient time was not granted by the AO for the same. It was also stated that there was sufficient reason for not making the payment because the assessee was having financial crunch and even to some of the employees, salary was not paid, so there was no question of deducting the TDS. The ld. counsel for the assessee placed the reliance on the judgment of Hon'ble jurisdictional High Court in the case of Mittal Steel Ltd. v. ACIT & Anr. [1999] 240 ITR 707. In the said case, it has been held as under:- " Section 201 of the Income-tax Act, 1061, is a penal provision to treat a person as an assessee in default if there is a failure to deduct the tax, or after deducting the tax it is not paid. The proviso makes it clear, that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by the department, payer ceases to be assessee in default, he is not liable to pay tax u/s. 201(1) of the Act. However in the present case, no efforts have been made to bring on record as to whether the recipients had paid the tax and filed the return assessing the amount in question in their hands. The claim of the ld. counsel for the assessee was that proper opportunity was not given to substantiate the said claim since the time allowed by the AO was not sufficient to collect those informations. 34. The main grievance of the assessee in this appeal is that proper opportunity of being heard was not given to the assessee. In the present case, the AO issued the notice dated 21.12.2011 and claimed that the same was served on the assessee on the same day. In the said notice the assessee was asked to furnish its explanation/submissions if any by 26.12.2011. The claim of the assessee is that the said notice was received on 29.12.2011. In this regard our attention was drawn towards the copy of the letter No.BLRDOO795E/2011 dated 21.12.2011 which was furnished on 12.04.2012 during the course of hearing, the copy of the aforesaid notice dated 21.12.2011 is placed on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected. The claim of the department is that the notice dated 21.12.2011 was issued and served to the assessee on the same day and assessee was asked to furnish/explain submissions by 26.12.2011. The claim of the assessee is that the said notice was received only on 29.12.2011. As we have pointed out in the former part of this order at para 24 that nothing was brought on record as to whether the said notice was received by the assessee on 21.12.2011 as claimed by the department or on 29.12.2011 as claimed by the assessee, however in our opinion, reasonable time for opportunity of being heard was required to be given to the assessee as has been held by the Hon'ble jurisdictional High Court in the case of Mittal Steel Ltd. v. ACIT (supra) and where no effective opportunity of being heard was being given, the order is not maintainable. On this issue relating to the opportunity of being heard to be given, the Hon'ble Orissa High Court in the case of Radhika Charan Banerjee v. Sambhalpur Municipality and Others reported at 1979 AIR 69 (Orissa) has held as under:- " A right of appeal wherever conferred includes a right of being afforded an opportunity of being heard, irrespective of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that the order dated 30.12.2011 passed by the AO u/s. 201(1) & 201(1A) of the Act as without providing reasonable and sufficient opportunity of being heard to the assessee. The ld. CIT(A) had also passed the impugned order without considering the aforesaid facts i.e., reasonable opportunity of being heard was not provided to the assessee and that no adjustment as provided in the Act has been made relating to the payment of taxes directly by the recipient, from the tax deposited if any by the assessee. In the present case, it is also not clear as to whether the assessee deducted the TDS only for the payments of salaries to the employees or for other payments of expenses also. We therefore deem it appropriate to set aside the impugned order and remand the same to the file of the Assessing Officer for fresh adjudication in accordance with law, after providing due and reasonable opportunity of being heard to the assessee. The assessee is also directed to cooperate for expeditious disposal and not to seek undue and unwarranted adjournments. 38. In the ITA No.370/Bang/2011 for the A.Y. 2011-12, the grounds raised by the assessee and the facts of the case are similar as were for the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
