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TMI Blog2014 (9) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... te of the same and then frame an order of assessment - The Tribunal has proceeded on the assumption that the assessee has been denied a reasonable opportunity by the AO and therefore, the order requires to be set aside - The approach of the Tribunal is not in accordance with law and it has not borne in mind the distinction between the jurisdiction of the FAA in taxation laws as compared to other jurisdiction - The powers of the FAA are co-extensive with that of the AO - the order of the Tribunal cannot be sustained and accordingly, it is set aside. If an assessee who is required to deduct any sum in accordance with the provisions of the Act 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 the Act, then such person shall be deemed to be an assessee in default in respect of such tax - not only the AO is competent to declare an assessee in default, by virtue of Section 221 which empowers an AO to impose penalty payable when tax is in default, authorizes the Assessing Authority also to impose penalty for failure to comply with Section 200 - order passed u/s 201 of the Act by the Assessing Authority is a vali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority passed an order on 30.12.2011 directing the assessee to pay the amount deducted with interest and issued a demand notice. The order was passed to initiate penalty proceedings under Section 221(1) separately. 4. Aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-V, Bengaluru. The First Appellate Authority after considering the arguments canvassed by both the parties held that the assessee has never denied the fact that taxes have been deducted from the salaries paid to its employees. Therefore, the argument of the assessee that the taxes should be collected from the deductees is not acceptable. The amount withheld by the assessee in reality belongs to the Government of India as per law. Therefore, the assessee cannot plead financial crunch as the reason for not remitting the TDS to the Government Account. The assessee had no right to withhold the tax deducted from payments without paying it to the Government Account. Because of this action of the assessee, the deductees are not in a position to claim the credit for tax deducted in their cases. Therefore, he confirmed the order passed by the assessing authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m order that the assessee was in dire financial difficulties having admitted the liability and an opportunity should be granted to repay the amount in installments proceeded to completely ignore this finding and set aside the impugned order on imaginary grounds and recorded a perverse finding? 7. The substantial questions of law that arise for our consideration in ITA Nos.239/2012; 240/2012 & 241/2012 are as under:- 1. Whether the Tribunal was correct in remanding the matter back to the file of the Assessing Officer when the order under Section 201 read with Section 201(1A) of the Act suffers from inherent lack of jurisdiction and therefore the said order is void, inoperative and nullity in the eyes of law? 2. Whether the Tribunal committed a grave error of law in not appreciating that legislative scheme of the Act which is bound up with the Rules make it abundantly clear that DGIT (Systems) is the competent authority for making an order Section 201 of the Act and therefore the Assessing Officer lacked jurisdiction to make an order under Section 201 of the Act? 3. Whether the Tribunal was correct in not appreciating that the power exercisable unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be remitted to the Tribunal to consider the case on merits and pass appropriate orders. 9. Per contra, learned Counsel appearing for the Revenue Sri K. V. Aravind submitted that, the prescribed authority’s duty is to receive the statement on file, look into the contents and if there is any deficiency they have to communicate to the assessee for compliance. In these cases, the amount collected as TDS is not paid, no Returns are filed and therefore it is for the assessing authority who is the competent authority to pass an order under Section 201. Therefore the order passed is valid and legal. Before issuance of notice under Section 201 of the Act, after survey, there was a correspondence between the parties wherein the assessee was called upon to produce the statements and accounts which he did and the amount reflected in the notice is taken from those correspondences and therefore it is too late in the day for them to contend that the jurisdictional facts were not ascertained before proceeding with the matter. Secondly, he contended the claim was not in dispute. Notice was issued. Sufficient opportunity was granted. When no explanation is offered, payment is not made, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer by the court of limited jurisdiction. The jurisdictional fact is a fact which must exist before a Court, a Tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends on the jurisdiction of a Court, a Tribunal or an Authority. It is the fact upon which an administrative agency’s power to act depends. If the jurisdictional fact does not exist, then the Court, authority or officer cannot act. If a Court or authority wrongly assumes existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming the existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess. There cannot be any quarrel with the aforesaid legal position. 12. In the instant case, the assessee was served with three notices dated 13-12-2011, 16-12-2011 and 21-12- 2011 claiming amounts mentioned therein and calling upon the assessee to show cause why the assessee should not be treated as an assessee in default under Section 201(1) of the Act in respect of the sum mentioned in the notice. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration the payments made by the assessee-company as ascertained from Ms.Rekha, Assistant Manager Accounts, the details of the outstanding TDS liabilities for the financial year 2010-11 was set out as under: F.Y Nature of Payment Section Amount 2010-11 Contractors 194C ₹ 8,98,98,548 Interest 194A ₹ 14,68,18,191 Rent 194I ₹ 4,99,35,917 Commission 194H ₹ 18,78,27,914 Professional 194J ₹ 5,90,96,159 Salaries – Local 192 ₹ 88,08,15,311 Total Rs.141,43,92,040 14. Further a letter dated 15-12-2011 was sent calling upon the assessee to furnish the outstanding TDS liabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est checks and the concept of materiality. The non-compliance revealed during such audit procedures are as mentioned in clause(b). Then they had set out non-compliance. Insofar as tax deducted but not paid to the credit of the Central Government is concerned, they have enclosed Annexure-IX. Annexure-IX shows the tax deducted for the months under various provisions of the Income Tax Act as well as the due dates and wherever the payment has been made, the date of payment is given. Wherever no such payment is made, the column is left blank. The said annexure also shows the amount of tax which is deducted and not paid. Based on this information and correspondence, the notice was issued under Section 201 of the Act. The demand was made as required under Section 201 of the Act. Therefore, the contention that the amount claimed in the notice has no basis and how the said amount is arrived at is not made known and therefore, the assessee did not have an opportunity to meet the case of Department is without any substance. Therefore, we do not see any merit in the said contention. 18. Insofar as the contention that there is violation of principles of natural justice is concerned, as is se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Authority undertaking to pay a sum of ₹ 130 crores. The said letter is dated 17th November 2011, which reads as under: KINGFISHER AIRLINES 7th November, 2011 The Asst. Commissioner of Income Tax(TDS) Circle -16(2), 59, HMT Bhavan, 4th Floor, Ganga Nagar, Bangalore – 560 032. Dear Madam, Sub: Liquidation of TDS dues. The assessee company is a premier airline company having a huge market share in India. The business of running airlines in India is a very tough task inview of the unfriendly and deteriorating macro economic situation. The existing Civil Aviation Policy and Tax Policy has been the cause for huge financial losses incurred by the assessee company. The losses have also caused tremendous financial strain on the company and attendant liquidity problems. Inview of the foregoing genuine circumstances beyond the control of the assessee the assessee is having difficulty in timely payment of Tax deducted at source. However, the assessee has in the last few years have made every effort possible to remit large amount of sum towards TDS. For the current year the assessee is making effort to expeditiously remit the TDS. However it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above payment has been reduced from 30 days to 7 days without giving any valid and sustainable reasons. While passing the orders, the payments made directly by the recipients u/s.191 of the Act read with Board Circular No.275/201-95-IT(B) has not been considered. For the last few years, due to global spurt in crude prices, aviation turbine fuel prices continued to shoot up and coupled with the exorbitant rates of taxes on aviation turbine fuel in India, put the civil aviation industry under severe pressure. The rising fuel costs during the period and increase in other operating costs further added to the problems of the company. Further the depreciation of the rupee against the dollar has also caused tremendous hardship on the operations of the company. The resultant increases in fares and fuel surcharges that the airlines had to implement, resulted in a slowdown in air travel, both in India and worldwide. The domestic carries in the country continued to add capacity, the growth in capacity was far in excess of the growth in traffic in the domestic market. This continued overcapacity situation led to stiff competition putting pressure on yields. All these factors combin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the foregoing, the company prefers this petition for complete stay of collection of the demand until the disposal of the appeals. The company further requests your honour to treat the company as not being in default in respect of the tax arrears in appeal as per the provisions of section 220(6) of the I.T Act in the interest of justice. It may be noted that the company’s request is in line with the conditions stated in the circulars/instructions for grant of stay and requests that absolute stay be granted till the disposal of the appeals. It has been so held by Rajasthan High Court, Jaipur Bench in 223 ITR 192 and recently by Delhi High Court in Soul v DCIT – 14 DTR 267, Subhash Chandra Sehgal v DCIT in 6 DTR 53, and Valvoline Cummins Ltd v. DCIT – 8 DTR 145. Hence we pray for staying the collection of the entire demand until the disposal of the appeal in the interests of justice. The Company prays for a personal hearing before disposal of the stay petition. Thanking You, Yours truly, For Kingfisher Airlines Ltd., Sd/- Authorised Signatory. 22. In the entire letter they have not expressed their grievance that they have neither been heard nor violat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is expected to throw some clarity on the long term bank finance requested for by the company to its consortium of bankers. As already mentioned in my earlier letter, we are making progress in our efforts for equity infusion and no sooner the long term bank finance/equity infusion is completed we will be in a position to give you a firm payment plan for liquidation of our TDS dues. However to show our commitment, we will arrange to make a payment of Rupees Twenty Crores in the coming week and follow it up with a payment plan. While I thank you for your co-operation and understanding, I would earnestly request you to please bear with us and do not resort to any coercive steps towards liquidation of our TDS dues. Your sincerely. Sd/- 24. One more letter came to be addressed by the Chairman & Managing Director on 2-3-2012 pointing out that as against the claim of ₹ 302 crores plus interest of ₹ 70.00 crores, on February 22nd, IATA remitted ₹ 15.15 crores to the IT Department, reducing the principal due to ₹ 286.85 crores and a proposal was given for making the balance amount. The said letter was addressed to the Chairman, CBDT, Government of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Rs.50.00 crores 6. September - Rs.60.00 crores 7. October - Rs.75.00 crores Total - Rs.272 crores. - We will pay the interest dues in 4 equal monthly installments thereafter. In view of the above payment proposal, we request the attachment of our IATA and bank accounts be lifted with immediate effect as we cannot continue operations in this crippled state. We would be most grateful for your kind acceptance of our proposal. Thanking you, Yours faithfully, Sd/- Vijay Mallya. cc: Mr.R.S.Gujral, Secretary – Revenue Government of India, New Delhi. 25. It was followed by one more letter dated 9-3-2012 making a proposal to pay ₹ 356.85 crores in eight equal monthly installments of ₹ 45.60 crores, which reads as under: KINGFISHER AIRLINES Vijay Mallya Member of Parliament Chairman and Managing Director March 09, 2012 Mr.Laxman Das, Chairman – CBDT, Government of India, New Delhi. MOST URGENT Dear Sir, This is further to my letter dated March 02, 2012 to yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for them to show the said payments and also that the amounts claimed are without any basis. If there is any substance in the said contention, it was open to the assessee to produce before the First Appellate Authority along with the appeal memorandum the particulars such as, number of employees employed by them, salary paid to them, the TDS deductions made from the salary, what is the total amount of TDS deduction which came to their hands and what is the amount they have to pay and requested the First Appellate Authority to set aside the order of the Assessing Authority on the basis of such factual position which was in their possession. 27. Section 106 of the Evidence Act, 1872 which deals with the burden of proving the fact, especially within knowledge, provides that when any fact is established within the knowledge of any person the burden of proving that fact is upon to him. The amount collected as TDS is the amount deducted from the salary of the employees of the assessee. The assessee has failed to furnish particulars such as the number of employees employed by them, the amount of salary paid to them, the amount of TDS deducted out of their salary and if any payment has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g those matters about which the assessee has a grievance, but a revising authority in the sense that, once the appeal is before him he can revise not only the ultimate computation arrived at by the (assessing officer), but he can revise every process which led to the ultimate computation or assessment. An appellate authority under the taxing enactments sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the law laid down by the legislature. An appeal is a continuation of the process of assessment, and an assessment is nothing but another name for adjustment of the tax liability to accord with the taxable event in the particulars tax payer’s case. 29. Therefore, if the grievance of the assessee is that Assessing Authority did not give sufficient opportunity to place their version and to produce receipts showing payments of money, they were not afforded with an opportunity to produce the documents to show that the assessee has not deducted the tax from the salary of its employees, it was open to the assessee to produce all those documents before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een urged. Even otherwise, if assessee wanted an opportunity to produce statement, nothing prevented the assessee from producing them along with the appeal or file an application to the First Appellate Authority requesting them to take note of the same and then frame an order of assessment. The Tribunal has proceeded on the assumption that the assessee has been denied a reasonable opportunity by the Assessing Officer and therefore, the order requires to be set aside. The approach of the Tribunal is not in accordance with law and it has not borne in mind the distinction between the jurisdiction of the First Appellate Authority in taxation laws as compared to other jurisdiction. The powers of the First Appellate Authority are co-extensive with that of the Assessing Officer. Therefore, the order of the Tribunal cannot be sustained and accordingly, it is set aside. JURISDICTION 31. The argument of the learned Senior Counsel appearing for the assessee is that, it is clear from Section 200 of the Act, the order under Section 201 is to be passed by the prescribed Income Tax Authority, which is prescribed under Rule 31, which is the Director General of Income Tax (Systems). Indeed, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (c); and (e) the amount of refund due to the deductor in pursuance of the determination under clause (c) shall be granted to the deductor : Provided that no intimation under this sub-section shall be sent after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed: Provided further 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (3) of Section 201 declares no order shall be made under Sub-section (1) deeming a person to be an assessee in default in failing to deduct the whole or any part of the taxes from a person resident in India at any time, after the expiry prescribed therein. As this order declaring an assessee to be in default would have serious consequence and the statute does not exclude issue of notice before passing such an order, principles of natural justice requires before passing an order, the assessee should be heard. Therefore, notice is issued to the assessee before passing such order. This order declaring an assessee as in default, is not an order which is contemplated under Section 200-A, where the prescribed Authority who is processing the return is a Director General of Income Tax (Systems). The Authority which is competent to pass an order under Section 201(3) is the Assessing Officer, who has the jurisdiction on the assessee on TDS matters under the provisions of the Income Tax Act. Though the word "Assessing Authority" is not stipulated in Sub-section (3) or in sub-section (1) of Section 201, the proviso to Section 201 throws some light on who is the competent authority to pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen required to be filed under law. If these statements are filed after the orders are passed, it only means the assessee has admitted the liability. In order to avoid future consequence of nonpayment of interest and penalty, these payments are made. Therefore, the liability is not in dispute. Deduction of the amount is not in dispute. Non-crediting the said amount to the Central Government account is not in dispute. Non-filing of statement is not in dispute. However, today, when they filed the statement, they have complied with the requirement of law. All the payments made as aforesaid are to be deducted out of the total amount due to the assessee if not deducted and only for the balance amount, the Authorities have to proceed, if any amount is due. That exercise shall be done by the Assessing Authority by giving effect to the orders which we have passed. In that view of the matter, we pass the following ORDER 1. All the appeals filed by the Revenue are allowed. 2. All the appeals filed by the assessee are dismissed. 3. However, the assessee shall produce before the Assessing Authority all the payments which they have made subsequent to the order of the Assessing Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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