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TMI Blog2017 (8) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... anation to section 191 of the Act, as explained by their Lordships in “M/s Jagran Prakashan Ltd.” (2012 (5) TMI 488 - ALLAHABAD HIGH COURT) was violated by the ITO (TDS), by not requisitioning, before issuing the show cause notice to the University, information from the recipients of the income, as to whether or not the taxes had been paid by them, nor seeking such information from the concerned Income Tax Authorities. As observed, this is a foundational jurisdictional defect going to the root of the matter. Violation of the mandate of the Explanation to section 191 is prejudicial to the invocation of the jurisdiction of the ITO (TDS) u/s 201/201(1A) of the Act. In absence of such compliance, the invocation of the jurisdiction is null an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. The ld. CIT(A) directed the ITO (TDS) to allow the assessee to adduce evidence that the deductees had themselves paid the tax due on their leave salary and in case it was established that due taxes had been paid by some employees, in respect of the short deduction, to charge only interest under section 201(1A) of the Act from such employees and not to hold the University as an assessee in default and to recompute the amounts in respect of which the University would be an assessee in default under section 201(1) and also the interest chargeable under section 201(1A). 3. The ld. Counsel for the assessee has maintained that the order of the ld. CIT(A) is liable to be cancelled inasmuch as in order to declare a deductor who had faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, fails to pay, or does not pay tax and where the assessee has also failed to pay such tax 4 directly, then, such person shall be deemed to be an assessee in default within the meaning of section 201(1), in respect of such tax. 6. Therefore, the Explanation to section 191 provides that if the employer does not deduct the tax in respect of payment of income in the nature of a perquisite, he shall be deemed to be an assessee in default under section 201(1). However, such deeming is subject to the pre-condition that the assessee has also failed to pay such tax directly. The operative expression in the Explanation is and where the assessee has also failed to pay such tax directly . This expression is succeeded by the expression then, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein, their Lordships have, inter alia, held as under: .. it is clear that deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly. In the present case, the Income tax authorities had not adverted to the Explanation to Section 191 nor had applied their mind as to whether the assessee has also failed to pay such tax directly. Thus, to declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that assessee has also failed to pay tax directly. The fact that assessee has failed to pay tax directly is thus, foundational and jurisdictional fact and only after finding that assessee has failed to pay tax directly, deductor c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed by Their Lordships, the provisions of Section 201(1) cannot be 7 invoked and the tax deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly . Once this finding about the nonpayment of taxes by the recipient is held to a condition precedent to invoking Section 201(1), the onus is on the Assessing Officer to demonstrate that the condition is satisfied. No doubt the assessee has to submit all such information about the recipient as he is obliged to maintain under the law, once this information is submit ted, it is for the Assessing Officer to ascertain whether or not the taxes have been paid by the recipient of income. This approach, in our humble understanding, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y prerequisite was that the details of the persons to whom payments were made, be on record. And once that is so, i.e., the assessee has submitted the requisite details to the ITO (TDS), it is for the ITO (TDS), as mandated in M/s Jagran Prakashan Ltd. (supra), to ascertain, prior to invoking section 201(1) of the Act, as to whether or not the due taxes have been paid by the recipient of the income. 14. In the present case, a reading of para 11 of the assessment order shows that it contains a chart, running into 5 pages, comprising the details of the employees to whom, leave salary was paid more than ₹ 3 lacs by the University during F.Y. 2014-15, relevant to the year under consideration. 9 15. Further, in para 4 of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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