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TMI Blog2022 (10) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of default committed by the assessee would apply and therefore liability u/s. 201(1) of the Act arises upon such default, directed the AO to make due verification of taxes paid by the payee and to calculate levy of tax u/s. 201(1) and levy of interest u/s. 201(1A) is not correct. We, therefore, reverse the order of the CIT(A) on this issue and the grounds raised by the revenue are allowed. In view of our above discussion, the grounds raised by the assessee are dismissed. - ITA Nos. 125, 126/Hyd/2021 , 780/Hyd/2020 - - - Dated:- 23-9-2022 - Shri Rama Kanta Panda , Accountant Member And Shri Laliet Kumar , Judicial Member Assessee by : None Revenue by : Shri K. P. R. R. Murthy , Sr. AR ORDER Per Shri Rama Kanta Panda , AM ITA No. 780/Hyd/2020 filed by the revenue and ITA No. 126/Hyd/2021 filed by the assessee are cross appeals and are directed against the order dated 11.09.2020 of Learned Commissioner of Income tax (Appeals)-10, Hyderabad relating to AY 2009-10. ITA No. 125/Hyd/2021 filed by the assessee is directed against the order dated 11.09.2020 of Learned Commissioner of Income tax (Appeals)-10, Hyderabad relating to AY 2009-10. For the sake o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated by the provisions of section 195 of the I.T. Act. The assessee explained that he was not aware of the provisions of section 195 of the I.T. Act, hence he has not deducted any tax on the payments made to the NRI's. The explanation of the assessee was not accepted by the AO and therefore, he considered the assessee to be an assessee in default to the extent of capital gains arising on sale of immovable property for a consideration of Rs. 2,00,76,000/- paid to the nonresident. Since, the payment of sale consideration of Rs. 2,00,76,000/- paid to Smt. Vuchuru Krupamayi Reddy, a non resident is chargeable to tax in India and since the assessee has failed to discharge his obligation to deduct tax at source as stipulated u/s. 195 of the I.T. Act, the AO invoking the provisions of section 201(1) of the I.T. Act held the assessee, Smt. Badri Manjula, Nellore as deemed to be an assessee in default in respect of tax not deducted at source in respect of payment of Rs. 2,00,76,000/-. He noted that 100% share of the Non Resident in the sale of the property was chargeable to tax in India as per the provisions of section 45(1) of the I.T. Act. He noted that the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income Tax Act, 1961. 3. On the facts and circumstances of the case, the ld. CIT(A) ought to have deleted the addition on account of interest u/s. 201(1A) of the Act of Rs. 5,51,841 and 220(2) of the Act of Rs. 6,56,434 4. The Ld. CIT(A) ought to have appreciated the fact that Income Tax Officer (International Taxation) is without jurisdiction and as such the order is liable to be quashed. 5. On the facts and circumstances of the case, the Ld. CIT(A) ought to have appreciated the fact interest u/s. 201 is compensatory in nature and once the assessment is completed in case of recipient by assessing income and tax along with interest under sections 234A, 2348 and 234C as the case may be, the department is compensated with the interest loss and in these circumstances levy of interest u/s. 201 (1A) of the Act in the hands of the appellant would mean to double taxation which is not permitted by law. 6. The Ld. CIT(A) ought to have appreciated the fact that once income has been assessed in the hands of the recipient, the deductor is absolved of his responsibility under the Act regarding the deduction of tax at source and the failure to do so, interest ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to be an assessee in default and accordingly invoking the provisions of section 195 of the I.T. Act levied interest u/s. 201 and 201(1A) of the I.T. Act. We find in appeal, although the ld. CIT(A) held that assessee comes under the purview of section 195(1) by virtue of non deduction of tax and therefore has committed a default and hence is liable for tax u/s. 201(1) and interest u/s. 201(1A), however, he held that if the assessee proves that the payee who received the income has paid the tax, then the assessee, who failed to deduct tax at source will not be deemed to be an assessee in default. While doing so, he was conscious enough to hold that the proviso speaks with respect to resident only. The relevant observation of the ld. CIT(A) in para 11 to 11.3 of the order reads as under:- 11. Now, the only grounds which need to be adjudicated are the fourth ground of appeal which is as under:- any other ground that may be urged at the time of hearing and also 3.4 of Additional Ground of appeal no. 3 which is as under: The ld. AO ought to have considered that the liability to make TDS is only a vicarious liability, which ceases to exist once the primary liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for resident by the Finance (No. 2)Act, 2019 w.e.f. 01.09.2019. Therefore, prior to the amendment, the first proviso to section 201(1) of the Act is applicable only in respect of resident payee and not non-resident payee. Therefore, the ld. CIT(A) despite knowing the fact that the language of section 195(1) for deduction of tax by the payer is clear and unambiguous, gave relief to the assessee by relying on amendment to the proviso to section 201(1) inserted in the statute book by the Finance Act, 2012 w.e.f. 01.07.2012. In our opinion, the said amendment is not applicable to the impugned assessment year. Under these circumstances, we are of the considered opinion that the ld. CIT(A), instead of following the settle position of law that the provisions of statute as on the date of default committed by the assessee would apply and therefore liability u/s. 201(1) of the Act arises upon such default, directed the AO to make due verification of taxes paid by the payee and to calculate levy of tax u/s. 201(1) and levy of interest u/s. 201(1A) is not correct. We, therefore, reverse the order of the ld. CIT(A) on this issue and the grounds raised by the revenue are allowed. In view of ..... 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