IN THE ITAT KOLKATA BENCH ‘A’
Peerless
Gen Fin & Inv. Co. Ltd.
v.
Assistant
Commissioner of Income-tax, Circle - 59, Kolkatta
G.D. AGRAWAL,
VICE PRESIDENT
AND N.L. DASH,
JUDICIAL MEMBER
IT APPEAL NOS. 1918
& 2128 (KOL.) OF 2007
[Assessment
year 1994-1995]
December 20,
2007
Section 253 of
Income-tax Act, 1961 - Appellate Tribunal - Appeal to - Assessment year 1994-95
- Whether jurisdiction provision, wherein mandatory can be taken up on record
sound of litigation before tribunal for fortune - Held, yes
Section 201 of
Income-tax Act, 1961 - Deduction of land at source consequence of failure to
deduction pay - Assessment year 1994-95 - In previous year relevant to
assessment year 1994-95 assessee paid interest be deposit holders without
deduction of tax of sources assessee claimed that before amendment in section
201(1) by deducting tax, be could not be made liable to pay same to Central
Government and that since financial year under consideration was prior to
1-6-2002, even if it was in default in deducting tax it could not be directed
to pay same under section 201(1) along with interest under section 201(1A) -
Whether even prior to amendment by Finance Act, 2002 in section 201(1), if
assessee filed t deduct tax in interest paid by income-tax Act or after
deducting failed to pay tax as required by section 200 it could be treated to
be assessee in default in respect of such tax under section 201(1) - Held, yes
Rule 36A of
Income-tax Rules 1962 - Income-tax authority for purposed section 206 -
Assessment year 1994-95 - Assessee, a non- banking financial company and having
branches in large number of cities spread all over India, paid interest to
deposit holders without deduction of tax Assessing officer noticed that
interest paid was liable to TDS under section 194A held assessee to be in
default under section 201(1) for sum of Rs.
1,34,44,122/- - He also levied interest under section 201(1A) upon assessee -
Whether since in instant case there were several person responsible for making
payment from which tax had to be deducted and further since assessee had
already been allotted TAN nos by those TDS officers,
in view of provisions of rule 38 under passed by Assessing officer concerned so
far it pertained to payments made outside his territorial jurisdictions was
liable to be vacated - Held, yes
Section 201
read with section 194A of Income-tax Act, 1961 - Deduction of tax at source -
Consequence of facture of deduction pay - Assessment year 1994-95 - Assessee a
non-banking financial company, paid interest to deposit holder without
deduction of tax at source Assessing officer having noticed that interest paid
was liable to TDS under section 194A held assessee to be in default under
section 201(1) and also levied interest under section 201(1A) upon it - Whether
since Assessing Officer, had not given a specific finding based on material
particulars about violation of section 194A. His finding was based upon
presumption. He had not given names of persons and interest paid to them on
which assessee had file to deduct tax Assessing Officer was not justified in
holding assessee to be in default under section 201(1) - Held, yes - Whether,
therefore, impugned orders passed by so were liable to be cancelled - Held, yes
In the
previous year relevant to the assessment year 1994-95, the assessee, a
non-banking financial company and having branches in large number of cities
spread all over the India, paid interest to deposit - holders, which were
exceeding 2 crores. The Assessing officer having
noticed that the assessee had paid total interest amounting to Rs. 13,09,54,590 without deduction
of tax and that the said interest paid was liable to TDS under section 194A
held that assessee to be an default under section 201(1) for an amount of Rs. 14666910 and also levied interest under section 201(1A)
amounting to Rs. 58,66,760 upon it. However the
Tribunal set aside the said order for the limited purpose of allowing
opportunity to the assessee on the issue of payment of TDS under section 201(1)
along with interest thereon under section 201(1A). Thereafter the Assessing
officer gave effect to the order of the Tribunal and held the assessee to be in
default under section 201(1) for the sum of Rs.
1,34,44,122/-. He also levied interest under section 201(1A) amounting to Rs. 70,58,153 upon the assessee.
On appeal, the
commissioner (Appeals) upheld the order of the Assessing Officer passed under
section 201(1). However, in respect of interest levied under section 201(1A),
he directed the Assessing officer to charge the interest for the period of 36
months only period of 42 months charged by. Both the parties aggrieved with the
order of the Commissioner (Appeals) are in appeal before us.
On cross
appeal, the assessee contended, inter alia, that
before amendment in section 201(1) by the Finance Act, 2002, which was with
effect from 1.6.2002, even if an assessee was in default in deducting the tax,
he could not be made liable to pay the same to the Central Government and that
since the financial year under consideration was prior to 1-6-2002, even if it
was in default in deducting the tax it could not be directed to pay the same
under section 201(1) along with interest under section 201(1A) that it was
assessed to TDS with several TDS officers and it had furnished TAN Nos.
allotted by those various TDS officers and therefore, the Assessing officer
concerned should restrict his order in respect of the transaction falling
within his jurisdiction and that the Assessing had even failed to point out
that the interest paid to each person was exceeding the limit as prescribed
under section 194A and in absence of the same the assessee could not be held to
be in default
In the first
round of appeal before the tribunal the assessee did not raise the issue of
validity of directly to pay the TDS under section 201(1) and interest thereon
under section 201(1A). In the second round of appeal the assessee had raised
the ground by arguing that the financial year under consideration was prior to
1-6-2002 and hence even if the assessee was in default in deducting the tax it
could not be directed to pay the same under section 201(1) along with interest
under section 201(1A). Therefore the question for consideration arose as to
whether this new ground can be taken up for the first time in set aside proceeding
before the Tribunal. The issue regarding the right of the assessee to challenge
the legal validity of the order in the second round of litigation was
considered by the Gujarat High Court in the case of P.V. Doshi
vs CIT [113] ITR 22w (Guj.).
In view of the ratio of the above decision of the Gujarat High Court, it is
evident that jurisdictional provision, which is mandatory, can be taken up in
the second round of litigation. Therefore, the assessee was to be permitted to
raise the issue relating to validity of the order in second round of
litigation. [
Section 201(1)
provides the consequence of failure to deduct or pay the tax. Thus section has
been modified by Finance Act, 2002 w.e.f. 1-6-2002.
As per section 201(1) before amendment by Finance Act, 2002, if any such person
fails to fails to deduct or after deducting fails to pay the tax as required by
Income-tax Act, he shall be deemed to be an assessee in default in respect of
the tax. Any such person means the person who is required to deduct the tax at
as source as per the provisions of section 192 to 196D. Therefore, even prior
to amendment by Finance Act, 2002 in section 201(1), if the assessee filed t
deduct the tax in the interest paid by the income-tax Act or after deducting
failed to pay the tax as required by section 200 it could be treated to be the
assessee in default in respect of such tax under section 201(1). [
From reading
the provisions of rule 36A of the Rules, it is evident that the Chief
Commissioner of Commissioner of Income-tax is situated, would designate the
Assessing Officer with whom the assessee has to furnish the return. Since in
the instant case there were several persons responsible for making the payment
from which tax had to be deducted, there were several persons responsible for
making the payment from which tax had to be deducted, there were several
designated authorities under Rule-36A. The assessee had already been allotted
TAN Nos. by those TDS officers. Therefore, the jurisdiction of each TDS
authority was restricted to the territorial areas allotted to him by the Chief
Commissioner or the Commissioner of Income-tax who had designated him the TDS
officer. Therefore, the order passed by the Assessing Officer concerned so far
it pertained to payments made outside his territorial jurisdiction was liable
to be vacated.
From reading
the provisions of section 194A it is evident that the assessee is liable to
deduct tax at source if payment/credit of interest to any person in a year
exceeded Rs. 2,500/-, it was the case of the case of
the assessee that mostly the interest accrued to each deposit holder in each
year was below the limit prescribed under section 194A and whenever it exceeded
the limit, the assessee had deducted the tax. The Assessing Officer had not given
a specific finding based on material particulars about the violation of Section
194A. His finding was based upon presumption. He had not given the names of the
persons and the interest paid to them on which the assessee had filed to deduct
the tax. Without giving the particulars with regard to the name of the person
and the interest paid to him, the assessee could not be held to have violated
the provisions of section 194A merely on the basis of presumption and
suspicion. It had been contended by the revenue that the assessee had not
furnished the required particulars despite number of opportunities having been
allowed by the Assessing officer. Even if the assessee had not furnished the
details or necessary particulars, the Assessing Officer could also penalize the
assessee in accordance with law if the assessee failed to comply with the
notices issued by him. However, the absence of particulars would not authorize
him to presume the default of the assessee under section 194A so as to entitle
him to take action under section 201(1) and 201(1A). [
Therefore, the
Assessing Officer was not justified in holding the assessee to be in default
under section 201(1). Therefore, the impugned order passed by
the Assessing Officer were liable to be cancelled.
P.V. Doshi v. CIT [ ] 113 ITR 99 (Guj.)
- Followed.