KARTHIKEYA HOTELS,HYDERABAD vs. INCOME TAX OFFICER TDS, WARD-1(4), HYDERABAD

We have heard both the parties and perused the petition and affidavit filed by the partner of the assessee seeking condonation of delay of 133 days in filing the appeal before the Tribunal. We find that,, the reasons explained by the partner of the assessee appear to be genuine and bona fide and come under ‘sufficient 4 Karthikeya Hotels cause’. We further find that, the Hon'ble Supreme Court in the case of Collector, Land Acquisition Vs. MST Katiji, reported in 167 ITR 471, has laid down certain principles for condoning the delay and directed that a lenient approach should be followed to avoid dismissal of meritorious cases on technical grounds. Going by the principles laid down in MST Katiji (supra), and also considering the submissions of the partner of the assessee, we condone the delay of 133 days in filing the appeal before the Tribunal and admit the appeal for adjudication.

The brief facts of the case are that, the assessee is engaged in Hotel business. The assessee in the instant case, as per the information available on record, it is noticed that,, in the Financial Year 2019–20, relevant to the A.Y. 2020–21, the assessee did not comply with the TCS provisions by not collecting tax at source from the buyers on the liquor sales, totaling Rs. 2,92,34,431/- made during the period from 01.04.2019 to 31.03.2020. In view of the above facts, proceedings under Section 206C(6A) and Section 206C(7) of the Income Tax Act, 1961 were initiated, and a show- cause notice dated 23.02.2023 was issued and served on the assessee. The assessee neither furnished an explanation nor 5 Karthikeya Hotels explained how the provisions of Section 206C(6A) and Section 206C(7) of the Act are not applicable. Therefore, the A.O., by taking note of the relevant information, passed an order under Section 206C(6A) and Section 206C(7) of the Act, dated 10.07.2023 and determined tax collected at source and interest of Rs. 4,28,284/-.

Aggrieved by the assessment order, the assessee preferred an appeal before Ld. CIT(A). During the appellate proceedings, Ld. CIT(A) provided three dates of hearing on 14.11.2024, 20.11.2025 and 17.12.2025, but the assessee neither appeared nor filed any response. Therefore, Ld. CIT(A) disposed of the appeal of the assessee for non-prosecution by following certain judicial precedents, including the decision of the Hon'ble Supreme Court in the case of CIT Vs. B.N. Bhattacharjee and another, reported in 118 ITR 461, and upheld the additions made by the A.O. towards short collection of tax at source and interest under Section 206C(6A) and Section 206C(7) of the Act.

Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee, Shri M.V. Anil Kumar and Ms. Sreelekha, Advocates, submitted that, Ld. CIT(A) erred in dismissing the appeal filed by the assessee for non-prosecution without providing reasonable opportunity of being heard to the assessee. The learned counsel for the assessee further referring to the order passed by the A.O. under Section 206C(6A) and Section 206C(7) of the Act dated 10.07.2023, submitted that,, the assessee is a retail seller of liquor and the provisions of Section 206C(6A) of the Act does not apply to the retail seller of the liquor to the consumer. Therefore, he submitted that,, the additions made by the A.O. towards short computation of TCS and interest should be deleted or, in the alternative, the matter may be remanded to the file of the A.O. to verify the facts and decide the issue in accordance with the law.

The Ld. CIT-DR for the Revenue, Dr. Narendra Kumar Naik, on the other hand, supporting the order of Ld. CIT(A), submitted that,, the assessee has not furnished any details before the A.O. and claimed that,, the provisions of Section 206C(6A) and Section 206C(7) of the Act are not applicable. In the absence of any relevant details and non-cooperation from the assessee, the A.O.

We have heard both parties, perused the material available on record, and had gone through the orders of the authorities below. There is no dispute with regard to the fact that,, the provisions of Section 206C(6A) of the Act deal with collection of tax at source in respect of sale of IMF, beer and wine, etc., and as per the said provisions, the seller of the liquor should collect TCS at the applicable rates from the buyers at the time of sale. The assessee claims that,, the provisions of Section 206C(6A) are applicable to the seller of the liquor at the first point itself and since the assessee is a retail seller of liquor to the consumers, the provisions of Section 206C(6A) are not applicable. No doubt, as per the provisions of Section 206C(6A), the seller of the liquor at the first instance should collect TCS at the applicable rates from the buyers at the time of sale. Therefore, to this extent, we accept 8 Karthikeya Hotels the arguments of the assessee, however, the fact with regard to whether the assessee is a retail seller or a distributor or the wholesale trader of IMF, beer and wine, is not known to us or not ascertained from the records. Since the assessee could not appear and explain its case before the A.O., and the A.O. has passed an ex parte order under Section 206C(6A) and Section 206C(7) of the Act, and further, there was no response from the assessee before Ld. CIT(A), in our considered view, the matter needs to be set aside to the file of the A.O. to reexamine the claim of the assessee in light of the provisions of Section 206C(6A) of the Act. Thus, we set aside the order of Ld. CIT(A) and restore the issue back to the file of the A.O., and the A.O. is directed to verify the claim of the assessee in the light of the provisions of Section 206C(6A) and Section 206C(7) of the Act, and the A.O. shall reconsider the issue after providing reasonable opportunity of being heard to the assessee.

In the result, the appeal of the assessee is allowed for statistical purposes.