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Facts
The assessee, M/s Sanklecha Constructions, is a partnership firm engaged in building and land development. The case involves an appeal against an order confirming a penalty under Section 201(1) of the Income Tax Act for non-deduction of TDS on interest paid to Dewan Housing Finance Corporation Ltd. The assessee claimed that the IT(TDS) officer erroneously used the word 'Penalty' instead of 'Tax and Interest'.
Held
The Tribunal held that the use of the word 'Penalty' in the order under Section 201(1) was a typographical error, as confirmed by the show-cause notice and the demand notice, which clearly indicated 'Tax and Interest'. The Tribunal further noted that the proviso to Section 201 places the onus on the assessee to furnish a certificate from a Chartered Accountant if they claim no tax was deductible. Since no such certificate was filed and the assessee's oral assurance lacked evidentiary value, the grounds of appeal were dismissed.
Key Issues
Whether the levy of tax and interest under Section 201(1) is valid, despite the use of the word 'Penalty' in the order, and whether the onus was on the assessee to provide a certificate regarding deductee's tax payment.
Sections Cited
250, 201, 201(1), 139, 292BB, 192, 156
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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: MS.ASTHA CHANDRA & DR.DIPAK P. RIPOTE
Assessment Year: 2015-16 M/s.Sanklecha Constructions, V The Income Tax Officer, 11, Op. of Kalika Park, Agra s. ITO(TDS), Nashik. Road, District Nashik, Nashik – 422002. Maharashtra. PAN: AAFFS1432H Appellant/ Assessee Respondent / Revenue Assessee by Shri Pramod S Shingte– AR Revenue by Shri Akhilesh Srivastva– Addl.CIT(DR) Date of hearing 18/06/2025 Date of pronouncement 27/06/2025 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal is filed by the Assessee against the order of ld.Addl./Joint Commissioner of Income Tax(Appeal)-1, Hyderabad passed under section 250 of the Income Tax Act, 1961 for A.Y.2015-16, dated 28.03.2025 emanating from Order u/s.201 of the Income Tax Act, dated 31.03.2022. The assessee has raised following grounds of appeal :
“ 1. On the basis of facts, in circumstances of the case and as per law, the CIT(A) is not justified in confirming the penalty of Rs.6,73,517/- levied u/s.201(1) of the Act.
On the basis of facts, in the circumstances of the case and as per law, CIT(A) is not justified in confirming the penalty levied u/s.201(1) of the Act when there is no provision u/s.201(1) to levy penalty.
On the basis of facts, in the circumstances of the case and as per law, CIT(A) is not justified in confirming the penalty u/s.201(1) which was levied by violating the principles of natural justice.
On the basis of facts, in the circumstances of the case and as per law, CIT(A) is not justified in confirming the penalty u/s.201(1) levied by order which is time barred in law and hence illegal.
On the basis of facts, in the circumstances of the case and as per law, CIT(A) is not justified in levying penalty of Rs.6,73,517/- without considering the request of the appellant to confirm whether the payees have filed the returns of income for the year under appeal and considered the interest paid by the appellant in its return of income, having regards to the facts of the case and to avoid double taxation.
6. The appellant craves for the addition to, deletion, alteration, modification of the above grounds of appeal.”
Submission of ld.AR : 2. Ld.AR for the Assessee submitted that there is no penalty u/s.201(1) of the Act. Therefore, AO has erred in levying penalty u/s.201(1) of the Act. Ld.AR took us through the Section 201(1) of the Act. Ld.AR filed a paper book. Ld.AR invited our attention to the show-cause notice issued u/s.201(1) of the Act, by the ITO(TDS) to demonstrate that the ITO(TDS) had invoked Section 201(1) of the Act, which is erroneous. Therefore, ld.AR submitted that the order may be quashed. On merits Ld.AR submitted that the Assessee had requested the AO and CIT(A) to obtain the information directly from the Deewan Housing Finance Corporation . However, both have rejected the request of the Assessee. Ld.AR pleaded that Deewan Housing Finance Corporation had assured the assessee that it will provide a certificate of No deduction asper Proviso to Section 201(1) of the Act. Hence assessee has not deducted the Tax at source.
Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of Assessing Officer(AO) and ld.CIT(A).
Findings & Analysis : 4. We have heard both the parties and perused the records.
4.1 The assessee is a Partnership Firm carrying on the business of Builders and Land developers. During the Assessment Proceedings it was observed that the Assessee has not deducted Tax at Source on the Interest of Rs.64,53,305/- paid to Dewan Housing Finance Corporation Ltd. 4.2 Accordingly the ITO has passed an order u/s 201(1) of the Act on 31/03/2022.
4.3 In this case, the ITO(TDS) in the order dated 31/03/2022 has noted that interest amounting to Rs.64,53,305/- was paid to M/s.Dewan Housing finance Corporation Ltd., without deducting TDS. There was one more entity to who interest was paid without deducting TDS.The ITO noted TDS liability of Rs.7,06,242/- was outstanding in the case of the tax deductor. The ITO issued a show cause notice. Then, the ITO passed an order under section 201(1) of the Act, dated 31.03.2022. The Paragraph 5 of the said order is reproduced here as under : “05. In view of the above and considering the default committed by the tax deductor, the penalty u/s 201(1) of the Act is calculated as under :-
Balance unpaid TDS Liability 7,06,242 Total payable 7,06,242
This amount shall be paid by the deductor as per the demand notice. Issued Demand notice u/s 156 along with Challan.”
4.4 Thus in the paragraph 5 the ITO has erroneously used the word ‘Penalty’. u/s 201(1) of the Act. Actually, it is a typing mistake by the ITO and by mistake the ITO has used the word Penalty. This is clear from the Heading of this order dated 31/03/2022 which is as under : “ Order u/s 201(1) of the Income Tax Act 1961” 4.5 Thus, the ITO has passed an Order u/s 201(1) of the Act. This fact is also evident from the Demand Notice enclosed with this impugned order. The First Paragraph of the said Demand Notice is as under : Quote “This is to give you notice that a sum of Rs.7,06,242/ for the Financial Year 2014-15 as amount of Tax and Interest Levied u/s 201(1) of the I.T.Act 1961 has been determined to be payable by you” Unquote.
4.5.1 The said demand notice is part of the Appeal Memo filed by the assessee. The impugned Demand Notice clearly mentions Tax and Interest u/s.201(1) of the Act.
4.5.2 We have also perused the Show Cause Notice issued by the ITO(TDS) dated 29/03/2022, nowhere in the said notice the ITO has used the word Penalty.
4.5.3 The said Notice is scanned and reproduced here as under :
4.6 In these facts for all the reasons discussed in earlier paragraphs, we are convinced that the use of the Word “Penalty” in the order u/s 201(1) is a Typographical error. As per section 292BB it is a curable defect. 4.7 Another important fact is that the Assessee has never raised this issue before the ITO during the proceedings. 4.8 The ld.CIT(A) has also referred the impugned Order as Order u/s.201of the Act.
5. The Ld.AR relied on the decision of ITAT Delhi Bench in the case of Lufthansa Cargo AG Vs. DCIT(TDS) order dated 17/01/2024. Ld.AR also filed copy of the said decision. However, the said decision is not applicable to the case of the Assessee as in the case of Lufthansa cargo AG, the deductee have paid the tax and filed a certificate to that effect. In the case of the Assessee no such certificate has been filed by the assessee, hence the case law relied by the Ld.AR is not applicable.
The Section 201(1) of the Act is reproduced here as under : Consequences of failure to deduct or pay. 201. (1) Where any person, including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, 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 this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions 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.” 6.1 Thus, it can be noted as per Proviso to Section 201 of the Act a certificate of the Chartered Accountant in the prescribed Form that the deductee has shown the impugned income in the return and paid tax needs to be filed if assessee has not deducted TDS. Admittedly no such Certificate has been filed. As per the Section 201 the onus of filling such certificate is on the Assessee.
In these facts and circumstances of the case, we have no hesitation in upholding the order of the Ld.CIT(A).
7.1 Accordingly, the Grounds of appeal number 1-5 raised by the assessee are dismissed.
8. Ground Number 6 : The assessee has pleaded that the CIT(A)/ ITO should have verified from the Dewan Housing Finance Corporation Ltd. However, we have already mentioned that the Section 201 has put the burden on the assessee . As per section 201 the assessee has to file the Certificate in the prescribed Form if Assessee has not deducted the Tax at source. Thus, the Act has given a duty to the Assessee to deduct the Tax at source , however as per the proviso to section 201 if the Assessee is of the opinion that No Tax needs to be deducted then the onus is on the Assessee to file a certificate in the prescribed form that deductee has paid tax on the impugned income. Assessee pleaded that Deewan Housing Finance Corporation Ltd had assured the assessee, however such oral averments have no evidentiary value.
8.1 Therefore, we agree with the ld.CIT(A) that the onus was on the assessee and assessee failed to do so. Accordingly, the ground number 6 of the Assessee has been dismissed.
In the result, appeal of the assessee is dismissed. Order pronounced in the open Court on 27 June, 2025.