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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
order of CIT (A) cancelling the order passed under section 201 (1) and the 201 (1A) of the act The Dy. Commissioner of Vs. Sahara India Financial Income-Tax, Central Circle-1, Corporation Ltd, Lucknow 1, Kapoorthalla Complex, Aliganj, Lucknow (Appellant) (Respondent) (Assessment Year: 1996-97) Against the order of CIT (A) cancelling the penalty levied under section 271C of the act The Addl . Commissioner of Vs. Sahara India Financial Income-Tax, Central Circle-1, Corporation Ltd, Lucknow 1, Kapoorthalla Complex, Aliganj, Lucknow (Appellant) (Respondent)
CO No. 15 /Luc/2004 (In /Alld/2000) (Assessment Year: 1996-97) Sahara India Financial Vs. The Dy. Commissioner of Corporation Ltd, Income-Tax, Central Circle- 1, Kapoorthalla Complex, 1, Lucknow Aliganj, Lucknow (Appellant) (Respondent)
CO No. 16 /Luc/2004 (In (Assessment Year: 1996-97 Sahara India Financial Vs. The Addl. Commissioner of Corporation Ltd, Income-Tax, Central Circle 1, Kapoorthala Complex, Lucknow Aliganj, Lucknow (Appellant) (Respondent)
Revenue by : Shri J. K. Mishra, CIT DR Assessee by: Shri Percy J. Pardiwala, Sr. Adv Shri J. J. Mehrotra, CA Shri Hardeep Singh, CA Shri Devashish Mehrotra, Adv Date of Hearing 30/01/2020 Date of pronouncement 08/06/2020 O R D E R PER PRASHANT MAHARISHI, A. M.
1. These are the two appeals filed by revenue against the CIT (A)-II, Lucknow [The LD CIT (A)] dated 24.03.2000 for the Assessment Year 1996- 97 and in both the appeals two cross objections are field by Sahara India Financial Corporation Ltd [Assessee]. For the same year , one appeal [ is filed by The Deputy Commissioner of Income Tax, Central Circle -1, Lucknow [ The ld AO] where in the ld CIT (A) has quashed order passed by him U/s 201 (1) & 201(1A) of the act holding that there is no default by assessee on merits for not deducting tax at sources u/s 194 A of the act as well as the order passed by ld AO is without jurisdictions. CO of the assessee supports the order of CIT (A). Second appeal [ITA No 686] is filed by The Additional Commissioner of Income-Tax, Central Circle-1, Lucknow against the order of the Ld CIT (A) cancelling penalty u/s 271C of the act for the reason that there is no fault u/s 194A by assessee, and order based on which penalty is initiated is quashed on merits as well as on jurisdiction issue. Co of the assessee supports the order of the LD CIT (A).
Facts shows that, For assessment year 96 – 97, the learned assessing officer, on examination of the profit and loss account of the assessee and the details obtained during the course of hearing under section 143 (3)of that year found that assessee company has provided interest of ₹ 71,03,37,564/- on deposits collected under GFDA scheme floated by assessee and debited the same to the profit and loss account by applying the average rate of interest on the balance amount of deposits bypassing monthly credit entries in the interest payable account without crediting the Page | 2 corresponding interest accrued on each individual deposit to the individual depositors account. As assessee did not deduct any tax from the above interest provision credited to the interest payable account, ld AO was of the view that provisions of section 194A of the act are applicable. Therefore, assessee was issued a show cause notice with respect to the applicability of provisions of section 201 (1) of the act and why interest under section 201 (1A) may not be charged.
The assessee contested that the provision of the interest has not been made on individual basis but made on the lump-sum basis on the total amount of deposit collected and therefore the provisions of section 194A are not applicable. Assessee also submitted that when payments are made or credited in excess of ₹ 2500/- to individual parties‟ account, relevant tax at appropriate rate is already deducted. Thus there is no default u/s 194A of the act, hence, section 201(1) and 201(1A) cannot apply.
Assessing officer rejected the contentions of the assessee and held that assessee should have deducted tax on the sum and therefore he found that total amount of interest paid ₹ 71,03,37,564/- on which tax is deductible at the rate of 10% amounting to Rs 7, 10,33,756/-. Therefore, he worked out the demand u/s 201 (1) of Rs 7,10,33,756/– and interest was calculated under section 201 (1A) of Rs. 3,63,29,469/–. Accordingly order under section 201 (1) and section 201 (1A) of the income tax act 1961 was passed on 1 June 1999 by The Asst Commissioner Of Income Tax, central circle – 1, Lucknow.
Assessee aggrieved with the order of the learned assessing officer preferred an appeal before The Commissioner of Income Tax (Appeals) –II, Lucknow. He passed an order on 24th of March 2000. The assessee challenged the legality of the order stating that the learned assessing officer does not have the power to pass an order under section 201 (1) and section 201 (1A) of the act because jurisdiction in respect of the TDS matters of same assessee has already been transferred to ITO TDS ward-2 Lucknow. The learned CIT – A after verification of several notifications issued therein found that the learned assessing officer did not have any jurisdiction to pass an order under section 201 (1) as well as under section 201 (1A) of the income tax act. The learned CIT – A also relied upon the views of the assessing officer of Central Circle as well as The Income Tax Officer (TDS) Ward – 2, Lucknow who also concurred with his view. Thus, according to him, such an order would have been framed only by the AO of, TDS Ward and not by the present assessing officer. Therefore, he cancelled the order passed by the assessing officer. On the merits of the case, he held that if the interest relatable to any individual depositor, whether credited directly to his account or credited to some other account like interest payable account, exceeds ₹ 2500, then only the appellant is liable to deduct tax at the time of credit or payments of interest, whichever is earlier. However if the Consolidated entry in respect of number of depositors are passed and the appellant claims that interest payable to each of the depositor is less than ₹ 2500, there is no tax withholding liability of the assessee. He explained the situation by way of an example stating that if the interest payable to number of persons is less than 2500 and that amount is credited to the consolidated interest payable account, if the interest payable to each of the person is not exceeding ₹ 2500, there is no liability of the assessee to deduct tax at source, irrespective of the amount credited to consolidated account. He therefore held that even on the merit, the learned assessing officer has wrongly concluded that the provisions of section 194A (1) laid down that taxes to be deducted from the interest credited to the interest payable account irrespective of threshold of Rs 2500/- per depositors to the individual parties. Therefore, he held that the assessee cannot be treated as an assessee in default under the provisions of section 201 (1) of the act. Therefore consequently he also held that interest u/s 201 (1A) also cannot be charged. He passed an order on 24th of March 2000, by which the learned assessing officer is aggrieved with. Therefore, the learned AO is in appeal before us.
6. The ld AO has raised the following grounds of appeal in for the Assessment Year 1996-97:-
1. That the ld CIT(A) has erred in law in failing to appreciate that once a "case" is transferred out of the charge of a CIT, no Assessing Officer in that charge can have jurisdiction over that case in view clear definition of the word “case” in explanation to section 127 and Ld. CIT(A) has erred in law in observing that omission of the name of ITO, TDS Ward- II, who excercised the jurisdiction for the purposes of TDS in the case of the assessee before the transfer of the „case‟ to the Central Circle Page | 4 shows that the jurisdiction for TDS was not transferred, ignoring the established fact and practice that in all transfer orders only the name of the Assessing Officer having jurisdiction for assessment, who maintains the GIR and PAN, is mentioned and such an erroneous interpretation would modify the provisions of law as explained in the said explanation.
2. The ld CIT(A) has acted contrary to the express words and spirit of law in holding that the provision of section 194A were not applicable in this case.
3. That the order of the ld CIT(A) being erroneous in law as well as on the facts deserves to be vacated and that of the AO restored.”
7. The assessee has raised the following grounds of appeal in CO No. 15/Luc/2004 in for the Assessment Year 1996-97:- “1. That the order passed by the ld CIT(A) is fully justified on the facts and circumstances of the case.
2. That the ld CIT(A) is fully justified in holding that the jurisdiction in respect of matters under Chapter XVIII-B of the Income Tax Act lies with the Income Tax Officer, TDS Ward-2, Lucknow and with the Assistant Commissioner of Income Tax, Central Circle-1, Lucknow no jurisdiction was vested.
3. That the ld CIT(A) is fully justified in holding that the provisions of section 194A are not attracted on the facts and circumstances of the case.”
8. Further pursuant to the above order passed for assessment year 1996 – 1997 under section 201 (1) and 201 (1A) of the act, since the assessee failed to deduct tax at source, notice under section 271C of the act was issued by The Additional Commissioner Of Income Tax, (Central), Lucknow on 24 June 1999 as to why a penalty of ₹ 7,10,33,156/- being amount of default of tax should not be levied. In response to that, assessee contested that a. The order passed by the assessing officer under section 201 (1) read with section 201 (1A) of the act is without jurisdiction. b. Assessee was not required to deduct tax at source as none of the depositors was having the interest liability of more than ₹ 2500 and therefore the provisions of section 194A of the act were not applicable.
The learned adjudicating authority rejected the contentions of the assessee and held that in view of the specific and unambiguous statutory provisions contained in section 127 of the act and also explanation to section 194A (1) of the act, assessee is required to deduct tax at sources and order passed by the ld AO is valid. He held that assessee deliberately ignored above facts Page | 5 and law and therefore he levied the penalty of ₹ 7,10,33,756/– under section 271C of The Income Tax Act by an order dated 6/10/1999.
10. Assessee challenged order of the penalty before the learned CIT (Appeal), Lucknow, who passed an order on 24th of March 2000 itself, allowing the appeal of the assessee, as he has already held by order of even date for same AY, that the learned assessing officer had no jurisdiction to pass order under section 201 (1) and section 201 (1A) of the act. Further, he held that in that order he has held that AO was unable to prove that there was any liability upon the appellant to deduct tax at source on the provisions of the interest. Therefore, he cancelled the penalty levied by the assessing officer/adjudicating authority.
Therefore aggrieved by the order of the CIT (Appeals), Lucknow the learned Additional Commissioner of Income Tax (central), Lucknow is in appeal before us. The additional Commissioner of income tax, Central, Lucknow has raised the following grounds of appeal (which are identical to the appeal number 685 of the AO) but are reproduced as under:-
1. That the ld CIT(A) has erred in law in failing to appreciate that once a "case" is transferred out of the charge of a CIT, no Assessing Officer in that charge can have jurisdiction over that case in view clear definition of the word “case” in explanation to section 127 and Ld. CIT(A) has erred in law in observing that omission of the name of ITO, TDS Ward-II, who excercised the jurisdiction for the purposes of TDS in the case of the assessee before the transfer of the „case‟ to the Central Circle shows that the jurisdiction for TDS was not transferred, ignoring the established fact and practice that in all transfer orders only the name of the Assessing Officer having jurisdiction for assessment, who maintains the GIR and PAN, is mentioned and such an erroneous interpretation would modify the provisions of law as explained in the said explanation.
2. The ld CIT(A) has acted contrary to the express words and spirit of law in holding that the provision of section 194A were not applicable in this case.
3. That the order of the ld CIT(A) being erroneous in law as well as on the facts deserves to be vacated and that of the AO restored.”
Assessee has filed cross objection number 16/ LUk/2004 raising following grounds:-
“1. That the order passed by the ld CIT(A) is fully justified on the facts and circumstances of the case.
2. That the ld CIT(A) is fully justified in holding that the jurisdiction in respect of matters under Chapter XVIII-B of the Income Tax Act lies with the Income Tax Officer, TDS Ward-2, Lucknow and with the Assistant Commissioner of Income Tax, Central Circle-1, Lucknow no jurisdiction was vested.
3. That the ld CIT(A) is fully justified in holding that the provisions of section 194A are not attracted on the facts and circumstances of the case.”
The learned departmental representative vehemently supported the order of the learned assessing officer submitting that a. Assessee has failed to deduct tax at source in terms of provisions of section 194A of the income tax act. He further referred to explanation to that section stating that even if the interest expenditure is credited to the interest suspense account even then assessee is required to deduct tax at source. He submitted that assessee has failed to deduct tax at source and therefore, assessee is liable to tax under section 201 (one) and interest under section 201 (1A) of the income tax act. b. He submitted that the learned assessing officer noted during the course of assessment proceedings that assessee has failed to deduct tax at source and therefore the passed an order on 1/6/1999. During the course of assessment proceedings as well as while passing an order under section 201 (1) and 201 (1A) of the act by the assessing officer, the jurisdiction was never challenged. He further stated that the AO was having a concurrent jurisdiction to pass such an order. He otherwise submitted that the passing an order under section 201 (1) and 201 (1A) of the income tax act, the ITO TDS as well as the assessing officer both have the concurrent jurisdiction and therefore the order passed by the assessing officer cannot be found fault with.
With respect to ITA number 686, he submitted that as the order of the assessing officer passed under section 201 (1) and section 201 (1A) of the act is perfectly in order and the failure of the assessee is without any reasonable cause or sufficient cause, the learned Addl Commissioner has correctly levied the penalty. He further stated that merely because the CIT – A has cancelled the order passed by the assessing officer under section 201 (1) and section 201 (1A) of the act, the penalty also cannot be cancelled.
The learned that authorised representative fully supported the order of the learned CIT – A stating that the assessing officer who passed an order under section 201 (1) and section 201 (1A) of the income tax act was not having the requisite jurisdiction to pass such an order. He therefore supported the order of the CIT – A on this ground that the order passed by the AO is without jurisdiction. To support his contentions, he referred to the notification dated 26 March 1990, 12 March 1991, order under section 127 of CIT Lucknow dated 7/6/1991 and order under section 127 of CIT Lucknow dated 11/05/1993 placed in paper book. He submitted that all these are considered by the CIT – A to reach at the conclusion that the assessing officer who passed such an order was not having the jurisdiction thereon.
On the issue of the merits, he submitted that none of the provision depositors of interest of the GFDA scheme is more than ₹ 2500/- with respect to any of the individual clients, therefore, there is no requirement of tax deduction at source as the individual interest payment/payable to the individual deposit holder in this year did not exceed Rs. 2500/- or more. He otherwise submitted that whenever there is an excess interest paid more than the amount of ₹ 2500, assessee deduct tax at source thereon and also complies with all other provisions of filing the return before The Income Tax Officer (TDS), Lucknow.
He explained the manner of provisioning which is mentioned by the ld AO in first paragraph of his order. He submitted that neither the depositor and nor the exact amount of interest payable to that depositor is identified when the provision are made. Thus, there is no requirement of TDS in such circumstances.
He therefore submitted that the learned CIT – A has correctly deleted the demand raised under section 201 (1) and interest under section 201 (1A) of The Income Tax Act and consequent penalty under section 271C of the act.
19. On the issue of levy of penalty under section 271C of the act, he submitted that assessee has a reasonable cause for non-deduction of tax at source because a. assessee believes that even if there is a provision to be made on a consolidated basis, tax is required to be deducted only when the individual amount of interest payable to each depositor exceeds in a financial year more than ₹ 2500/–. He submitted that assessee confirms that there is no such account in which the interest amount is payable more than ₹ 2500/– and wherever it is, the requisite tax has been deducted at source by the assessee. In such circumstances, he submitted that there is a reasonable cause for failure to deduct tax at source. b. Even otherwise he submitted that when the order under section 20 (1) and 201 (1A) of the income tax act does not survive, the penalty proceedings initiated on that basis also do not survive.
20. With respect to the argument of the learned departmental representative that the assessing officer was having a concurrent jurisdiction over the assessee to pass an order under section 201 (1) and section 201 (1A) of the act, he referred to the decision of the honourable Delhi High Court in case of Volvoline Cummins Ltd versus The Deputy Commissioner Of Income Tax New Delhi (2008 – (DL1) - GJX- 0658 – DEL]. He submitted that honourable Delhi High Court has , relying upon the decision of the Calcutta High Court in (2000) 246 ITR 133, wherein it has been explained the meaning of the expression „concurrent‟ to mean that authorities have any powers to deal with the situation but the same work cannot be divided between them. In view of this, he submitted that when the work of the ITO TDS was assigned to him, it could not be done by the assessing officer.
We have carefully considered the rival contention and perused the orders of the lower authorities. Clearly, assessee has made provision of interest payable to depositors. The manner of making provision is to apply the average rate of interest on the balances of total deposits by passing monthly credit entries in the interest payable account. Section 194A of the act provides that Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income 36[by way of interest on securities], shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. The explanation below that provides that where any income by way of interest as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
22. By Circular No. 495, dated 22-9-1987, CBDT explained the provision stating that under the existing provisions, deduction of tax at source from interest is to be made at the time of payment or credit to the account of the payee. With a view to prevent postponement of liability relating to such deduction of tax at source, section 194A has been amended to provide that tax will be deducted at source, on accrual of interest at the end of the accounting year or at the time of credit to the account of a payee or at the time of payment, whichever is earlier. Similarly, section 195 has been amended to ensure that deduction of tax at source from payments to non-residents will have to be made at the time of payment or at the time of giving credit to the account of the non-resident, whichever is earlier. Any sum credited to "suspense account" or "interest payable account" shall be deemed to be credited for the purpose of tax deduction at source. Therefore, if the individual account interest payments exceed Rs 2500/- merely because they are credited to the different account than the account of depositors, TDS liability of the deductor cannot be eliminated. But, there has to be provision of interest of individual account where credited to the account of depositor or to interest payable account is more than Rs 2500/- for the FY, then only tax is required to be deducted. On the merits whether the assessee is required to deduct tax at sources or not the ld CIT (A) has held as under :- “5. So far as the legality of the order is concerned Shri Thakkar submitted that the Assessing Officer has completely misunderstood the provisions of section 194(1) and the explanation there under. Shri Thakkar pointed out that the AO in his order concludes as under:-
“Since the total amount of interest credited to interest payable account exceeds Rs. 2500/- in this case, the following demand is raised against the assessee in accordance with the provisions of section 194A(1).
Shri Thakkar submitted that provisions of section 194A(1) state as below:- “ Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident, any income by ways of interest other than income by way of interest on securities, shall at the time of credit of such income to the account of payee or at the of payment thereof in cash by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rate in source.
Exp: From the purpose of this section, where any income by way of interest aforesaid in credited to any account, whether called “interest payable account” or “expense account” or by any other name, in the books of account of persons liable to pay such income such crediting shall be deemed to be credit of such income to the account of assessee and the this provisions of section shall apply accordingly.
7. Shri Thakkar further quoted the provisions of sub- section (3) of section 194A which states as below:- “provisions of sub-section (1) shall not apply as the case may be aggregate of the amount of much income as the case may be the aggregate of the amount of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub- section (1) to the account of or to be payee does not exceed two thousand five hundred rupees.”
Shri Thakkar submitted that in view of the above it is clear that the legislature has used the word account/ payee in singular. This means that interest credited to the account of one single depositor or the interest credited to any account in relation to that single depositor is to be taken into consideration and if interest relatable to that single depositor exceeds Rs. 2565/- there was a liability to deduct tax at source. In the case of the appellant the AO did not point out that interest liability relating to any of the depositor exceeds Rs. 2500/- and unless this is pointed out, there was no liability to deduct tax and the appellant cannot be deemed to be an assessee in default and the provisions of section 201(1A) are not at all applicable. 9. I have carefully considered the submission raised on behalf of the appellant and I have also gone through the provisions of section 194A of the Act and am I am also the opinion that if the Interest relatable to any individual depositor whether credited directly to his account or credited to some other account like interest payable account, suspense account, etc exceeds Rs. 2500/- , the appellant is liable to deduct tax at the time of such credit of interest. However, if a consolidated entry in respect of a number of depositors is passed and the appellant claims that interest payable to each of the depositor is less than Rs. 2500/- there is no tax liability. The situation can be understood in a better manner by giving an example. Suppose, the interest payable to A, B, C and D is Rs. 2000/-, Rs. 2100/-, Rs. 2200/- and Rs. 2300/- but these amounts are not credited in the respective account of the payee but a consolidated Page | 12 interest amount of Rs. 8600/- is credited to the interest payable account, there is no liability to deduct any tax. Therefore, the AO has wrongly conducted that the provisions of section 194A(1 laid down that tax has to be deducted from the interest credited to the interest payable account irrespective of payment of interest to be individual parties provided the total amount of interest credited exceeds Rs. 2500/-. I, therefore hold that the appellant cannot be treated as an assessee in default under the provisions of section 201(1) of the Act. Simultaneously, interest under the provisions of section 201(1) cannot charged.”
23. On this aspect the ld AR vehemently submitted that there are no accounts where the individually interest payable to them is in excess of Rs 2500/- and wherever it is requisite tax is deducted. This is not disputed by the ld DR. Therefore, we hold that there is no infirmity in the order of the ld CIT (A) in holding that assessee was not required to deduct tax at sources where the interest payable to individual account holder does not exceed Rs 2500/- in FY.
On the issue of jurisdiction, the ld CIT (A) held as under :- “16. The word Assessing Officer has been defined under sub-section (7A) of Section 2 of the IT Act as below:- Assessing Officer means the Asstt. Commissioner or Dy. Commissioner or Assistant Director or Dy. Director or the Income Tax Officer who is vested with the relevant jurisdiction by virtue of directions or order issued under sub-section (1) of sub-section (2) of section 120 or any other provisions of this Act. (underlying by me). ] Therefore, it is clear that an Assessing Officer derives his jurisdiction from the orders passed by the competent authority in this regard and he cannot travel beyond the jurisdiction assigned to him. 17. An important aspect which is not to be forgotten is that prior to the centralization the Sahara Group of cases were assessed by the various Assessing Officer falling under the control of Commissioner of Income-tax, Lucknow. The Commissioner of Income Tax, Lucknow on 12.05.1988 passed an order No. 36, in which the jurisdiction of the income tax officer, TDS Ward-2, Lucknow was defined as below:- The Assessing Officer shall have jurisdiction for the purpose of Chapter XVIIB (Except sections 198, 199) and section 272BB & 273B of the Income Tax Act, 1961 within the jurisdiction of learned Commissioner of Income-tax, Lucknow charge. It is further clarified that the reference to words “Assessing Officer” in section 194C, 195, 197 of the Income Tax Act, 1961 relates to the Assessing Officer having jurisdiction to make assessments of Income Tax.” 18. Thus, it is clear that by this order the powers provided under Chapter XVIIB of the Act were taken away from the Assessing Officer completing the assessment and were conferred upon the Income Tax Officer, TDS Ward-2, Lucknow. This was done in respect of all the assessee falling within the jurisdiction of Learned Commissioner of Income-tax, Lucknow charge which extended not only upon the revenue district of Lucknow but to some outskirts station also for away upto Horadabad, Bareilly etc. therefore, on 11.07.1988 the learned Commissioner of Income-tax , Lucknow passed another order by which the jurisdiction of Income Tax Officer, TDS Ward-2, Lucknow was defined as below:- “The Assessing Officer shall have jurisdiction for the purpose of chapter XVIIB (Except sections 198, 199) and section 272BB and 273B of the Income Tax Act, 1961 of revenue district of Lucknow. This is further clarified that the reference to words “Assessing Officer” in section 194C, 195, 197 of the Income Tax Act, 1961 relates to the income tax officer having jurisdiction to make assessments of the Income Tax.”
In view of the above it is clear that now the jurisdiction of Income Tax Officer, TDS Ward-2, Lucknow was restricted to those assessees only who were situated in the revenue district of Lucknow. Thereafter, the Commissioner of Income-Tax, Lucknow passed another order dated 26.03.1990 by which the jurisdiction of the Income Tax Officer TDS, Ward-2, Lucknow was defined as below:- “All the functions of Assessing Officer under chapter XVII and section 272BB, 273B of Chapter XXI and Chapter XXII of the Income Tax Act, 1961 in respect of such areas or such persons or classes of persons or of in such income or classes of cases in respect of revenue district of Lucknow. It is further clarified that the reference towards “Assessing Officer” in section 194C, 195 and 197 of the Income Tax Act, 1961 relating to the Assessing Officer having jurisdiction to make assessments of Income Tax.”
Finally the Commissioner of Income-tax, Lucknow passed an order on 12.03.1991 which has already been referred to by Shri Thakkar in his submission and for the sake of convenience the jurisdiction granted by the order upon the income tax officer, TDS Ward-2, Lucknow is reproduced as below:- “All the functions of Assessing Officer under Chapter XVIIB, BB & D, Chapter XXI and Chapter XXII of the Act in respect of such areas, or such persons or classes of persons mentioned below:- All persons responsible for paying any income or sum of the nature mentioned in section 192 to 194, 194A, 194B, 194C, 194D, 194Em 196F, 195 and 196A and for deducting any tax in sum as income tax or for collecting tax in accordance with the provisions of section 206C, whose office (including a branch officer) within the revenue district of Lucknow.
21. This last order also shows that in respect of the assessee belonging to the Sahara Group, the functions under Chapter XVIIB were assigned to Income Tax Officer, TDS Ward-2, Lucknow.
At this stage it will be helpful if the provisions of section 127 of the Act may also be looked into which state as below”- (1) The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (underlining by me) 22. The above section clearly shows that over one case, more than one Assessing Officer may have jurisdiction and this can be possible only when either they have been given concurred jurisdiction on the various power under the Income Tax Act have been divided amongst them. Precisely in the case of the appellant, it was the second type of power because whereas the income tax Officer, TDS Ward-2, had the powers only under Chapter XVIIB, and D and Chapter XXI and XXII all other powers under the Act continues with the various Assessing Officer who were basically responsible for the completion of the assessment proceedings, penalty etc.
For the first time the Learned Commissioner of Income-tax, Lucknow passed an order u/s 127 on 07.06.1991 and vide this order the following cases belonging to the Sahara Group were transferred to Central Circle-II, Lucknow:- Name and address of the From Assessing Sl. assessee Officer No.
1. M/s. Sahara India Savings & DCIT, Spl Range- Investment, Corporation II, Lko Kapporthala, Lko 2. Sahara India Ltd, Kapoorthala, DCIT, Spl Range- Lko II, Lucknow.
3. Sahara Investment India Ltd, DCIT, Spl Range- Kapoorthala, Lucknow II, Lucknow.
4. Sahara Investment India Ltd, Co. Circle, Lko Kapoorthala, Lucknow 5. Sahara India Textiles Mills Ltd, Circle-1(1), Lko Kapoorthala, Lko 6. Sahara India Pharma, Chem Ltd, Do Kapoorthala, Lucknow.
Sahara India Construction Co. Do Ltd, Kapoorthala, Lucknow 8. Sahara India Muri Ltd, Co. Circle, Lko Kapoorthala, Lucknow 9. Sahara India, Aliganj, Lucknow DC(Asstt.), Range-II, Lko 10. Sahara India Commercial Ltd, Do Aliganj, Lucknow 11. Sri Subrato Rai, New Hyderabad, Ward-1(6), Lko Lko 25. Vide another jurisdiction order dated 11.05.1993 the learned Commissioner of Income-tax, Lucknow passed u/s 127 of the Act transferred the following cases belonging to Sahara Group to control Circle-III, Lucknow. Name and address of From Assessing Officer Sl. the assessee Page | 17 No.
M/s. Sahara India ACIT, Circle 2(3), Lko Marketing, Sahahra India Bhawan Kapoorthala, Lko 2. M/s. Sahara Printers Do (P) Ltd, 1, Kapoorthala, Lko 3. M/s. Sahara India Do Mass Communications, 1, Kapoorthala, Aliganj, Lucknow 4. M/s. Sahara Hotels (P) Do Ltd, 1, Kapoorthala, Aliganj, Lucknow 5. M/s. Sahara India Do Publications (P) Ltd, 1, Kapoorthala, Aliganj, Lucknow 6. M/s. Shabi Do Advertisisng, 1, Kapoorthala, Aliganj, Lucknow 7. M/s. Sahara India Do Housing Corp. Ltd, 1, Kapoorthala, Aliganj, Lucknow 8. M/s. Sahara India Do Mutual Benefit Co Ltd, 1, Kapoorthala, Aliganj, Lucknow 9. Sri Ishtiaq Ahmed, ACIT, Circle-2(3), Lucknow Sahara India Bhawan, Aliganj, Lucknow Page | 18
Sri Uttam Kumar Bose, Do 1, Kapoorthala, Aliganj, Lucknow 11. Swapna Roy, Sahara Do India Bhawan, Lucknow 12. Sri Om Prakash Do Srivastava, 1, Kapoorthala, Aliganj, Lucknow 13. Sri JB Roy, 1, Do Kapoorthala, Aliganj, Lucknow 14. Sri Sanjay Bahadur Do 15. M/s. Sahara India Do Airlines Ltd, 1, Kapoorthala, Aliganj, Lucknow 26. It is pertinent to note that whereas the commissioner of Income Tax, Lucknow transferred the cases from various Assessing Officers to Central Circle-III, Lucknow, he did not transfer the cases from Income Tax Officer, TDS Ward-2, Lucknow to Central Circle-III, Lucknow. Explanation below section 127 states that the word “case” in relation to any persons means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date and includes also all proceedings under this act which may be concerned after the date of such order or direction in respect of any year. In view of this explanation, it is clear that only those proceedings which were either pending or completed or could have been initiated by the various Assessing Officers mentioned in the two orders passed u/s 127 on 07.06.2001 and 11.05.1993 were transferred to Central Circle-III, Lucknow. The proceedings which were pending or which were completed or / could be initiated by ITO, TDS Ward-2, Lucknow were never transferred to Central Circle-III, Lucknow.
27. In view of the above discussions, I hold that the Assessing Officer did not have any jurisdiction to pass an order u/s 201(1) as well as u/s 201(1A) of the Act.
28. It is not only who is holding this view but the Assessing Officers of Central Circle as well as Income Tax Officer, TDS Ward-2, Lucknow also held the same view and a few of the examples are given as below:- (1) In case of M/s. Sahara India Ltd, the ITO TDS Ward-2, Lucknow passed an order u/s 201(1a) relating to Assessment Years 1989-90 to 1994-95, appeal of which was decided by the ld CIT(A) on 28.08.1997. The Assessing Officer of Central Circle never raised any objection that ITO, TDS Ward-2, Lucknow did not have jurisdiction in the matter. (2) In the case of Sahara India Housing Ltd, ITO, TDS Ward- 2, Lucknow passed an order u/s 201(1A) for Assessment Year 1996-97 for which the appeal was decided on 12.03.1998 by CIT(A)-III, Lucknow and the AO, Central Circle, Lucknow never raised any objection that ITO, TDS Ward-2, Lucknow did not have any jurisdiction. (3) In case of Sahara India Airlines Ltd, for Assessment Year 1996-97 the ITO, TDS Ward-2, Lucknow passed an order u/s 201(1A) of the Act for which the appeal was decided by the CIT(A)-III, Lucknow on 12.03.1998. In this case also the Assessing Officer, Central Circle, Lucknow did not raise the objection that proper jurisdiction was with his and not with the ITO, TDS Ward-2, Lucknow. (4) On 09.12.1996 ITO, TDS Ward-2, Lucknow wrote a show cause notice No. TDS./ S-2958(c)(f)/95-96 to Sahara India Financial Corporation Ltd, and by this notice the said assessee was informed that for FY 1995-96 no annual return was filed by it and it was asked to show cause as to why penalty u/s 272A should not be imposed. Page | 20 (5) The most important case to be noted is that M/s. Sahara India Financial Corporation Ltd for FY 1995-96 filed annual return in Form No. 24 before the ACIT, Central Circle, Lucknow on 06.06.1996. The AO, Central Circle, Lucknow on 04.05.1997 transferred the said return to ITO, TDS Ward-2, Lucknow and thereafter the ITO, TDS Ward-2, Lucknow passed an order u/s 201(1A). (6) On 18.02.2000 the ITO, TDS Ward-2, Lucknow issued a show cause notice u/s 201(1) and 201(1A) of the Act to Sahara India Ltd, for FY 1990-91 asking the said assessee to show cause as to why it should not be deemed to be an assessee in default for not deducting tax at source u/s 194B of the IT Act. Thus, the Assessing Officers of Central Circle also properly understood that the jurisdiction under Chapter XVIIB did not vest with them and unnecessarily they have assumed the jurisdiction in the case of the appellant in this year.
To summarize, I hold that there was no legal obligation upon the appellant do deduct tax at source. Further, the AO did not have any jurisdiction to pass an order u/s 201(1) and 201(1A) of the Act.” [Note para no 24 is not mentioned in the order of CIT (A)] 25. The order passed by the learned CIT – A has considered the notifications issued by THE COMMISSIONER OF INCOME TAX, Lucknow. The notification dated 26/3/1990 which is effective from that date clearly says that INCOME TAX OFFICER, WARD – 2 (TDS), Lucknow shall be an assessing officer as mentioned under various section of TDS including section 195 and 197 of the income tax act. The notification dated 14/3/1991 also gives the jurisdiction to THE INCOME TAX OFFICER TDS, Lucknow over all persons responsible for any action mentioned under various sections of TDS. Further looking at the orders passed under section 127 of the income tax act by the Commissioner of income tax Lucknow, it is apparent that jurisdiction over TDS has not been transferred to the other specified officers other than ITO (TDS), Lucknow. Further in case of sister concerns also the ITO TDS Ward – 2, Lucknow and not the officer of the central circle, has passed the respective orders under section 201 (1A relating to several years which have been mentioned in paragraph number 28 of the order of the learned CIT – A. Further in sub paragraph number five of para 28 of that order , in case of the assessee itself the orders have been passed by the ITO (TDS), Ward – 2 Lucknow under section 201 (1A) of the act. Therefore, it is apparent that the jurisdiction of all TDS matters over the assessee was with ITO (TDS) Ward – 2, Lucknow and not with The Deputy Commissioner of Income Tax, Central Circle – 1, Lucknow. Thus, on reading of all these notifications produced before us and considered by the learned CIT – A on jurisdictions of assessing officer as well as TDS officers, it is apparent that the order passed by the learned Assistant Commissioner of Income Tax, central circle – 1, Lucknow under section 201 (1) and 201 (1A) of the act on 1/6/1999 has correctly been held by the learned CIT – A as without jurisdiction.
In view of above it do not find any infirmity in the order of the learned CIT – A in quashing the order passed by the learned assessing officer under section 201 (1) and 201 (1A) of the act on 16 1999 on the issue of jurisdiction as well as on the merits. Accordingly, the appeal of the learned assessing officer in ITA number 685 is dismissed.
As the cross objection filed by the assessee is supportive in nature, it is allowed.
ITA number 686 filed by the learned additional Commissioner of income tax against the order of the learned CIT – A cancelling the penalty under section 271C of the income tax act is also dismissed for the reason that, there is no default by the assessee under section 194A of the income tax act relating to deduction of tax at source on interest paid for the year. Further the action of penalty was initiated based on the order under section 201 (one) and 201 (1A of the act passed by the learned assistant Commissioner of income tax, central circle – one, Lucknow was also found to be without jurisdiction. Therefore, when the penalty itself was initiated on an order, which was not passed by a proper jurisdictional officer, penalty initiated based on that order, even otherwise, could not survive. Thus, the learned CIT – A quashed the order of the penalty under section 271C of the act also. We do not find any infirmity in the order of the learned CIT – A and therefore the