BAWEJA MOVIES P.LTD,MUMBAI vs. ITO TDS 1(1)(3), MUMBAI

The assessee has raised more or less common grounds of appeal

The brief facts of the case are that the assessee company is engaged in the business of production of feature films for entertainment. A survey under Section 133A of the Income Tax Act, 1961 (hereinafter "the Act") for TDS verification has been carried out on 13.12.2005. During the course of survey, the AO noticed that the assessee has made various payments which attract TDS under the provisions of Sections 194C and 194J of the Act, but failed to deduct TDS on such payments and accordingly, a statement was recorded from the Director of the assessee company, Shri Harjaspal S. Baweja. The Director of the company, while recording statement, in reply to question No. 8 stated that he has made various payments without deduction of tax at source under respective provisions of the Act and further admitted that TDS was not deducted on the above payments by mistake. Consequent to the survey, the AO has taken up proceedings under Sections 201(1) and 201(1A) of the Act and called upon the assessee to explain as to why the assessee shall not be treated as assessee in default for failure to deduct TDS on various payments. In response to the notice the assessee, vide letter dated 16.03.2011, submitted that the amount paid under the head ‘processing charges’ to M/s. Adlabs Ltd. is not settled because of various reasons and finally the same has been reversed in the subsequent financial year. Therefore the question of deduction of TDS on such payment does not arise. Similarly the assessee has filed explanation for other payments to argue that TDS is not applicable on these payments. The assessee also taken the plea that since the deductee has paid the tax on the impugned amount in their income tax returns, in view of the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. vs. CIT 293 ITR 226 the assessee cannot be held as assessee in default when the deductees have paid tax on the said amount. The AO, after considering the relevant submissions of the assessee and also taking into account the statement recorded during the course of survey coupled with the observations of the Tax Auditor in its report, held the assessee as assessee in default for 3 & 2671/Mum/2015 M/s. Baweja Movies P. Ltd failure to deduct TDS on various payments as listed in his order at para 4.1 and computed short deduction of tax under Section 201(1) Act and interest under Section 201(1A) of the Act.

Aggrieved by the order of the AO, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee neither appeared nor filed any written submissions, which is evident from the fact that the CIT(A) has recorded dates of hearing given to the assessee in his order at para 2 on pages 1 & 2 as per which the assessee was given 10 hearings on various dates for which the assessee appeared and sought time without filing any details in respect of the observations made by the AO with regard to non- deduction of tax at source on various payments. The CIT(A), after considering the assessee’s non cooperation for disposal of the appeal, passed ex-parte order wherein he has upheld the findings of the AO in respect of non-deduction of tax at source on payments made to various parties, short deduction of TDS on payments made to M/s. Prime Focus Ltd. and also failure to deposit TDS deducted on certain payments. However, considering the plea of the assessee in so far as payments made by deductees in their income tax returns by following the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (supra) directed the AO to verify the claim of the assessee with necessary evidences and if the assessee is able to demonstrate that the deductees have paid the tax on the impugned amount, exclude those amounts for the purpose of determination of short deduction of tax under Section 201(1) of the Act but reiterated that interest under Section 201(1A) of the Act will remain till the date of filing of return of income by the deductees. Aggrieved by the order of the CIT(A), assessee is in appeal before us.

The learned A.R. at the time of hearing submitted that the learned CIT(A) has passed ex-parte order without affording reasonable opportunity of hearing to the assessee to justify its case with necessary evidence. Therefore one more opportunity of hearing may be given before the CIT(A) to file necessary evidences to prove that the assessee has deducted TDS on 4 & 2671/Mum/2015 M/s. Baweja Movies P. Ltd payments wherever applicable and also in cases wherever there is dispute between the parties regarding payment the assessee has reversed such payments in the subsequent years. The learned A.R. further submitted that the assessee filed various evidences before the AO to justify that the payees have paid tax on the impugned amount in their income tax returns but the AO ignored all evidences filed before him to hold the assessee as assessee in default under Sections 201(1) and 201(1A) of the Act. The assessee is having all details which can be filed before the lower authorities and hence the issue may be set aside to the file of the CIT(A) to decide the issue on merits.

On the other hand, the learned D.R. strongly supported the order of the CIT(A) and submitted that the assessee is non-cooperative for the proceedings before the CIT(A), which is evident from the fact that the CIT(A) has given 10 dates of hearing for which the assessee either and sought adjournment or not attended on the date of hearing. Therefore the CIT(A) is left with no option but to dispose of the appeal on the basis of the material available on record. Therefore there is no reason for the assessee to ask one more opportunity to go before the CIT(A) to file necessary evidences.

We have heard the rival contentions and perused the material available on record. The AO has computed short deduction of tax and interest under Sections 201(1) and 201(1A) of the Act on the basis of admission of the Director of the company during the survey proceedings in statement recorded for which the Director has admitted that by mistake the company has not deducted tax on various payments. This fact is further supported by the report of the Tax Auditor where the Tax Auditor in its audit report has quantified short deduction of tax on various payments. The assessee claimed before the lower authorities that in number or cases it has deducted TDS wherever applicable under the respective provisions of the Act. Further, in some cases where there is a dispute between the parties regarding final payment the assessee has not deducted TDS and also reversed such payments in subsequent financial

Having heard the rival contentions, we found that the CIT(A) has passed the ex-parte order on the basis of the material available on record to uphold the findings of the AO to treat the assessee as assessee in default under Sections 201(1) and 201(1A) of the Act. Although the assessee has not appeared before the CIT(A) when number of opportunities were given, the CIT(A) has not appraised the facts in the light of the written submissions filed by the assessee vide its letter dated 19.02.2015. The CIT(A) has simply upheld the findings of the AO to treat the assessee as assessee in default under Sections 201(1) and 201(1A) of the Act without considering the objections of the assessee with regard to non-applicability of TDS provisions on certain payments and also reversal of certain payments in subsequent financial years. Though there is failure on the part of the assessee in appearing before the CIT(A) on various dates but the CIT(A) could have considered the written submissions filed by the assessee in the light of the observations made by the AO. Since the CIT(A) has upheld the findings of the AO without considering the objections filed by the assessee, we are of the considered view that the issue needs to be re- examined by the AO in the light of the evidences filed by the assessee. Therefore, we set aside the issue to the file of the CIT(A) to decide the issue afresh in the light of the objections filed by the assessee vide letter dated

In the result, the appeals filed by the assessee are allowed for statistical purposes.