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Income Tax Appellate Tribunal, DELHI BENCH “A” BENCH NEW DELHI
Before: SHRI O.P. KANT & SHRI AMIT SHUKLA
PER BENCH:
These aforesaid appeals have been filed by the assessee against separate impugned orders passed by the Ld. CIT (Appeals), Ghaziabad of even date 14.08.2014, in relation to the proceedings u/s 201(1) and 201(1A) r.w.s. 254 for the Assessment Years 2002-03, 2003-04 and 2004-05. Since the issues involved in all the appeals are common arising out of the identical set of facts, therefore, same were heard together and are being disposed off by way of this consolidated order.
For the sake of proper appreciation of facts and issues, the appeal for the A.Y. 2002-03 in ITA No. 6052/Del/2014 are discussed and the
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findings given therein will apply mutatis-mutandis in all the appeals. The grounds raised by the assessee which are common in all the years read as under:- “1) That the CIT (Appeals) ought to have condoned the delay in filing the appeal as there was sufficient cause on the part of the appellant and consequently the dismissal of appeal on account of delay is arbitrary, unjust and illegal. 2) That the CIT (Appeals) ought to have adopted a pragmatic approach in the condonation of delay and consequently the dismissal of appeal on technical ground without considering sufficient cause is bad in law. 3) That in the absence of a show cause notice u/s 201(1)/201(1A) of the Income-tax Act, 1961 (the Act), the assumption of jurisdiction to pass the order u/s 201(1)/201(1A) of the Act is bad in law and consequently the demand created as a result of order dated 8th March 2011 read with order dated 21st April 2005, thereby treating the assessee in default is arbitrary and bad in law. 4) That in the absence of any action taken against the payees or in the absence of any evidence that any demand legally recoverable from payees or is outstanding against the payees, the holding of the appellant as assessee in default and then recovery of the amount determined by the AO, is arbitrary, unjust and bad in law. 5) That without prejudice to the above-mentioned grounds, the authorities below have erred on facts and under the law to hold the assessee in default u/s 201(1) and 201(1A) of the Act, thereby creating demand of Rs.33,819/- is arbitrary, unjust and at any rate very excessive. 6) The above grounds of appeal are independent and without prejudice to one another.”
The above named assessee (through branch manager) is a public sector bank in whose case proceedings u/s 201(1) and 201(1A) was initiated and order was passed on 24.3.2005 levying short charge of tax u/201(1) and interest u/s 201(1A), wherein the Assessing Officer had held that the assessee has failed to deduct tax at source u/s 194A on the interest over Rs. 5,000/- on “Flexi Fixed Deposit Schemes” to
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various persons. The details of interest paid for the three financial years and credited above Rs. 5,000/- without TDS were as under:-
Sl. No. Financial Interest Amount TDS involved Year paid/credited 1 2001-02 1,56,032 15,915 2 2002-03 24,87,277 2,61,164 3 2003-04 31,71,966 38,064
This information was obtained by the Assessing Officer u/s 133(6) and without issuing any show cause notice and any proceeding been conducted in the cases of deductee-assessees had treated the assessee as assessee-in-default. The Assessing Officer relying upon the CBDT’s circular no. 715 dated 8.8.1995, held that the assessee should have deducted tax at source on the interest at the time of deposits and the Flexi Fixed Deposit Scheme is a kind of time deposit and therefore, the assessee was liable for tax u/s 201(1) read with section 194(A).
This mater in the original proceedings had travelled up to the stage of the Tribunal, wherein, Tribunal vide order dated 2.2.2007, at the first instance dismissed the assessee’s appeal for want of COD approval. However, later on, in the Miscellaneous Application filed by the assessee the said order was recalled and in the final order the Tribunal had set aside the order of the Learned CIT(Appeals) for all the three years and restored the same to the file of the Assessing Officer for fresh adjudication after providing reasonable opportunity to the assessee to lead the evidence to effect that, whether the payees have suffered tax in their hands on the said income. In pursuance of the ITAT order, the Assessing Officer required the assessee to furnish details in respect of all the customers to whom interest on Flexi Fixed Deposit was paid during the F.Ys. 2001-02, 2002-03 and 2003-04 were providing the details like name of the payee; amount of interest paid;
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amount of TDS deducted; amount and date of income tax paid by the payee on such interest with the evidence; date of filing of income tax and amount interest u/s 201(1A) due on late payment of tax. In response the assessee could only furnish the details of certain payees for which the Assessing Officer had given due credit and the balance interest payment on which TDS was not deducted he levied tax u/s 201(1) on account of short charge and interest u/s 201(1A) in the following manner:-
Sl Financial Interest Amount TDS Interest u/s Total No. Year paid/credited (-) involved 201(1A) from short interest u/s 201(1) the end of the charge of included in the F.Y. to the date tax & taxable income of the order interest by the assessee 1 2001-02 1,56,032 15,915 17,904 33,819 2 2002-03 24,87,277 2,61,164 2,62,469 5,23,633 3 2003-04 31,71,966 38,064 33,868 71,932
The Learned CIT (Appeals) in his order observed that there was a delay in filing of the appeal by the assessee and the assessee could not prove the reasons for such a delay and accordingly all the appeals were held to be non-maintainable. However, he further proceeded to decide the appeals on merits and thereby confirming the order of the Assessing Officer.
On behalf of the assessee, Branch Manager appeared before us and submitted that in the case of Allahabad Bank for other branch, exactly similar issue has been dealt and decided by the Tribunal in favour of the assessee vide order dated 4.3.2016 in ITA Nos. 5992,
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5993, 5944/Del/2012. Thus, the issue involved is squarely covered by the decision of the Tribunal.
On the other hand the Sr. DR strongly relied upon the order of the Assessing Officer and the Learned CIT (Appeals) and submitted that there was a statutory mandate upon the assessee to deduct the tax at source on the interest payment accrued to the payee on “Flexi Fix Deposits” and failure to do so definitely amounts to assessee being treated as assessee in default and therefore, tax u/s 201(1) and interest u/s 201(1A) has rightly been levied.
We have heard both the parties and also perused the relevant materials on record. First of all, from the perusal of the impugned order, it is seen that the Learned CIT (Appeals) has held that the appeal of the assessee is not maintainable as there is a delay in filing of the appeal but at the same time he has proceeded to decide the appeal on merits. Once the appeal is dismissed on account of delay then there was no occasion or point to decide the appeal on merits and if the appeal has been decided on merits, this inter alia can be inferred that the Learned CIT (Appeals) has condoned the delay as he has not only entertained the appeal but also gone ahead to decide the appeal on merits on which the assessee has denied the liability for tax. Thus, we will confine ourselves on the findings of the Learned CIT (Appeals) on the merits.
Here in this case, on the perusal of the order of the Assessing Officer as well as the Learned CIT(Appeals), nowhere it is borne out, how the Assessing Officer had satisfied himself as to whether the deductee/payee has failed to pay taxes directly. It is only when a finding is arrived in the case of the deductee/payee that he has failed to pay tax directly, then only deductor, i.e., the present assessee can be
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deemed to be the assessee-in-default in respect of such tax and then only proceedings u/s 201(1) and 201(1A) can be initiated. This proposition of law has been explained by the Hon'ble Jurisdictional High Court in the case of Jagran Prakashan Ltd. vs. DCIT (TDS) (2012) 345 ITR 288 (All). The Hon'ble High Court after discussing the issue in detail has observed and held as under:- “A deductor who fails to deduct income-tax at source shall be deemed to be an assessee in default only when the assessee has also failed to pay such tax directly. Thus, there is no occasion to treat the deductor as an assessee in default unless the assessee has not paid the tax directly. The fact that the assessee has failed to pay tax directly is thus, a foundational and jurisdictional fact and only after finding that the assessee has failed to pay tax directly, can the deductor be deemed to be such tax. The Explanation to section 191 of the Income-tax Act, 1961, is confined only to the amount of tax which was required to be deducted. While interpreting the provisions of the charging section of the Income-tax Act and the machinery part both have to be treated as an integrated code. In a case where tax has not been deducted at source, the short deducted tax cannot be realised from the deductor and the liability to pay such tax shall continue to be with the assessee direct, whose income is to be charged and a person who fails to deduct the tax at source, at best is liable for interest and penalty only. Nothing under section 201 can be read to mean that when the tax has not been deducted by the deductor, the tax not deducted can be realised from the deductor. No such provision is made under section 201 obviously because the liability to pay Income-tax is on the
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assessee directly in whose case, the tax has not been deducted.”
If we apply the aforesaid principle of the Hon'ble High Court on the facts of the present case, we find that the Assessing Officer has nowhere given any finding that the deductee/assessee has failed to pay taxes directly and without such finding the Assessing Officer cannot treat the deductor that is, the present assessee as assessee- in-default. This precise issue has been dealt by the Tribunal in the case of Allahabad Bank only for the same assessment year on similar set of facts wherein the Tribunal has observed and held as under:- “Though the impugned order of the AO is after the direction of ITAT, we take note that Hon’ble jurisdictional High Court (Allahabad High Court) has settled the law, in respect to the issue before us in the case of M/s. Jagran Prakashan Ltd. vs. DCIT – 345 ITR 288 (All) held as under:- “……..it is dear that deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly. In the present case, the Income Tax Authorities had not adverted to the Explanation to section 191 nor had applied their mind as to whether the assessee has also failed to pay such tax directly. Thus, to declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that assessee has also failed to pay tax directly. The fact that assessee has failed to pay tax directly is thus, foundational and jurisdictional fact and only after finding that assessee has failed to pay tax directly, deductor can be deemed to be an assessee in default in respect of such tax………” The law in respect of initiation of proceedings u/s 201/201(1A) have been settled only after the aforesaid pronouncement of the order in the year 2012 and the ITAT order in the first round to the Assessing Officer was assessment year back so no we are bound to follow the law laid by the Hon'ble Jurisdictional High Court in M/s. Jagran Prakashan Ltd. (surpa).
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In assessee’s own case in a similar matter the Agra Bench of the Tribunal observed after taking note of the law laid in Jagran Prakashan Ltd. (supra) as under:- “6. It is thus clear that the onus is on the revenue to demonstrate that the taxes have not been recovered from the person who had the primarily liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked. Once all the details of the persons to whom payments have been made are on record, it is for the Assessing Officer, who has all the powers to requisition the information from such payers and from the income tax authorities to ascertain whether or not taxes have paid by the persons in receipt of the amounts from which taxes have not been withheld. As a result of the judgment of Hon’ble Allahabad High Court in Jagran Prakashan’s case (supra), there is a paradigm, shift in the manner in which recovery provisions under section 201(1) can be invoked. As observed by Their Lordships, the provisions of Section 201(1) cannot be invoked and the "tax deductor cannot be treated an assessee in default till it is found that asses see has also failed to pay such tax directly" . Once this finding about the non payment of taxes by the recipient is held to a condition precedent to invoking Section 201(11 the onus is on the Assessing Officer to demonstrate that the condition is satisfied. No doubt the assessee has to submit ail such information about the recipient as he is obliged to maintain under the law, once this information is submitted it is for the Assessing Officer to ascertain whether or not the taxes have been paid by the recipient of income, 'This approach, in our humble understanding, in consonance with the law la id down by Hon’ble Allahabad High Court.” From a reading of the Assessing Officer’s order, it is clear that the Assessing Officer has not made any exercise to ascertain whether the deductee/payee assessee has failed to pay any tax directly before initiation of proceedings u/s 201/201(1A) of the Act, thus assumption of jurisdiction itself stands vitiated and all subsequent proceedings are in the eyes of law. Therefore, we quash the initiation of proceedings of the Assessing Officer at the outset itself. The AO ought to have assumed jurisdictional fact as laid by the
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Hon'ble High Court which as stated before is obviously absent. So, we quash the impugned assessments itself.”
Thus, respectfully following the Coordinate Bench’s decision in the case of the assessee itself, we hold that the proceedings u/s 201(1)/201(1A) has not been validly initiated and therefore, the impugned order u/s 201(1) read with section 201(1A) is bad in law and same is quashed. In the result the appeal of the assessee is allowed.
Admittedly, similar facts are permitting in all the years; therefore, the aforesaid findings will be applicable mutatis mutandis in all the appeals of the assessee. 12. In the result, all the appeals filed by the assessee are allowed.
Order pronounced in the open court on 13th September, 2017.
Sd/- Sd/- (O.P. KANT) (AMIT SHUKLA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER)
Dated: 13/09/2017 Narender Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi
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Date 1. Draft dictated on 13.9.2017 2. Draft placed before author 13.9.2017 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the 15.9.2017 Sr.PS/PS 6. Kept for pronouncement on 7. File sent to the Bench Clerk 15.9.2017 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order.