CHIEF MUNICIPAL OFFICER, NAGAR PALIKA,PITHAMPUR vs. ITO, DHAR
Facts
A TDS survey was conducted on the assessee, Nagar Palika, Pithampur, to verify TDS compliances. Discrepancies were found, leading to notices under Section 201(1)/(1A) of the Income-tax Act. The Assessing Officer (AO) passed an order creating a demand for TDS and interest. The assessee appealed to the CIT(A) but did not succeed.
Held
The tribunal observed that the assessee had deducted tax at a lower rate than prescribed under Section 194J for professional services. The lower authorities confirmed the demand due to non-compliance and lack of evidence from the assessee. However, considering the principle of natural justice and the assessee's submission that it is a local authority that did not get a proper opportunity, the matter was remanded.
Key Issues
Whether the assessee was rightly treated as an assessee in default for short deduction of TDS under Section 194J and whether the lower authorities provided a reasonable opportunity of being heard.
Sections Cited
201(1), 201(1A), 194J
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first-appeal bearing DIN: ITBA/APL/S/250/2024-25/1074785141(1) dated 20.03.2025 passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT(A)-8, Mumbai [“CIT(A)”] which in turn arises out of order dated 28.02.2023 passed by learned ACIT, TDS, Indore [“AO”] u/s 201(1)/(1A) of Income-tax Act, 1961 [“the Act”] for Financial Year 2015-16 relevant to Assessment-Year 2016-17, the assessee has filed this appeal on following grounds:
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“1. On the facts and circumstances of the case and applicable law Ld. CIT(A) erred in sustaining the order passed by Ld. AO under section 201(1)/201(1A) which is contrary to the material on records and provisions of the Act, unjust and bad in law. 2. On the facts and circumstances of the case and applicable law, Ld. CIT(A) erred in sustaining the order passed w/s 201(1)/201(1A) without providing a reasonable opportunity of being heard 3. On the facts and circumstances of the case and applicable law, Ld. CIT(A) erred in treating the assessee in default within the meaning of section 201(1) for short deduction of TDS u/s 194J for an amount of Rs. 4,36,013. 4. On the facts and circumstances of the case and applicable law Ld. CIT(A) erred in treating the assessee in default within the meaning of section 201(1) for short deduction of TDS u/s/194J for an amount of Rs. 4,36,013 and thereby levying an interest u/s 201(1A) of Rs. 3,91,495. 5.The appellant craves leave to add, amend alter otherwise raise any other ground of appeal.”
The background facts leading to present appeal are such that a TDS
Survey was conducted by Income-tax authorities on 24.10.2019 in the
premise of Nagar Palika, Pithampur, Dhar to verify TDS compliances out of
certain payments wherein certain discrepancies were observed. Subsequent
to survey, the AO issued notices u/s 201(1)/(1A) to assessee. Ultimately, the
AO passed order dated 28.02.2023 u/s 201(1)/(1A) creating a total demand
of Rs. 8,27,509/- [consisting of TDS + Interest uptill the date of passing
order]. Aggrieved, the assessee carried matter in first-appeal but did not get
any success. Now, the assessee has come in next appeal before us.
Ld. AR for assessee at first carried us to following para of order passed
by AO:
“In view of the provisions of Section 194J of the Act, tax was deductible on payments for such services u/s 194J of the Act @ 10%. However, the
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assessee has deducted tax @ 1%/2%. During proceedings u/s 201(1)/201(1A) of the Act for F.Y. 2015-16, assessee neither filed any submissions in this regard nor substantiated deduction of tax @ 1%/2% on aforementioned planning, designing, DPR work, Candidate training etc. services, being professional services, by the above persons. Thus, it is concluded that assessee has no explanation whatsoever to offer in relation to non-deduction of TDS @ 10% u/s 194J of the Act on professional services provided by the above persons for financial year under consideration.” 4. Thereafter, Ld. AR carried us to following paras of order passed by
CIT(A):
“5.1. In the instant case, total non-compliance on the part of the appellant leaves me with no option other than to decide the appeal ex-parte, on merits of the case. No supporting documents/eviderice produced by the appellant during the course of proceedings before the AO as well as appellate proceedings. The burden of proof is always on the person who makes the claim. In this case, it is the appellant who has made the claim by filing the appeal was supposed to furnish documentary evidence in support of his claim. The appellant has not availed any opportunity to do so. 5.4 I have perused the impugned order order u/s 201(1)/ 201(1A) of the Act dated 28.02.2023. The appellant has not furnished any submissions in support of the grounds of appeal during the appellate proceedings. Taking into account the entire conspectus of this case, I see no reason to disturb the categorical findings of the assessing officer and thus, the order passed by the AO in question is hereby confirmed. 6. In the end result, the appeal is DISMISSED. Order passed under section 250 read with section 251 of the Act.” 5. Ld. AR next submitted that the assessee is a local authority working
as a wing of Govt. for statutory functions and the assessee was not able to
make representation before lower authorities and that is why the lower-
authorities have passed ex-parte orders. However, the assessee is ready and
willing to make a proper representation before AO if an opportunity is given
and prays that the present matter should be remanded to the file of AO for a
fresh adjudication after hearing assessee.
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Ld. DR for revenue agrees with the prayer of Ld. AR but makes a
request to direct the assessee to represent his case before AO and do not
seek unnecessary adjournments.
In view of above submissions of parties; having regard to the principle
of natural justice and also bearing in mind that no prejudice would be
caused to revenue if the present matter is restored at the level of AO, we
remand this matter back to the file of AO for adjudication afresh, at the risk
and responsibility of assessee. The AO shall give necessary opportunity of
hearing to assessee and pass an appropriate order uninfluenced by his
earlier order. The assessee is also directed to remain vigilant and ensure
participation in the hearings as may be fixed by AO and do not seek
unnecessary adjournments failing which the AO shall be at liberty to pass
appropriate order in accordance with law. Ordered accordingly.
Resultantly, this appeal is allowed for statistical purpose.
Order pronounced in open court on 27/02/2026
Sd/- Sd/-
(PARESH M. JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore
िदनांक/Dated : 27/02/2026 Patel/Sr. PS
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Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYSr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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