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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. BILLAIYA
Instant appeal by the assessee is directed against the order dated 15th January 2014, passed by the learned Commissioner (Appeals)–16, Mumbai, for the assessment year 2009–10.
Following grounds have been raised by the assessee:–
“GROUND I: 1. On the facts and in the circumstances of the case in law, the Ld. CIT(A) erred in confirming the order of the AO in treating the Appellant as "assessee in default" on short deduction of WOCKHARDT HOSPITALS LTD. 2 tax deducted as source without appreciating the facts that the recipient/payee would have already paid taxes on their income and recovering the same again from the Appellant amounts to recovery of tax twice.
2. The CIT(A) failed to appreciate and ought to have held that once the basic information like declaration from the recipients, PAN and income tax acknowledgement number of the recipients are given, the onus to verify whether the recipients have paid taxes on their income shifted to the Department.
3. The Appellant prays that it be held that the Appellant is not 'assesse in default'. Alternatively, the AO he directed to verify, on the basis of declaration, whether the recipients have paid taxes on their income and pass an appropriate order. GROUND II:
1. 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the order of the AO in holding the Appellant as "assessee in default" under section 201 of the Act and thereby levying the interest under section 201(1A) of the Act.
2. The Appellant prays that the interest levied under section 201(1A) of the Act be deleted or be appropriately reduced.”
As far as ground no.1 is concerned, briefly stated the facts are, on verification of TDS statement filed by the assessee in form no.26Q for the first quarter of the financial year 2008–09, the Assessing Officer found that the assessee has made short deduction of tax at source by not deducting tax at appropriate rate. As per the information available with him, the Assessing Officer quantified the short deduction of TDS at ` 42,02,940. He, therefore, passed an order under section 201(1) and 201(1A) of the Act, demanding tax of ` 42,02,940 and interest of ` 14,71,160. Being aggrieved of such order of the Assessing
WOCKHARDT HOSPITALS LTD. 3 Officer, assessee preferred appeal before the learned Commissioner (Appeals).
Before the first appellate authority, challenging the order of the Assessing Officer in treating the assessee as “assessee in default”, it was pleaded by the assessee that the short deduction of tax was on account of the fact that the assessee instead of deducting tax @ 22.66% as applicable to corporate has applied the rate of 11.33% applicable to non–corporate. It was submitted, such short deduction of tax is in respect of two recipients i.e., G.E. Capital Services India and DSP Merrill Lynch Capital Ltd. However, as both these recipients have given declaration stating that they have filed their return of income for the relevant financial year declaring the amount received as income and paid taxes therefore, the assessee cannot be treated as an assessee in default under section 201(1) and no demand for recovery of the taxes for alleged short deduction can be raised. In support of such contention, assessee also submitted the confirmation / declaration received from two recipients in respect of whom there was short deduction of tax. The learned Commissioner (Appeals), after considering the submissions of the assessee and perusing the confirmation / declaration of the recipient companies observed that the onus is on the assessee to satisfy the TDS officer that taxes have been duly paid by the deductees. He observed, the declaration /
WOCKHARDT HOSPITALS LTD. 4 confirmation issued by both the companies do not specify whether they have paid taxes on the amount received from the assessee and, if so, the date of payment. He, therefore, upheld the action of the Assessing Officer in treating the assessee as an assessee in default and raising the demand under section 201(1) of the Act.
The learned Counsel for the assessee reiterating the stand taken before the learned Commissioner (Appeals), submitted, the assessee having furnished confirmation / declarations from both the recipients to the effect that they have shown the amounts received in the return of income filed by them for the assessment year under consideration, there is no justification to treat the assessee as an assessee in default under section 201(1) of the Act. The learned counsel drawing our attention to the confirmation letters issued by G.E. Capital Services India and DSP Merrill Lynch Capital Ltd. (the deductees) submitted that the confirmation letters would make it clear that amounts received from the assessee were declared as income in the return of income filed by them for the assessment year 2009–10. He submitted, when the deductees have declared the income / receipts on which there was short deduction of tax in their return of income for the assessment year under dispute, the assessee cannot be treated as an assessee in default under section 201(1) as per the decision of the Hon'ble Supreme Court in Hindustan Coca Cola Beverage (P.) Ltd. v/s
WOCKHARDT HOSPITALS LTD. 5 CIT, [2007] 293 ITR 226 (SC). Further, learned counsel submitted, if the Assessing Officer still had any doubt with regard to the fact, whether the receipts subject to deduction of tax has been declared as income in the return of income filed by the deductee and taxes were paid thereon, it is for the Assessing Officer to exercise his powers conferred on him and can get the fact verified on the basis of details furnished by the assessee. In this context, he relied upon the decision of the Tribunal in case of Vodafone Essar Ltd. v/s DCIT, [2011] 45 SOT 82 (Mum.). He, therefore, pleaded for restoring the matter back to the file of the Assessing Officer to verify the claim of the assessee by making necessary enquiry.
Learned Departmental Representative relied upon the order of the learned Commissioner (Appeals).
We have considered the submissions of the parties, perused the material available on record and the case laws cited by the learned counsel. Undisputedly, it is a case of short deduction of tax at source and not non–deduction of tax at source. As could be seen from the facts on record in respect of two recipient viz. G.E. Capital Services India and DSP Merrill Lynch Capital Ltd., assessee has deducted tax @ 11.33% instead of 22.66% by treating them as non–corporate entities. However, it is the specific plea of the assessee that both the aforesaid recipients have declared the amounts received as income in the return
WOCKHARDT HOSPITALS LTD. 6 of income filed for the assessment year under consideration and paid taxes. In this context, assessee has filed before the Departmental Authorities confirmation letters issued by both the recipients. Assessee has also furnished before the Departmental Authorities the assessment details of both the recipients along with their Permanent Account Number. As could be seen from the order of the learned Commissioner (Appeals), though, he does not deny the fact that assessee has furnished confirmation from both the recipient companies but he has rejected assessee’s claim by stating that confirmation letters do not specify whether taxes have been paid on the amount received and, if so, the date of payment of tax. In our view, the decision of the learned Commissioner (Appeals) is unacceptable. On a perusal of the confirmation letters, it is clearly evident that both the recipient companies have admitted the fact that the amount received from the assessee which were subject to deduction of tax at source have been shown by them in the return of income filed by them for the assessment year 2009–10. That being the fact, keeping in view the principle laid down by the Hon'ble Supreme Court in Hindustan Coca Cola Beverage (P.) Ltd. (supra), assessee cannot be treated as an assessee in default under section 201(1). If the Assessing Officer had any doubt with regard to the claim of the assessee that deductees have shown the receipts as income and paid taxes thereon, he could have made necessary enquiry as all necessary details relating to the WOCKHARDT HOSPITALS LTD. 7 deductee with their assessment jurisdiction have been furnished by the assessee before the Departmental Authorities. Without doing so, Assessing Officer cannot fasten the liability on assessee. The Tribunal, Mumbai Bench, in Vodafone Essar Ltd. (supra), has observed as under:– “34. ……. However, the question is whether as a fact it has been established that the payees have included the income in their returns and paid taxes thereon. This requires factual verification. We are, however, unable to share the view of the CIT(A) that the onus is entirely on the assessee to prove that the taxes have been paid by the payees. It is true that the onus is initially on the assessee who takes up the plea but when sufficient details which would enable the Assessing Officer to verify the factual position have been filed before the Assessing Officer it was for the Assessing Officer, with his vast powers, to invoke them and have the details furnished by the assessee verified. In the present case the assessee has furnished the Permanent Account Numbers of nineteen parties and letters of confirmation have been filed from eight of them before the CIT(A). The Permanent Account Numbers would facilitate an enquiry to be made by the Assessing Officer from the Assessing Officers assessing the payees. It is also to be noted that from eight out of the nineteen parties the assessee has also furnished letters of confirmation. The assessee would appear to have done what it could under the circumstances and it would be a somewhat extreme position to take if it is argued that the burden is entirely upon the assessee. The assessee, it must be remembered, is dealing with its competitors, i.e., the other service providers, who may not be willing to part with their accounts and the details regarding their tax payments or returns of income to the assessee except confirming that the taxes have been paid. But when their Permanent Account Numbers are made available to the Assessing Officer, it would not be unreasonable on the part of the assessee to ask the Assessing Officer to have the payments verified from the records of the Assessing Officers within whose jurisdiction the payees are assessed. We are, therefore, unable to appreciate or uphold the decision of the CIT(A) placing the onus entirely on the assessee and in refusing to accept the plea that the taxes cannot be recovered twice in respect of the same income on the ground of inadequate evidence. In our view, the CIT(A) ought to have directed the Assessing Officer to invoke his powers under the Act and have the payment of taxes by the payees verified from the respective Assessing Officers assessing the payees with the help of the WOCKHARDT HOSPITALS LTD. 8 Permanent Account Numbers of the payees made available by the assessee. We direct the Assessing Officer to do so. If upon verification it is found that the taxes have been paid by the payees fully in respect of the roaming charges received by them from the assessee, nothing survives. In such an event no taxes can be recovered from the assessee and the assessee cannot be treated to be in default. The issue is, accordingly, restored to the Assessing Officer with the above directions.”
Respectfully following the aforesaid observations of the co– ordinate Bench of the Tribunal, we direct the Assessing Officer to verify whether taxes have been paid by the payees in respect of the amount received by them from the assessee and if upon such verification it is found that the deductees have paid tax on the amount received by them from the assessee cannot be treated as an assessee in default. This ground is allowed for statistical purposes.
In ground no.2, assessee has challenged levy of interest under section 201(1A) of the Act.
Having heard the parties, we are of the view that as far as assessee’s liability to pay interest under section 201(1A) is concerned, the same will remain irrespective of the fact whether the deductee have shown the amount received as income and paid tax thereon. As held by the Hon'ble Supreme Court in Hindustan Coca Cola Beverage (P.) Ltd. (supra), assessee is liable to pay interest under section 201(1A) till the date of payment of taxes by the deductees on the WOCKHARDT HOSPITALS LTD. 9 income received by them from the deductor assessee. This ground is, therefore, dismissed.
In the result, assessee’s appeal stands partly allowed for statistical purposes. Order pronounced in the open Court on 5th January 2016