Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, RAIPUR BENCH, AT PUNE
Before: HON’BLE SHRI RAVISH SOOD & SHRI G. D. PADMAHSHALI
॥ आयकर अपीलीय न्यायाधिकरण, रायपुर न्यायपीठ, पुणे में ॥ (Through Virtual Hearing) IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, AT PUNE BEFORE HON’BLE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपीऱ सं. / ITA No. 105 to 107/RPR/2020 निर्धारण वर्ा / Assessment Year : 2007-08 to 2009-10 M/s Ravi Shree Narayan Transport ACC Main Gate, Jamul Square, Jamul, Bhilai.(C.G.)PAN : ASHFR7461F . . . . . . . अपीऱधर्थी / Appellant बनाम / V/s. Asstt. Commissioner of Income Tax, . . . . . . . प्रत्यर्थी / Respondent TDS, Raipur (C.G.) द्वारा / Appearances Assessee by : Shri S. R. Rao Revenue by : Shri G. N. Singh सुनवाई की तारीख / Date of conclusive Hearing : 22/11/2022 घोषणा की तारीख / Date of Pronouncement : 26/12/2022 आदेश / ORDER Per G. D. Padmahshali, AM The present bunch of appeals is challenged against the consolidated order of Commissioner of Income Tax (Appeals)-II, Raipur [for short “CIT(A)”] passed u/s 250 of Income-Tax Act, 1961 [for short “the Act”], which turned out of consolidated order passed u/s 201(1) & 201(1A) of the Act, by the Asstt. Commissioner of Income Tax(TDS), Raipur [for short “AO”], for three assessment years [for short “AY”] 2006-07 to 2008-09. ITAT-Raipur Page 1 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 2. Since the legal issue involved in these bunch of appeals is identical, with the agreement of both the parties, the matter is heard together for a consolidated order, resultantly the adjudication in lead case ITA/105/RPR/2020 positioned in succeeding paragraphs, shall mutatis mutandis apply to ITA/106 to 107/RPR/2020.
Before travelling to facts, it’s necessary to reproduce the identical grounds assailed by the appellant as; 1. In the facts and in the circumstances of the case and in law, ld. Commissioner of Income Tax (Appeals) has erred in confirming the TDS –Income Tax- demand of Rs. x,xx,xxx/- worked out u/s 201 of the Income Tax Act, 1961 and Interest demand of Rs. x,xx,xxx/- charged u/s 201(1A) of the Act. 2. In the facts and in the circumstances of the case and in law, ld. Commissioner of Income Tax (Appeals) has erred in not applying the law laid down by the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. Vs CIT (2007) 293 ITR 226/163 Taxman 355 (SCC) while sustaining the TDS demand of Rs. x,xx,xxx/- u/s 201 of the Income Tax Act, 1961 and Interest demand of Rs. x,xx,xxx/- charged u/s 201(1A) of the Act. 3. The order of ld. Commissioner of Income Tax (Appeals) is bad in law and facts.
ITAT-Raipur Page 2 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 4. The common facts borne out of records applicable to bunch of appeals, pithily stated are; 4.1 The assessee is partnership firm and assessed to income tax as such, is engaged in the business as transport contractor, whose case was selected for TDS compliance verification on 23/12/2009 under the provisions of chapter XVII of the Act. On the verification of records, the Ld. AO noted that, the appellant has failed to make TDS on the payment of ₹6,75,99,663/- made towards Labour charges, Transportation Charges and Interest/finance charges on unsecured loans for the assessment year 2006-07 to 2009-10, consequently the appellant was put to show notice which remained unattained.
4.2 Following the principle of natural justice, the Ld. AO accorded further opportunity to the appellant, pursuant to which the authorised representative [for short “AR”], made written submission inter-alia confirming firm’s failure to deduct the TDS in certain cases, and in respect to balance transactions able to
ITAT-Raipur Page 3 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 demonstrate the inapplicability of TDS provision to the satisfaction of the Ld. AO.
4.3 Holistically considering the submission of the appellant with respect to Labour Charges & Transportation payments individually not exceeding the celling of ₹20,000/- and collectively ₹50,000/-, and further the payment of interest made to banks, the Ld. AO quantified the amount of Labour charges, Transportation Charges & Interest/Finance charges paid by the appellant without making TDS therefrom (tabulated on Page 2 of the impugned order), held the appellant as ‘assesse in default’ in terms of section 201 of the Act and determined the penalty equivalent of non-deduction of TDS u/s 201(1) and consequential interest u/s 201(1A) of the Act.
4.4 Aggrieved by the aforestated consolidate order, the assessee challenged levy of penalty u/s 201(1) of the Act, before first appellate authority [for short “FAA”] contending that, penalty raised u/s 201(1) of the Act on failure to make TDS on labour and ITAT-Raipur Page 4 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 transportation payment is contra legem as the TDS provisions, following the precedents laid for preceding year by the Tribunal in assessee’s own case are inapplicable. In relation to TDS on finance charges it is submitted that, recipients NBFC’s are regular tax payers and must have incorporated the quantified interest/finance charges in their respective tax returns leaving no scope for tax evasion, consequently liability of TDS stands discharged in the light of decision of Hon’ble Apex Court in “Hindustan Coca Cola Beverages (P) Ltd. Vs CIT” reported in 293 ITR 226 (SC). Insofar as the interest u/s 201(1A) is concerned, the appellant agreed for confirming the same in the light of settled legal position. The said submission did inspire the Ld. FAA who in turn following the precedents deleted the entire demand attributed to non-compliance of TDS with respect to Labour Charges & Transportation charges, however confirmed the entire demand raised u/s 201(1) and 201(1A) of the Act in respect of interest/finance charges payment made by the appellant.
ITAT-Raipur Page 5 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 4.5 Aggrieved by the consolidated order of FAA, the appellant is in appeal before this Tribunal on the grounds set out in para 3 hereinbefore.
During the course of physical hearing, Ld. AR pressing into service the first proviso to section 201(1), r.w.e to section 191 of the Act and decision of Hon’ble Apex Court in “Hindustan Coca-Cola Beverages Pvt. Ltd.” (supra), contended that, the assessee’s liability stands discharged as soon the recipient NBFC’s have disclosed the said receipts as income in their respective returns and paid the taxes due thereon, hence the assessee firm should not be treated as ‘assessee in default’ u/s 201(1) of the Act, and holding so, there leaves no scope for application of section 201(1A) of the Act. Au contraire the learned departmental representative [for short “DR”] submitted that, the levy of penalty u/s 201(1) and interest u/s 201(1A) are consequential, automatic and unprotected by the proviso to section 201(1) of the Act, hence the action of FAA is perfectly justified in confirming the liability towards non- compliance and which need to be withstood as such.
ITAT-Raipur Page 6 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 6. After hearing to the rival contentions of both the parties; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [for short “ITAT, Rules”] perused the material placed on records till the date of conclusive hearing and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue.
The only substantive question to be adjudicated under the present bunch of appeals relates, as to ‘whether default in deducting tax (TDS) on finance charges/interest payment to non-banking financial company/corporation [for short “NBFC”] is sufficient to hold the appellant as an ‘assessee in default’ within the realm of section 201(1) of the Act?’ Conversely ‘whether levy of penalty u/s 201(1) r.w.s. 221(1) of the Act is protected by the first proviso to section 201(1) of the Act?’ and in reaching the answer hereto, it is apt to quote the provision in verbatim which reads as; ―201. Consequences of failure to deduct or pay [(1) Where any person, including the principal officer of a company,— ITAT-Raipur Page 7 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident— (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as maybe prescribed:] Provided [further] that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.
[(1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole ITAT-Raipur Page 8 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,— (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub- section (3) of section 200. Provided . . . . . . .‖ (Emphasis Supplied)
At the outset it is suffice to state that, the proceedings u/s 201 are default proceedings that are instigated only when any default is committed by the person, either in non-deducting tax (TDS), or in not paying the tax (TDS) or in deducting but not depositing or short deduction or short deposit thereof as required by or under the Act. In the event of any such failure the proceedings are launched against the person responsible and an inquiry is conducted and if at the conclusion of such proceedings, it is found that the person responsible for paying any sum has either failed to deduct any tax (TDS) or has failed to deposit the same after its deduction as required by or ITAT-Raipur Page 9 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 under the Act ( i.e. chapter XVII of the Act), then such person is deemed to be an ‘assessee-in default’ with respect to such tax u/s 201(1) of the Act, subject to prescription of explanation to section 191.
In this context, on a plain reading of provision of section 201 aforesaid, it uncloudly inflicts that, a person by a fiction is deemed as an ‘assessee in default’ exclusively for two reasons vis-à-vis occasions such as; firstly when the person fails to deduct tax (TDS) i.e. on failure to deduct the taxes at source and secondly when the person fails to pay the tax (TDS) after such deduction to the credit of ex-chequer as required by or under the Act. Nevertheless, the first proviso appended to section 201(1) of the Act excludes certain person from the application of deeming fiction subject to compliance of certain conditions; however such exclusion does not enumerate both the situations endorsed by section 201(1) of the Act. Nota bene, the exclusion by virtue of first proviso is restricted to first situation or occasion or the category of person that is to say, the person who fails to deduct tax (TDS) and not the latter category of person who after such ITAT-Raipur Page 10 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 deduction of tax (TDS) fails to pay either whole or part of deducted tax (TDS) as required by or under the Act, and such failure de-facto triggers the compensatory provision laid u/s 201(1) and 201(1A) which are inexorable for the said default committed.
Panoramically, in the present impugned case, it remained an undisputed fact that, the appellant failed in deducting the tax (TDS) from the payment of finance charges (interest) paid to three NBFC’s viz; SREI International Finance Ltd., Magma Leasing Ltd., and Tata Motors Ltd. and default continued till case was selected for TDS compliance verification on 23/12/2009 under the provisions of chapter XVII of the Act, consequently the Ld. AO initiated the proceedings u/s 201 of the Act and considering the written representation held the appellant as ‘assessee in default’ in terms of provision of section 201(1) of the Act and quantified the defaulted amount of tax remained to be deducted by an order u/s 201(1) of the Act and consequential compensatory interest u/s 201(1A) of the Act, which remained uncontroverted by the appellant during the ITAT-Raipur Page 11 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 proceedings before TAB as well during this appellate proceedings. It shall be worthy to note that, neither before the TAB nor during the course of present hearing has the appellant placed on record any evidential material to showcase or exhibit a good and sufficient reason led to such default so as to seek pardon from application of provisions of section 201 of the Act.
Thus, in the present case, admittedly there was ex- facie default in deducting tax (TDS) which continued till date, for the reason penalty u/s 201(1) of the Act found enforced against the appellant upon its failure to discharge the liability to deduct & pay coupled with failure to exhibit a good and sufficient reason behind such failure, and levy of interest u/s 201(1A) of the Act found being automatic and without escapement finds force in para 10 of very same decision of Hon’ble Supreme Court in “Hindustan Coca-Cola Beverages Pvt. Ltd.” (supra), which was relied by the Ld. AR and which reads as under; ―10. Be that as it may, the circular No. 275/201/95- IT(B) dated 29.1.1997 issued by the Central Board of Direct Taxes, in our considered opinion, should put an ITAT-Raipur Page 12 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 end to the controversy. The circular declares "no demand visualized under Section 201 (1) of the Income- tax Act should be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under Section 201 (1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty under Section 271C of the Income-tax Act."‖ (Emphasis supplied)
Undisputedly, the appellant has failed to satisfy the Ld. TAB on both counts, firstly that the taxes due on finance charges/interest which appellant failed to deduct have been duly discharged by the deductee-assessee i.e. NBFC’s and secondly there exist a good and sufficient cause for failure to make TDS thereon in terms of second proviso to section 201(1) of the Act. Since the said default in making TDS from the finance charges de jure outside the exclusion carved out by the first proviso to section 201(1) of the Act and the levy of interest u/s 201(1A) thereon being automatic, finds no shelter, for the reasons the orders of Ld. TAB on the subject matter found flawless, and needs to be sustained. ITAT-Raipur Page 13 of 14
M/s Ravi Shree Narayan Transport ITA No. 105 to 107/RPR/2020 AY: 2007-08 to 2009-10 13. In view of the aforesaid discussion, we find no merit in the grounds raised by the appellant; consequently there remained no iota of doubt in confirming the consolidated order appealed against in pleno, ergo ordered accordingly.
The, adjudication laid herein ITA No 105/RPR/2020 shall mutatis mutandis apply to ITA No 106-107/PRP/2020, thus derivably stands adjudicated against the appellant.
Resultantly, the bunch of appeals of the appellant assessee is dismissed in aforestated terms. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this MONDAY 26th Day of December, 2022.
-S/d- -S/d- RAVISH SOOD G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / PUNE ; दिन ांक / Dated : 26th Day of December, 2022. आदेश की प्रधिधलधपअग्रेधिि / Copy of the Order forwarded to : 1.अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT-II, Raipur (C.G.-India) 4. The CIT(A)-II, Raipur (C.G.-India) 6. ग र्डफ़ इल / Guard File. 5. DR, ITAT, Raipur Bench, Raipur. आिेश नुस र / By Order, वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय न्य य दिकरण, पुणे / ITAT, Pune.
ITAT-Raipur Page 14 of 14