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2007 (12) TMI 309 - AT - Income TaxAssessee in default u/s 201(1)/201(1A) - TDS deduction liability u/s 194A - Non-Banking Financial Co. (NBFC) - Jurisdiction while passing the order under section 201(1)/201(1A) - HELD THAT:- We are unable to agree with this contention of the learned counsel. As per section 201(1) before amendment by Finance Act, 2002, if any such person fails to deduct or after deducting fails to pay the tax as required by Income-tax Act, he shall be deemed to be an assessee in default in respect of the tax. Any such person means the person who is required to deduct the tax at source as per the provisions of sections 192 to 196D of the Act. Therefore, in our opinion, even prior to amendment by Finance Act, 2002 in section 201(1), if the assessee fails to deduct the tax as required by the Income-tax Act or after deducting fails to pay the tax as required by section 200 of the Act, he can be treated to be the assessee in default in respect of such tax under section 201(1) of the Act. In our opinion, the jurisdiction of each TDS authority is restricted to the territorial area allotted to him by the Chief Commissioner or the Commissioner of Income-tax, who has designated him the TDS Officer. Thus, the second limb of argument of the assessee’s counsel is accepted and the order of the ITO (TDS), Kolkata, so far it pertained to payments made outside his territorial jurisdiction is vacated. Failure to deduct TDS - We find that the ITO (TDS) in the order under consideration has not given a specific finding based on material particulars about the violation of section 194A. His finding is based upon presumption. He has not given the names of the persons and the interest paid to them on which the assessee has failed to deduct the tax. In this case originally the ITO (TDS) vide his order dated 24-6-1996 held the assessee to be in default for not deducting the tax from interest paid to deposit holders on presumption and worked out assessee’s liability on estimated basis. The matter was set aside by the ITAT. However, in the order giving effect to the order of the ITAT, again the ITO (TDS) has worked out the assessee’s liability of TDS on the basis of estimate and presumption. Without giving the particulars with regard to the name of the person and the interest paid to him, in our opinion, the assessee cannot be held to have violated the provisions of section 194A merely on the basis of presumption and suspicion. It has been contended by the Ld. DR that the assessee has not furnished the required particulars despite number of opportunities having been allowed by the ITO (TDS). In contrast it has been explained by the assessee’s learned counsel that the complete particulars relating to Head Office and 7 branches falling within the territorial jurisdiction of the concerned ITO (TDS) have been furnished. Without going to the controversy whether the assessee has furnished the required particulars or not, in our opinion, even if the assessee has not furnished the details or necessary particulars, the ITO (TDS) can take necessary steps to ensure the furnishing of particulars and can also penalize the assessee in accordance with law if the assessee failed to comply with the notices issued by him. However, the absence of particulars will not authorize him to presume the default of the assessee under section 194A so as to entitle him to take action under section 201(1) and 201(1A) of the Act. The assessment year involved is 1994-95, (i.e., relating to financial year 1993-94) which is more than 13 years old. Thus, in our considered opinion, there is no justification for setting aside the matter again to the file, of the ITO (TDS) for second time. Considering the totality of the facts and circumstances of the case, we hold that ITO (TDS) was not justified in holding the assessee to be in default under section 201(1) of the Act for financial year 1993-94, i.e., relating to AY 1994-95. Accordingly, the order passed under section 201(1) for AY 1994-95 is cancelled. Consequentially the order levying interest thereon under section 201(1A) of the Act is also cancelled. In the result, appeal by the assessee is allowed and that by the revenue is dismissed.
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