2018 (5) TMI 1958 - AT - Income Tax

Denial of exemption u/s 10(5) read with Rule 2B - reimbursement of Leave Travel Concession involving foreign leg through circuitous route as long as the employees designated place is in India for his leave travel concession and he actually visits the place as designated and the bank has not paid any amount for foreign tour which has been undertaken by the employee from his own pocket - HELD THAT - We find that before the AO assessee has taken stand that assessee is not liable to deduct the TDS on payment of Leave Travel Concession which include the foreign travel and this stand was not accepted by the AO. Before the AO assessee has not raised any plea with regard to the payment of taxes on the receipt of such Leave Travel Concession by the employees/recipient. In such type of situation, where the assessee has not placed the relevant information with regard to the recipient/employees for payment of tax on such receipts of Leave Travel Concession the onus cannot shifts upon the Assessing Officer. As carefully examined the orders of the Tribunal in the case of Aligarh Muslim University and Branch Manager Allahabad Bank 2017 (8) TMI 278 - ITAT AGRA and we find that in those cases Tribunal has held that where the relevant information is placed before the AO, AO is required to make necessary verification and without establishing that the recipient of such payment has not offered it to tax the assessee cannot be held to be in default. Since the assessee has not placed such information before the AO, we are of the view that AO is not under the obligation to make such enquiries without having the basic information. Therefore, we are of the view that let this matter go back to the AO for making a necessary verification with regard to payment of tax of such receipt by the recipient. We, accordingly, set aside the order of the CIT(A) and restore the matter to the AO with the directions to re-adjudicate the issue afresh after affording an opportunity of being heard to the assessee in the light of the aforesaid order of the Tribunal. The assessee is also directed to place all relevant information with regard to the recipient of such payments before the AO. Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues Involved:
1. Denial of exemption under section 10(5) for reimbursement of Leave Travel Concession involving foreign leg.
2. Treatment of the bank as an "assessee in default" for alleged non-deduction of TDS on reimbursement towards Leave Travel Concession.
3. Direction to produce necessary evidence of employees' returns to the Assessing Officer.
4. Confirmation of the action of Tax Officer to levy interest under section 201(1A) of the IT Act.

Issue 1: Denial of exemption under section 10(5) for reimbursement of Leave Travel Concession involving foreign leg:
The assessee appealed against the order of the CIT (A) denying exemption under section 10(5) for reimbursement of Leave Travel Concession involving foreign leg through a circuitous route. The contention was that as long as the employee's designated place is in India for the leave travel concession and the employee actually visits the designated place, and the bank has not paid any amount for the foreign tour, the exemption should apply. The Tribunal noted that the primary onus is on the assessee to provide relevant information and evidence regarding the payees' tax compliance. Since the assessee failed to furnish such information, the AO's finding that the assessee is in default for non-deduction of TDS was upheld. The Tribunal directed the matter back to the AO for necessary verification with directions to the assessee to provide all relevant information about the recipients of such payments.

Issue 2: Treatment of the bank as an "assessee in default" for alleged non-deduction of TDS:
The assessee contended that the bank should not be treated as an "assessee in default" for alleged non-deduction of TDS on reimbursement towards Leave Travel Concession. The Tribunal emphasized that without establishing that the recipient did not offer the payment to tax, the AO cannot hold the payer in default. However, since the assessee did not provide necessary information about the payees' tax compliance, the AO's finding of default was deemed proper. The Tribunal set aside the CIT (A)'s order and instructed the AO to re-adjudicate the issue after receiving all relevant information from the assessee.

Issue 3: Direction to produce necessary evidence of employees' returns to the Assessing Officer:
The CIT (A) directed the assessee to produce evidence of employees' returns to the AO, which the assessee argued was unnecessary as the AO could collect such evidence from the income tax department based on the information already provided. The Tribunal noted that the assessee failed to provide relevant information about the payees' tax compliance, shifting the onus back to the assessee. The order of the CIT (A) was set aside, and the matter was sent back to the AO for re-assessment.

Issue 4: Confirmation of the action of Tax Officer to levy interest under section 201(1A) of the IT Act:
The Tribunal also addressed the confirmation of the Tax Officer's action to levy interest under section 201(1A) of the IT Act. The Tribunal found that the AO's decision was based on the lack of relevant information provided by the assessee regarding the payees' tax compliance. Consequently, the appeal of the assessee was allowed for statistical purposes, and the matter was remanded back to the AO for re-assessment based on the directions provided.

In conclusion, the Tribunal's judgment focused on the assessee's failure to provide necessary information regarding the tax compliance of the payees, leading to the confirmation of the AO's findings and the direction for re-adjudication with the provision of complete information.