TMI Blog2012 (7) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... ght on record as to whether the said request was rejected or accepted by the AO. It is well settled that nobody should be condemned unheard as per the maxim “audi alteram partem. Reasonable time for opportunity of being heard was required to be given to the assessee as the AO decided the issue in haste and the time allowed to the assessee was not sufficient, particularly when an adjournment was sought by the ld. counsel for the assessee for 05.01.2012 - the orders u/s. 201(1) & 201(1A) have been passed on 30.12.2011, even when the present case was not a time barring case where orders were to be passed within a short period - thus, it is advisable set aside the impugned order and remand the same to the file of AO for fresh adjudication in accordance with law, after providing due and reasonable opportunity of being heard to the assessee - in favour of assessee for statistical purposes. - ITA Nos. 369 to 371/Bang/2012 - - - Dated:- 25-5-2012 - SHRI N.K. SAINI, SMT. P. MADHAVI DEVI, JJ. Appellant by : Shri K.R. Pradeep, C.A. Respondent by : Shri S.K. Ambastha, CIT-I (DR) O R D E R Per N.K. Saini, Accountant Member These three appeals filed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich may be submitted during the course of hearing of this appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered. 4. From the above grounds, it is clear that the grievance of the assessee relates to action of the ld. CIT(A) in confirming the action of the Assessing Officer holding the assessee as assessee in default u/s. 201(1) Income-tax Act, 1961 [hereinafter referred to as the Act in short ] and the interest levied u/s. 201(1A) of the Act. Apart from that, the grievance of the assessee is that sufficient and adequate opportunity of being heard was not provided to the assessee which violated the principles of natural justice. 5. The facts of the case in brief are that the assessee company is engaged in the business and operating as a schedule passenger airline in India. A survey u/s. 133A of the Act was conducted in the assessee s premises on 18.03.2011 in order to verify TDS compliance. According to the Assessing Officer, the said survey revealed that the assessee was not remitting the taxes deducted at source by it to Government s account within the due dates as prescribed in the Act. The AO during the course of verification of TDS com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g an order overlooking and without considering the TDS remittances made to the account of central government by the appellant. 4.2. Interest u/s 201(1A) is compensatory in nature, therefore cannot be charged after the date from which the payee / deductee has deposited the tax, apparently this aspect has not been considered in the orders. Hence, the appellant prays that interest U/S-201(1A), if any, requires to be restricted to till the date of payment of taxes by the payee / deductee. 4.3. The assessee is suffering from severe financial crunch and its operations have become strained. These aspects are known to the department and the same has been communicated voluntarily by the assessee at periodical intervals. From the order passed by the A.O it is not known whether the financial strain has been considered before passing the order. The various Courts have held that the penal provisions under the IT Act can be invoked only in the absence of existence of reasonable cause or absence of good and sufficient reasons. No person can be declared as assessee in default unless the A.O is satisfied based on the objective reasons that the conditions U/S-201(1) and 220(1) are attracted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e passing their respective orders. It was contended that the due date for deduction of tax at source arises on payment of salary and not on credit, however the assessee was treated as assessee in default u/s. 201(1) of the Act overlooking the payment of TDS and taxes paid directly by the recipients. It was further contended that the interest u/s. 201(1A) is compensatory, therefore the taxes paid by the deductee/payee has to be reckoned while quantifying the interest and that the quantification of interest in respect of non-salary payments has to be as per rule 30 of the Income-tax Rules, 1962. It was also contended that the order passed by the AO is without jurisdiction because the income-tax authority for TDS payment and subsequent process/proceedings is notified as Director General of Income Tax (System)/NSDL. It was further submitted that w.e.f. 1.4.2010 new provision has been incorporated in the form of section 200A(1)(d) of the Act wherein new procedure for quantifying the payment has been prescribed and the new procedure outlines the following steps before any recovery steps are taken against the assessee:- Step-1. Section 200 (1) Any person deducting any sum in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uantified in assessee s case was against the provisions of Income-tax Act and therefore requires to be quashed. It was contended that the assessee requested for an adjournment by writing a letter dated 19.12.2011, but no response was given by the AO to the said letter. It was further contended that the notice for hearing on 26.12.2011 was received by the assessee on 29.12.2011, however the AO without verifying the service of notice on the assessee passed the order on 30.12.2011, therefore proper opportunity of being heard was not given to the assessee, which is against the principles of natural justice. It was also contended that the AO alleged that certain information were called for, however nothing is mentioned in his order, what were the informations called for, as such the order passed by the AO as well as the ld. CIT(A) without giving proper opportunity of being heard is violation of principles of natural justice. It was stated that the tax authorities have not mentioned under which section of the Act, the TDS was to be deducted, therefore the assessee has arbitrarily been declared as assessee in default , particularly when nothing was brought on record that the assessee acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on tax deducted under Chapter XVII of the Act, which was required as per the provisions of section 200(3) of the Act. It was further contended that the assessee had deducted, but not paid to the Government account the amount of tax detailed in the relevant orders passed u/s. 201(1) 201(1A) of the Act. It was stated that the above facts were mentioned by the AO having jurisdiction over the TDS provisions over the assessee that the assessee company had not filed the statement u/s. 200(3) of the Act, tax deducted and paid to the Government account and the TDS returns u/s. 206(1) of the Act. 14. It was further contended that in the present case the assessee had liability to pay to the Government account a substantial amount of tax actually deducted under various provisions of Chapter XVII-B of the Act which was evident from the details furnished by the assessee itself on 18.03.2011 during the course of survey and that the tax audit report also revealed the defaults of payment in illustrative manner, therefore the assessee was in default in terms of the provisions contained in section 200 of the Act and not an assessee deemed to be in default in terms of failure to deduct tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d TDS merely because any frivolous and farcical appeal had been filed on flimsy grounds, as such the AO cannot be prevented for recovering the deducted amounts on the bogus pretext and non-filing of TDS returns u/s. 206 of the Act, recourse to section 191 of the Act and pending verification of survey u/s. 197 of the Act. Ld. CIT(DR) submitted that there is no bar under the Income-tax Act to pass an order before the end of financial year or pass multiple orders u/s. 201(1) of the Act for the same assessment year and that the tax collected on behalf of the Central Government cannot be retained beyond a prescribed time of payment and corresponding deduction/collection of tax irrespective of the liability u/s 201(1A) of the Act. Therefore, a defaulter u/s. 201(1) of the Act cannot take refuge of appeals and litigations and use the appellate machinery to continue refusing to pay and delaying the payment of collected tax and diverting such amounts for its business or other purposes. It was further submitted that the Central Government cannot be a perceived or presumed partner of the assessee in its business venture or misadventure, whether in profit or loss, therefore extra caution have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01(1) dated 30.12.2011 nor any adjournment was sought. However it was admitted that notice dated 13.12.2011 was faxed to the assessee company and Shri K.R. Pradeep, C.A., fixing the date for 19.12.2011 and Shri K.R. Pradeep, C.A. sought adjournment vide letter dated 19.12.2011 for 05.01.2012 without any Power of Attorney. The ld. CIT(DR) submitted that the assessee was given ample opportunities to pay the deducted taxes as per section 200 of the Act and avoid proceedings u/s. 201(1) of the Act. It was further submitted that after the proceedings u/s. 201(1) of the Act, no notice is statutorily prescribed and in case of nonpayment of deducted tax such action is automatic. It was further stated that the order u/s. 201(1) of the Act is not an assessment order determining the liability through protracted proceedings, but a penal provision and the liability to pay the deducted tax is not the penalty amount nor the order is a penalty order. Reliance was placed on the judgment of Hon ble jurisdictional High Court in the case of Mittal Steel Ltd. 240 ITR 707 (Kar). It was further stated that the assessee was admittedly in default of payment of deducted tax and for that purpose opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of M/s. Intel Tech India Pvt. Ltd. 55 DTR 173 (Kar), the assessee deductor disputed the liability to deduct or pay where the deductee had filed the return and paid the taxes on its income and that in the another decision relied by the ld. counsel for the assessee in the case of Commissioner of Wealth-tax v. Kantilal Manilal 152 ITR 447 (SC), the decision by the Hon ble Supreme Court was rendered in the context of section 2(m)(iii) of the Wealth-tax Act, where it was held that the tax liability which was to be reduced from the net wealth, could only be done after the end of previous year and determination of tax liability, so the facts were not similar to the facts of the assessee s case. 20. It was further stated that in case of non-deduction, the assessee may dispute the very application of TDS provisions and claim the bona fide belief that tax was not deductible and may also take shelter of section 191to challenge the action u/s. 201(1) of the Act, however, no such dispute arises when tax has been admittedly deducted and not paid. Therefore in such cases of default, even the order u/s. 201(1) of the Act was not required to hold the assessee in default, through a process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27.09.2007. It was further stated that section 200A of the Act introduced by the Finance Act, 2009 w.e.f. 1.4.2010 is merely a procedural section to streamline the process of quarterly statements filed u/s. 200(3) of the Act in the computerized set-up and institutionalize the practice already in existence since 01.04.2005 with regard to electronic filing of TDS statements and returns, processing thereof and issue of refunds in TDS cases. The same is comparable to the introduction of section 139B/C/D of the Act by the Finance Act, 2006 for e-filing of returns of income and that of section 143(1) to 143(1C) by the Finance Act, 2008 for processing of such returns by CPC, which in turn does not confer any jurisdiction of assessment and recovery to CPC. It was further stated that rules 31A and 37A of the Income-tax Rules, 1962, as it existed prior to their substitution by new rule 31A w.e.f. 01.04.2010 already had prescribed rules for e-TDS quarterly statements and TDS returns to be filed with NSDL. The new rule 31A only empowers the DGIT (Systems) to specify the procedures, formats and standards for furnishing the statements u/s. 200(3) of the Act in place of CBDT and to administer the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the prescribed time, prepare such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed. 27. From the above provisions, it is clear that any person being an employer referred to in sub-section (1A) of section 192, i.e., any person responsible for paying any income in the nature of perquisites which is not provided for by way of monetary payment, referred to in section 17(2) of the Act, shall after paying the tax deducted to credit of Central Government has to submit such statement in such form to the prescribed authority i.e., DGIT(Systems)/NSDL. This section is a procedural section to streamline the process of statements in the computerized set up, but this section does not take away the powers of the AO to initiate proceedings u/s. 201(1) of the Act. We therefore do not find merit in the aforesaid contention of the ld. counsel for the assessee. 28. In the present case, it is an admitted fact that the AO initiated proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (c); and (e) the amount of refund due to the deductor in pursuance of the determination under clause (c) shall be granted to the deductor : 30. The said section has been inserted by the Finance (No.2) Act, 2009 w.e.f. 1.4.2010, The present assessment year is A.Y. 2010-11, so this section is applicable for the assessment year under consideration because the assessment year starts w.e.f. 1.4.2010 and more over the survey u/s. 133A took place on 18.03.2011 and only on the basis of the documents and statements which were outcome of that survey, the AO took action u/s. 201(1) 201(1A) of the Act, therefore the provisions contained in section 200A(1) of the Act are applicable to the present case. Clause (c) of subsection (1) of section 200A provides that the sum payable or the refund due to the deductor shall be determined after adjustment of amount computed under clause (b) against any amount paid under section 200 201 of the Act and any amount paid otherwise by way of tax or interest. Similarly the provisions contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educted or liable to be paid and has not been paid and thereafter has to serve a notice of demand calling upon the assessee to make such payment. Sufficient safeguards have been provided in the section itself and as such it cannot be considered that the provisions are ultra vires the Constitution. The contention that under section 191, there could be a direct payment of tax by the assessee to the Department, has no relevance for the offence which the assessee has committed in not deducting the tax under various sections of the Act, particularly, in Chapter XVII. The finding that there was a failure to deduct the tax has to be on the basis of either the assessment or other records available with the assessee and, therefore, the contention that no process or procedure has been stipulated, has no force. The Assessing Officer, has to provide an opportunity and, therefore, there is sufficient guideline protecting the right of innocent assessees. The provisions of section 201, therefore, cannot be considered to be ultra vires. 32. From the ratio laid down in the aforesaid referred to case, it is clear that the provisions contained in section 201 of the Act are penal in nature to treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on 21.12.2011 as claimed by the department or on 29.12.2011 as claimed by the assessee. However, the facts remain that the orders u/s. 201(1) 201(1A) of the Act have been passed on 30.12.2011. Now we have to see as to whether the time allowed by the AO was sufficient and reasonable while deciding the present controversy. In the present case, it is also noticed that the assessee vide letter dated 19.12.2011 written to the AO (copy of which is placed at page 18 of the assessee s compilation) sought an adjournment and requested to adjourn the case to some time after 05.01.2012, however nothing is brought on record as to whether the said request was rejected or accepted by the AO. It is well settled that nobody should be condemned unheard as per the maxim audi alteram partem . In the instant case, nothing is available on record as to whether the aforesaid request vide letter dated 19.12.2011 which was received on 19.12.2011 vide receipt No.872 by the Income-tax Department, Range 16, Bangalore (this fact is clear from the copy of the said letter placed at page 18 of the assessee s compilation). 35. In the present case it is not in dispute that a survey took place in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly explaining the points of view of the appellant, when accepted, may, in some cases amount to affording effective opportunity of hearing. What particulars of natural justice should apply to a given case must also depend to a great extent on the facts and circumstances of that case. Hon ble High Court further observed that - Where no effective opportunity of being heard has been given to the appellant in disposing of his appeal in spite of his express request that this counsel should be heard, the order must be quashed. 37. In the present case also, the AO while invoking the penal provisions of section 201 of the Act, was acting in a quasi-judicial capacity, therefore he was required to give adequate opportunity of being heard to the assessee. It is usually said that justice delayed is justice denied , in other words, if there is delay in giving the justice it is presumed that justice is denied therefore decision is to be taken expeditiously, but at the same time it is also true that justice hurried is justice buried . In the present case, in our opinion, the AO decided the issue in haste and the time allowed to the assessee was not sufficient, particularly when an ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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