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TMI Blog2012 (10) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... en her address as No.9, Bonham Road, Hong Kong which confirms the fact that she was an NRI. The Assessing Officer noticing that the assessee, in accordance with the provisions of section 195 of the Income Tax Act, 1961 (herein after referred as 'the Act') in Assessment Year 2007-08 ought to have deducted at source 20% of the sale consideration (plus surcharge of 10% and education cess of 2%) of Rs. 61,62,500 and remitted the same to the Government of India before making payment to the seller of the property, Ms. Geetanjali Bhagawan Melwani as she was an NRI, failed to do so. As the assessee had not complied with the provisions of section 195, the Assessing Officer accordingly initiated proceedings under section 201(1) of the Act calling upon the assessee to show cause why he should not be treated to be an assessee in default in respect of tax not deducted at source in respect of the payment in question. On the assessee's request the Assessing Officer granted the assessee adequate time and opportunity to make submissions to the show cause notice issued on 15.9.2009. The assessee in his various replies stated that he was under the impression the seller was based in Pune a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 201(1) and consequently 201(1A) against the appellant. 3. The LAO erred in passing an order under section 201(1) and raising a demand of Rs. 13,82,870 without jurisdiction. Section 201(1) would only deem an assessee to be under default and does not envisage any demand being created for which notice under section 156 could be raised. The LAA erred in confirming the action of the LAO. 4. The LAO erred in not appreciating the facts and holding the appellant liable to deduct tax at source under section 195. The LAO further erred in not appreciating the fact that the appellant was a non-resident and genuinely was not aware that the tax law required him to deduct tax under section 195. The LAO erred in not appreciating the fact that section 201(1) being penal in nature, an order under the action required the LAO to establish that the appellant was aware of the requirement of section 195. In the absence of such awareness, the appellant was not liable to be attracted by section 195. The LAA erred in confirming the action of the LAO. 5. The LAO erred in levying interest under section 201(1A) and LAA erred in confirming the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inate bench of this Tribunal in the case of Meena S Patil v. ACIT (International Taxation) reported in [2008] 300 ITR (AT) 0317 dt.29.3.2007 which she stated was held in favour of Revenue and against the assessee on similar facts. It is submitted that in the cited case, the absolute sale deed of the property clearly maintained that the sellers were NRIs as the address mentioned therein showed they were resident abroad. In these circumstances, the Tribunal had held that the assessee was liable to deduct tax at source under section 195 of the Act. In view of the similar facts in the cited case, the learned Departmental Representative submitted that, there the assessee in the present case was rightly held to be an assessee in default under section 201(1) and as there was no merit in the assessee's claim and his appeal was liable to be dismissed. 6.3 We have heard both parties and carefully perused and considered the material on record, the submissions made and judicial decisions cited. The facts on record are that the assessee in the relevant period on 11.8.2006, purchased a residential flat from one Smt.Geetanjali Bhagwan Melwani at 'Chalet', Aga Abbas Ali Road, Ulsoor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act as he was required to, the Assessing Officer held him to be an assessee in default under section 201(1) of the Act. We, after considering the facts of the case are of the considered view that the Assessing Officer and the learned CIT (Appeals) have rightly held him to be an assessee in default in accordance with the provisions of section 195 r.w.s. 201(1) of the Act. This ground of the assessee also stands dismissed. 7.1 In the grounds raised at S.No.4, the learned counsel for the assessee contended that the authorities below, while quantifying the tax to be deducted at source under section 195, had erred in applying the rate on the entire sale consideration of Rs. 61,62,500 and not on the capital gain of Rs. 9,29,753 arising of this transaction. The learned counsel for the assessee reiterated the submissions made before the learned CIT (Appeals). 7.2 The learned Departmental Representative on her part supported the findings of the authorities below, which she contended was clearly in accordance with the provisions of section 195 of the Act. The learned Departmental Representative drew our attention to paras 6 and 7 on pages 4 to 6 of the learned CIT (Appeals)'s order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has- (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. (2) Where the person responsible for paying any such sum chargeable under this Act (other than salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to determine, by general or special order], the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. (3) Subject to rules31 made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under subsection (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 197. The only thing which is required to be done is to file an application for determination by the Assessing Officer that such sum would not be chargeable to tax in the case of the recipient, or for determination of the appropriate proportion of such sum so chargeable, or for grant of a certificate authorizing the recipient to receive the amount without deduction of tax, or deduction of income tax at any lower rate. On such determination, tax at the appropriate rate could be deducted at the source. If no such application is filed, income tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such 'sum' to deduct tax thereon before making payment." The Hon'ble Apex Court has held that if the assessee failed to make an application under section 195(2) r.w.s 197 of the Act to the Assessing Officer for lower deduction of tax, then income tax on such 'sum' is to be deducted and it is the statutory obligation of the person responsible for making such payment of such 'sum' to deduct tax thereon before making payment. In the instant case of the assessee, the legal position is clear in as much as not having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 may be 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 or any part of the tax or after deducting fails to pay the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correction of the demand/order on the premise that the receipt in the hands of the non-recipient was getting out of the net of taxation under the Act due to one or other reason." In view of the observation of the Hon'ble Court in the case of Samsung Electronics (supra), we are of the view that the Assessing Officer is competent to quantify and raise demand under section 201 of the Act and issue notice of demand under section 156 of the Act the moment the assessee failed to deduct tax at source at the specified rate from the sale consideration of Rs. 62,61,500 before making payment of the same to the seller who is an NRI in the relevant period. 8.4 Further, we also do not agree with the proposition put forwarded by the assessee, that the Assessing Officer ought to have quantified the demand under the provisions of section 221 of the Act and not under section 201(1) of the Act. As already held by us, the Assessing Officer has rightly raised the demand under section 201(1) of the Act as soon as the assessee defaulted in making tax deduction under section 195 of the Act from out of the 'sum' i.e. the sale consideration. A perusal of section 201 of the Act will clarify th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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