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2016 (3) TMI 246 - PATNA HIGH COURT

2016 (3) TMI 246 - PATNA HIGH COURT - [2016] 384 ITR 328 - Recovery of demand - attachment of account whereas the appeal was pending - AO refused to grant stay - non deduction of TDS - a proceeding under Section 201(1) read with Section 201(1A) - Held that:- In the light of the proviso to Clause (b) of subsection (1) of Section 201 of the Act, there can be no escape from the conclusion that if the person, who fails to deduct, whole or part of the tax, at source, shall not be deemed to be an asse .....

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relevant thereto, we are clearly of the view that the respondent No.2, namely, Commissioner of Income Tax (Appeals)-II, Patna, is duty bound to take up the appeal at the earliest and if it is found that the taxes, which were to be deducted, at source, by the present petitioner while making payment to the said two Corporations, have been paid by the said two Corporations as deductees, the impugned demands, raised by the respondent No.2, namely, Commissioner of Income Tax (Appeals)-II, Patna, shal .....

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Section 201(1) read with Section 201(1A) of the Income Tax Act, 1961 ((hereinafter referred to as 'the Act'), instituted against the petitioner, which is a department of the State Government, constituted to construct and maintain roads and bridges in the State of Bihar, the respondent No. 3 herein, namely, Assistant Commissioner of Income Tax, TDS Circle, Patna, held that the petitioner had not deducted income tax, at source, on the payments made to Bihar Rajya Pul Nirman Nigam Limited .....

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(Appeals)-II, Patna, on the ground, inter alia, that the payments, made to Bihar Rajya Pul Nirman Nigam Limited and Bihar State Road Development Corporation Limited, are in the nature of allotments of funds to the said Corporations, on the instructions of the Government of Bihar, for the purposes of construction of roads and bridges and that the same did not constitute a contract for work under Section 194(1) of the Act. 3. Having preferred an appeal, as indicated above, accompanied by an appli .....

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ver, while the appeal was pending consideration before the respondent No.2, namely, Commissioner of Income Tax (Appeals)-II, Patna, the respondent No.3, namely, Assistant Commissioner of Income Tax, TDS Circle, Patna, attached the accounts of the petitioner maintained with the District Treasury Officer, Patna, for recovery of the whole amount, in dispute, totaling to a sum of ₹ 1,18,58,89,226/-. 4. Though the appeal is still pending for consideration by the respondent No.2, namely, Commiss .....

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14-15. 5. We have heard Mr. D. V. Pathy, learned Counsel, appearing for the petitioner, and Ms. Archana Sinha @ Archana Shahi, learned Counsel, appearing for the respondents. 6. Without expressing any opinion on the correctness or the otherwise of the substantial questions of law, which have been raised by the writ petitioner including the question as to whether the payments made by the petitioner to the Corporations were in the nature of payment of contract or simple disbursement of amount on b .....

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Development Corporation Limited, have filed their returns and, in terms of the assessments made, taxes have also been paid by the two Corporations, and since the taxes, due from Bihar Rajya Pul Nirman Nigam Limited and Bihar State Road Development Corporation Limited, have already been received by the Income Tax Department, the Income Tax Department ought not to proceed against the present petitioner under Section 201(1) read with Section 201(1A) of the Act, and, therefore, the petitioner's .....

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etitioner has filed? Yet another question is : If, in terms of the assessments, made by the said two Corporations, the Corporations have already paid taxes, is it legally valid and justified for the respondents to continue to keep under attachment the account of the petitioner maintained with the District Treasury Officer, Patna, for the purposes of recovery of the said sum of ₹ 1,18,58,89,226/-? 9. Our quest for an answer to the above questions brings us to the Circular No.275/201/95-IT(B .....

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Act". 10. A careful reading of the Circular, which we have reproduced above, clearly shows that no demand, as envisaged by Section 201(1) of the Act, can be enforced against the deductor if the tax, due to be paid by the deductee, has already been paid by the deductee. In other words, if the deductor (i.e., the petitioner herein), who has to make deduction at source of the payments made to the deductee (i.e., the Corporations) failed to make the deduction, will the deductor, i.e., the petit .....

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entioned, has been amply clarified by the Supreme Court by pointing out, in Hindustan Coca Cola Beverate P. Ltd. v. Commissioner of Income-Tax, reported in, [2007] 293 ITR 226 (SC), that when there is no dispute that the tax due has already been paid by the deductee-assessee, a proceeding, under Section 201(1) of the Income Tax Act, 1961, read with Section 201(1A) thereof, is untenable and, therefore, cannot be continued against the deductor. 12. Giving the Circular, dated 29.01.1997 aforementio .....

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ay, 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: 1[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 ac .....

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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.]" 13. In the light of the proviso to Clause (b) of subsection (1) of Section 201 of the Act, there can be no escape from the conclusion that if the person, who fails to deduct, whole or part of the tax, at source, shall not be deemed to be an assessee in default if in respect of such tax, the deductee has furnished his r .....

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