TMI Blog2021 (3) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. The assessee has to maintain secrecy and confidentiality of these payments and hence it is claimed that no income-tax was deducted at source as otherwise it will breach the confidentiality once PAN of the payee is uploaded while filing TDS returns. The assessee is facing genuine hardship as on the one hand it is bound to maintain complete secrecy of payments as is mandated by State Government as the nature of expenses is claimed to be for supply of pre-printed examination paper, while on the other hand, the provisions of the 1961 Act requires the deduction of income-tax at source under Chapter XVII-B if the payment falls under the said provisions. The assessee has not obtained any certificate from the AO for non deduction of TDS on these payments as is mandated under the provisions of Section 197 of the 1961 Act. Provisions of Section 119 empowers CBDT to grant exemption from rigours of provisions of the 1961 Act to redress genuine hardship of the taxpayers. The assessee has also filed additional evidences before tribunal(pb/page 8-11) by way of allocation of budget of the assessee by State Government which also contains allocation for Secret Services Expenses, these evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this issue is also restored back to the file of the AO for denovo adjudication on merits in accordance with law. - ITA No. 329/ALLD/2017, ITA No. 330/ALLD/2017, ITA No. 10/ALLD/2018, ITA No. 11/ALLD/2018 - - - Dated:- 26-3-2021 - Shri.Vijay Pal Rao, Judicial Member And Shri Ramit Kochar, Accountant Member For the Appellant : Shri A.K. Singh, Sr. DR For the Respondent : Shri Sanjay Kumar, Adv. ORDER PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: These four appeals are cross appeals, two filed by Revenue and two filed by assessee, the appeal in ITA Nos. 329 330/Alld/2017 for assessment year s(ay s) : 2013-14 and 2014-15 respectively were filed by Revenue, while appeal in ITA No. 10 11/Alld/2018 for ay: 2013-14 and 2014-15 were filed by assessee, these appeals are directed against, the appellate order dated 21.09.2017 in appeal no. 25/ITO/TDS/Alld/15-16 passed by learned Commissioner of Income-tax (Appeals), Allahabad, U.P. (hereinafter called the CIT(A) ) for ay: 2013-14 and appellate order dated 21.09.2017 in appeal no. 26/ITO/TDS/Alld/15-16 passed by learned CIT(A) for ay: 2014-15 respectively, the appeals before ld. CIT(A) had arisen from two se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ay: 2014-15) on account of the assessee's failure to deduct tax at source u/s 194C on the various payments made under the head 'Advertisement Sales Services', without stating any cogent reason/material therefor. 5. That the ld CIT(A)'s order to the above extent is not based on any cogent reason/material whatsoever and hence perverse, which is not sustainable on facts in law. 6. That the appellant craves leave to add, amend or alter all or any of the above grounds at the time of hearing of this appeal. 3. The assessee has raised following grounds of appeal in memo of appeal filed by it with tribunal for ay: 2013-14 and 2014-15: Assessee s Appeal in ITA no. 10/Alld/2018 for ay:2013-14 1. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding the demand of ₹ 32,518/-on account of non / short deduction of tax at source on payments made for Special Services. 1.1 That the Appellant had under mistaken belief admitted the non / short deduction of ₹ 32,158/-. 2. That on the facts and circumstances of the case and in law, the learned Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in upholding that certain payments made under the head Advertisement, Sales Services are subject to deduction of tax at source u/s 194C of the Act @ 2%, whereas tax at appropriate rate was deducted by the Appellant. 7. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that there was a short deduction of ₹ 1,17,646/- under the head Rent Other Charges as against ₹ 2,59,990/- as per the assessment order, whereas in the remand report the Assessing Officer had admitted that no tax was deductible and payment was towards House Tax. 8. Without Prejudice, the learned Commissioner of Income Tax (Appeals) erred in confirming that tax was deductible @20%, by applying section 206AA, in cases wherever tax was not deducted at all. 9. Without Prejudice, the learned Commissioner of Income Tax (Appeals) ought to have held that the payer can be treated as assessee in default, for non deduction of tax at source, only in cases where the payees have failed to pay tax on their income. That the Appellant craves leave to add, alter, modify, vary, delete any ground of appeal before or at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Commissioner of Income-tax (Appeals) erred in upholding that certain payments made under the head Stationery Forms are subject to deduction of tax at source u/s 194C of the Act. 5.1 That the Appellant had under mistaken belief, admitted during Appellate proceeding, that the payments were covered u/s 194C was applicable. 6. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding that certain payments made under the head Office Furniture Equipment s are subject to deduction of tax at source u/s 194C of the Act. 6.1 That the Appellant had under mistaken belief, admitted during Appellate proceedings, that the payments were covered u/s 194C was applicable. 7. That on the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding that certain payments made under the head Advertisement, Sales Services are subject to deduction of tax at source u/s 194C of the Act @ 2%, whereas tax at appropriate rate was deducted by the Appellant. 8. That on the facts and circumstances of the case and in law, the learned Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which led A.O. to hold that the assessee has short deducted income tax at rates than what is prescribed under the provisions of the 1961 Act, to the tune of ₹ 32,158/- u/s 201(1) of the Act and further the assessee was held to be liable by AO for payment of interest u/s 201(1A) of the 1961 Act. The payee wise charts are reproduced by the AO in its order at page no. 3.The assessee on its part had not furnished any details in compliance of notice dated 18.12.2015 issued by the AO. 5.3Secondly, the A.O. observed that the assessee has made payments for Suspense Service expenses which are contractual payments covered under the provisions of Section 194C of the 1961 Act on which no tax was deducted at source by the assessee and also no PAN number of the payee was furnished by the assessee, and as per the Assessing Officer the income-tax ought to have been deducted by assessee while making payments for Suspense Service Expenses u/s 194C @ 20% and the assessee has made payment to the tune of ₹ 2,35,00,000/- on which no income-tax was deducted at source and the AO further observed that the assessee has not even supplied PAN number of the payees, which led A.O. to hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has furnished PAN of the payee/deductee as is required u/s 206AA of the 1961 Act, which led AO to hold that the assessee has defaulted in not deducting of income tax at source u/s 201 (1) of the Act to the tune of ₹ 7,00,000/- and also the AO further held that the assessee is liable to pay interest u/s 201(1A) of the 1961 Act. The assessee on its part had not furnished any details in compliance of notice dated 18.12.2015 issued by the AO. 5.7Further, the A.O. observed that the assessee has made payment towards advertisement sales and services to the tune of ₹ 47,86,094/- on which no income-tax was deducted at source under the provisions of Section 194C of the 1961 Act and further the AO observed that the assessee has not submitted PAN of the payees/deductees as is required u/s 206AA of the 1961 Act, which led AO to hold that the assessee has defaulted within the provisions of Section 201(1) of the 1961 Act to the tune of ₹ 9,57,218/- u/s 201 (1) of the Act and further the assessee is in default u/s 201(1A) of the Act towards interest on non deduction of income tax at source. The assessee on its part had not furnished any details in compliance of notice dated 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttar Pradesh and is a Statutory Body governed by the State Government. The assessee submitted that it conducts various examinations for appointments to UP State Government. It was submitted that as per the State Govt. policy, some amount has been allocated towards Secret/Suspense funds, which was used directly by Secretary, Public Service Commission for the purposes as defined in the Financial Hand Book of Public Service Commission. The copy of the same was filed by assessee before Ld. CIT (A) for reference. It was submitted by assessee before ld. CIT(A) that the expenditure made out of these funds cannot be audited by the Auditor General. It was submitted by assessee before ld. CIT(A) that as per Govt. policy to maintain high level confidentiality, even no tender/work contract were awarded to any person for the expenditure under this head. It was submitted that it is only through treasury that the Assessing Officer came to know that an amount of expenditure of ₹ 2,35,00,000/- was incurred by the assessee, it was submitted that the actual expenditure incurred under this head was ₹ 1,69,00,000/-. It was submitted that with the object to maintain secrecy and confidentiali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available, by invoking provisions of Section 206AA of the Act which is not justified as the assessee has not deducted income tax at source on these payments and if at all it is to be considered for default in deduction of income-tax at source, then the applicable rate u/s 194J is 10% should be applied. 6.5 Stationery Forms The assessee submitted before ld. CIT(A) that the total expenditure made during the relevant period under consideration was ₹ 35,00,000/-, whereas the A.O. has wrongly mentioned in its order that the total expenditure of ₹ 34,89,081/- was incurred by the assessee. It was submitted that income-tax was duly deducted on all the payments at the time of passing of bill by treasury. It was submitted that the PAN was also provided before the ld. ITO(TDS) at the time of regular proceedings. The assessee produced list of relevant payments along with PAN and TDS amount before ld. CIT(A). The assessee submitted before ld. CIT(A) that this head of expenditure is covered u/s 194C and the applicable rate of TDS is 1% for individual and 2% for other than individual. It was submitted that no income-tax is to be deducted at source for payments made to a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10375.00 2472.00 Not available Total 3500000.00 53734.00 It was submitted that as per list furnished, income tax was deducted at source in every eligible payment on which income tax was required to be deducted at source, but the assessee may be treated as assessee in default only in the cases where the PAN was not available, and accordingly the defaults comes to 20% of (₹ 34395+129778+110375= ₹ 274548) i.e. ₹ 54,910/- less TDS already deducted at source on these payments to the tune of ₹ 4960/-, which comes to ₹ 49,950/- The assessee submitted that default raised by AO was to the tune of ₹ 6,97,816/- which should be limited to ₹ 49,950/- and interest thereon. 6.6 Office Furniture Forms The assessee submitted before ld. CIT(A) that the total expenditure incurred during the year was ₹ 10,99,921/-, whereas the A.O. wrongly mentioned the amount of expenditure in its order as ₹ 35,00,000/-. The assessee submitted that the TDS was deducted on all the payments at the time of passing bill b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that ₹ 20,000/- or less in single payment. The assessee submitted before ld. CIT(A) that the assessee deducted income tax at source on all eligible payments but the assessee may be treated as assessee in default for non furnishing of PAN of the deductees which comes to 20% of (₹ 31145 + ₹ 111626), which comes to ₹ 25,471/-. It was submitted that the AO erroneously held assessee to be in default for ₹ 7,00,000/- along with interest, while the default should be restricted to ₹ 25,471/- and interest thereon. 6.7 Advertisement, Sales Services The assessee submitted that the total expenditure made during the relevant period was ₹ 2,35,00,000/-, whereas the A.O. has wrongly mentioned in its order that the total expenditure was ₹ 47,86,094/-. It was submitted that income tax was deducted at source on all the payments at the time of passing of bill by treasury. It was submitted that the PAN was also provided by assessee before the ITO (TDS) at the time of regular proceedings. The assessee submitted complete details of payments along with PAN and TDS amount before the Ld. CIT(A) for verification. The assessee submitted that since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent heads in question so that verification of actual payments/expenditure may be done and applicability of TDS thereon may be examined. 3. In compliance, the deductor has furnished a copy of its submissions before your honor along with it s annexures, a website (Koshvani of UP Treasuries) downloaded copy of the grant-wise scheme-wise expenditure statements and monthly DDO reconciliation statement for both the financial years. The required cash books have not been produced till date; however the register named 11-C containing bill wise details of payments to different parties and TDS thereon have been produced fur verification only on 30.08.2017. The inferences drawn, on the basis of the TRACES downloaded 26Q statement filed by the deductor, 11-C registers produced for verification and head wise list of expenditure furnished as annexure to the submissions before your honor, are given in Para 5 6 below. 4. In the back ground of the case, I would like to submit here that the then TDS AO passed the order u/s 201(1)/201(1A) for A.Y. 2013-14 2014-15 in respect of 26Q after affording several opportunities vide his letters dated 18.05.2015, 17.06.2015, 10.07.2015, 04.09.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Suspense service 2,55,98,658 3,69,00,000 ------do----- Honorarium 1,67,01,426 34,99,010 -do-- - Stationery form 34,89,081 35,28,729 -- do--. Office furniture Equip 35,28,729 34,42,134 ---.do-- - Advt. sales services 27,00,000 2,55,98,658 - -do-- - Rent other charges 29,98,438 27,00,000 .--do-- 6. (i) Payment of special services The payments under this head are in the nature of payments to legal professionals attracting the provisions of section 194J. For the F.Y. 2012-13 relevant to AY 2013-14, the then TDS AO had worked out short charge of ₹ 32518/- by applying TDS rate of 10% in cases where the deductor had done T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is head of expenditure. (iii) Honorarium The register 11-C produced for verification contained only the consolidated bill amount of such payments on a particular date. The nature of payment under this head is honorarium which has been covered u/s 194J of the I.T. Act, 1961 by the TDS AO. The party wise details of the consolidated bill amount, on any particular date, are not available on this register. In respect of the list of expenses totaling ₹ 34,99,720/- under this head, furnished before your honor as well the undersigned, it has been noticed that the payments mentioned in table below are above the prescribed monetary limit u/s 194J hence liable for TDS. The tax was deductible at source on such following payments and the deductor was under obligation to make TDS due to non-possession of no deduction certificate from the payees. Since, neither PAN of such payees have been furnished by the deductor nor covered in 26Q statements ; the short charge calculated by applying the rate of 20% works out as under:- F.Y. Name of the party Amount paid Tax deductible @ 20% Tax ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erification contained the party wise details of payments and TDS thereon. The party wise gross bill amount details as per the list of expenses under this head to the tune of ₹ 35,00,000/- for F.Y. 2012-13 and ₹ 35,28,729/- for F.Y. 2013-14, furnished before your honor as well the undersigned, match with details of 11-C registers and monthly DDO reconciliation statement of Treasury. The payments under this head, being contractual in nature, are covered u/s 194C of the I.T. Act, 1961. On verification, it is found that the payments mentioned in the said list attracting TDS provisions are subjected to TDS and also covered in 26Q statements except the payments given in the table below where TDS has been short deducted as PANs of payees were not available with the deductor at the time payment and these payees are also not covered in 26Q statements filed by the deductor. The short charge calculated by applying 20% rate on following payment works out as under:- F.Y. Name of the Party Amount paid Tax deductible @ 20% Tax deducted by the deductor Short deduction Remarks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 145 6629 698 5931 Not in 26Q Three Star Traders (PAN do not relate) 123887 24777 2324 22453 Not in 26Q 2013-14 Java Enterprises 98700 19740 2211 17529 Not in 26Q Three Star Traders 68590 13718 1450 12268 Not in 26Q (vi) Advertisement, Sales Services: The register 11-C produced for verification contained the party wise details of payments and TDS thereon. The party wise gross bill amount details as per the list of expenses under this head to the tune of ₹ 2,35,00,000/- for F.Y. 2012-13 and Rs, 2,55,98,658/- for F.Y. 2013-14, furnished before your honor as well the undersigned, match with details of 11 C registers and monthly DDO reconciliation statement of Treasury.The payments under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been paid from other heads of expenditure. The details of such payees with their total gross bill amount paid from other heads and TDS made thereon for F.Y. 2012-13 2013-14 are given in the table below. Since, the deductor had no PAN of such payees at the time of payment, the TDS must have been done @ 20%. Further, these payees have not been covered in 26Q statements filed by the assessee. F.Y. Name of the party Amount paid Tax deductible @ 20% Tax deducted by the deductor Short deduction Remarks 2012-13 Jaz Enterprises 402358 80472 6875 73597 Not in 26Q Java Enterprises 73153 14630 1418 13212 Not in 26Q Three Star Traders 173155 34631 3794 30837 Not in 26Q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has not fulfilled its obligation to deduct income tax at source while making aforesaid payments and has defaulted in deduction of income-tax at source, as in view of ld. CIT(A) there are no exemption given to payments for these suspense services and there are no provision in the 1961 Act which exempt the payer of these suspense services from deduction of income-tax at source on the basis of confidentiality of secret funds. The ld. CIT(A) observed that these payments have been made by assessee by cheque, and therefore the identity of the recipient is not secret and it is well known to the banking authorities. The ld. CIT(A) observed that the assessee was under obligation to deduct income-tax at source while making payments towards these suspense service expenses, which was not been done by the assesse. It was also observed by ld. CIT(A) that these payments were not exempt in the hands of recipients. The ld. CIT(A) referred to provisions of Section 201 of the Act. The ld. CIT(A) also referred to provisions of Section 206AA of the 1961 Act and held that the assessee has not furnished the PAN of the deductees/payees and thus, consequently ld. CIT(A) held that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Counsel for the assessee submitted before the Bench that in both the years similar issues have arisen. It was submitted by ld. Counsel for the assessee that only Ground of Appeal No. 2, 2.1 2.2, as well Ground No 7 and 8 as raised by assessee in its appeal filed with tribunal are pressed for the ay: 2013-14 and prayers were made to dismiss other grounds of appeal raised by assessee in its appeal filed for ay:2013-14. The ld. DR did not raise any objection if Ground No. 1,1.1,3,3.1,4, 4.1, 5,5.1, 6 and 9 raised by assessee in memo of appeal filed by assessee for ay:2013-14 with tribunal are dismissed. After hearing both the parties, we dismiss ground number 1, 1.1, 3,3.1,4,4.1,5,5.1,6 and 9 raised by assessee in memo of appeal filed by it with tribunal in ITA No. 10/Alld./2018 for ay: 2013-14. We order accordingly. 10.2 Proceeding further, the ld. Counsel for the assessee submitted that the assessee is an autonomous body under UP Government. It was submitted that the expenses are incurred through treasury. It was submitted by ld. Counsel for the assessee while arguing ground number 2 of the assessee s appeal that there are payments which are for services which are confidenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Services Expenditure, the same was produced for the first time before tribunal and the same need verification by AO and hence prayers were made to set aside the issue to the file of the AO for fresh consideration. The ld. DR also submitted that examination paper printed by the printers is not a commodity and hence it cannot be excluded from the provisions of Section 194C of the 1961 Act. The ld. DR relied upon explanation to Section 194C of the 1961 Act. The ld. DR relied upon the appellate order passed by ld. CIT(A) so far as the AO order was sustained by ld. CIT(A). The ld. DR also supported the grounds of appeal raised in memo of appeal filed by Revenue with tribunal. The ld. DR also submitted that provisions of Section 206AA was rightly invoked by the authorities below. The ld. DR also submitted that the other issue of TDS on rent and other services is also to be set aside and remitted to the file of the AO for fresh adjudication. 11. We have heard rival contentions and perused the material on record. The appeal was heard through video conferencing through Virtual Court. We will firstly adjudicate assessee s appeal for ay: 2013-14. The assessee is now pressing ground nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by AO and hence prayers were made to restore the issue to the file of AO for denovo adjudication. The assessee has taken a consistent stand that these payments are confidential/secret in nature and the details cannot be revealed owing to matter of State Policy. These are part of approved budget allocated by U.P.Government which include expenses for secret services and the Secretary of the assessee viz. Lok Seva Aayog, U.P.( U.P. Public Services Commission) is authorized to incur the expenses under the head Secret Services expenses. We are in agreement with the assessee that in Government, there could be expenses which are covered under the veil of secrecy as matter of State Policy and the details cannot be divulged as mandated and obligated under State Policy. Thus, the assessee cannot be compelled to reveal the details of these expenses. But at the same time the provisions of the 1961 Act entails liability for deduction of income tax at source on payments which are covered within Chapter XVII-B of the 1961 Act. There are provisions within the 1961 Act which relaxes the rigours of provisions for deduction of income tax at source. Section 197 and 119 of the 1961 Act are relevant. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment falls under the said provisions. The assessee has not obtained any certificate from the AO for non deduction of TDS on these payments as is mandated under the provisions of Section 197 of the 1961 Act. Provisions of Section 119 of the 1961 Act empowers CBDT to grant exemption from rigours of provisions of the 1961 Act to redress genuine hardship of the taxpayers. The assessee has also filed additional evidences before tribunal(pb/page 8-11) by way of allocation of budget of the assessee by State Government which also contains allocation for Secret Services Expenses, these evidences are vital to resolve the issue but the same requires verification by the authorities below. It is equally well settled that the duty of all taxing authorities to assist taxpayers so that they get reliefs which they are entitled to. Reference is drawn to Circular issued by the Central Board of Direct Taxes Circular No: 14 (XL-35) dated April 11, 1955. It states: Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of 11-C register, it has been noticed that payments to the parties covered under above heads have also been paid from other heads of expenditure. The details of such payees with their total gross bill amount paid from other heads and TDS made thereon for F.Y. 2012-13 2013-14 are given in the table below. Since, the deductor had no PAN of such payees at the time of payment, the TDS must have been done @ 20%. Further, these payees have not been covered in 26Q statements filed by the assessee. F.Y. Name of the party Amount paid Tax deductible @ 20% Tax deducted by the deductor Short deduction Remarks 2012-13 Jaz Enterprises 402358 80472 6875 73597 Not in 26Q Java Enterprises 73153 14630 1418 13212 Not in 26Q Three Star Traders 17315 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue is also restored back to the file of the AO for denovo adjudication on merits in accordance with law. Needless to say that the AO shall grant proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The evidences filed by assessee in its support shall be admitted by AO and adjudicated on merits in accordance with law. The AO is directed to pass speaking and reasoned order. This will dispose of ground number 8 of the assessee s appeal. This ground is allowed for statistical purposes. We order accordingly. Revenue s Appeal in ITA no. 329/Alld/2017 for ay: 2013-14 12. The Revenue has raised as many as 6 grounds in its appeal filed with tribunal. We have observed that the main grievance of the Revenue is that ld. CIT(A) has passed a non speaking cryptic order while granting relief to the assessee under the heads (i) Honorarium (ii)Stationary and Forms (iii) Office Furniture and Equipments (iv) Advertisement Sales Services. We have carefully gone through the appellate order passed by ld. CIT(A) and it is observed that relief is granted by ld. CIT(A) based on the computation of default in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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