The Chief Executive Officer, Jila Panchayat,, Indore v. THE ITO,TDS & TRO, Ratlam

ITA 202/IND/2010 | 2003-2004
Pronouncement Date: 02-03-2011 | Result: Dismissed

Appeal Details

RSA Number 20222714 RSA 2010
Assessee PAN AQQPS7473P
Bench Indore
Appeal Number ITA 202/IND/2010
Duration Of Justice 10 month(s) 17 day(s)
Appellant The Chief Executive Officer, Jila Panchayat,, Indore
Respondent THE ITO,TDS & TRO, Ratlam
Appeal Type Income Tax Appeal
Pronouncement Date 02-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 02-03-2011
Date Of Final Hearing 14-12-2010
Next Hearing Date 14-12-2010
Assessment Year 2003-2004
Appeal Filed On 15-04-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NOS.200 TO 203/IND/2010 A.YS. 2001-02 TO 2004-05 CHIEF EXECUTIVE OFFICER JILA PANCHAYAT NEEMUCH PAN AQQPS 7473 P APPELLANT VS ITO TDS & TRO RATLAM RESPONDENT APPELLANT BY :S/SH. M.C. MEHTA & H. CHIMNANI CAS RESPONDENT BY :SH. PRADEEP KUMAR MITRA SR. DR O R D E R PER JOGINDER SINGH JUDICIAL MEMBER THESE APPEALS ARE BY THE ASSESSEE AGAINST THE COMMO N ORDER OF LD. CIT(A)-UJJAIN DATED 8.2.2010 WHEREIN FOLLOWING COMMON GROUND HAS BEEN RAISED: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE INTEREST OF RS.25 29 095/- CHARGED U/S 201(1A) OF THE ACT ON THE TDS AMOUNT OF RS.27 86 146/- (ASSESSMENT YEAR 2001-02) RS.1 33 596/- ON THE TDS AMOUNT OF RS.1 93 365/- (ASSESSMENT YEAR 2002-03) RS.14 10 121/- ON THE TDS AMOUNT OF RS.26 00 388/- (ASSESSMENT YEAR 2003-04) AND RS.10 29 600/- ON THE TDS AMOUNT OF 2 RS.25 74 000/- (ASSESSMENT YEAR 2004-05) ESPECIALLY WHEN NO SUCH INTEREST IS CHARGEABLE IN ANY ASSESSMENT YEAR AND SAME REQUIRES TO BE RESTRICTED ON WHICH THE RETURN OF THE RESPECTIVE YEAR WAS DUE FOR FILING BY THE DEDUCTEE. 2. DURING HEARING OF THESE APPEALS WE HAVE HEARD S HRI M.C. MEHTA ALONG WITH SHRI HITESH CHIMNANI LD. COUNSEL FOR THE ASSESSEE AND SHRI PRADEEP KUMAR MITRA LEARNED SENIOR DEPART MENTAL REPRESENTATIVE. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE PANCHAYAT WAS UNDER A REASONABLE BELIE F THAT IT IS NOT REQUIRED TO DEDUCT AND DEPOSIT TDS ON THE PAYMENTS MADE TO M/S DEWAS UDHYOG TOWARDS IRRIGATION WORK AS THE PROJECT WAS NOT COVERED BY CIRCULAR NO. 502 OF CBDT DATED 27.1.1988 AND ON THE REASON THAT THE ASSESSEE AND MPSIC ARE GOVERNMENT UNDERTAKINGS THE REFORE NOT REQUIRED TO DEDUCT TAX AND DEPOSIT THE SAME TO THE GOVERNMENT EXCHEQUER. IT WAS SUBMITTED THAT THE PROVISIONS OF DEDUCTION OF TAX AT SOURCE WERE INTRODUCED IN THE CASES OF WORK CONTRAC TS U/S 194C AND IN THE CASE OF A CONTRACTOR THE TAX DEDUCTED AT SOURCE WHICH IS AROUND 2% OF THE GROSS PAYMENT IS USUALLY A HIGHER FIGURE TH AN THE TAX PAYABLE BY A CONTRACTOR ON HIS NET INCOME. A PLEA WAS ALSO RAISE D THAT INTEREST U/S 201(1A) IS CHARGEABLE AS A COMPENSATORY MEASURE TO COMPENSATE THE GOVERNMENT FOR THE LOSS OF TIMELY RECEIPT OF REVENU E EITHER BY WAY OF DEDUCTION OF TAX AT SOURCE BY THE SPECIFIED PERSON AND THE DEPOSIT OF THE SAME WITH THE GOVERNMENT OR BY WAY OF PAYMENT OF TA XES BY THE 3 DEDUCTEE WHO IS LIABLE TO PAY TAXES ON INCOME ARISI NG FROM THE SAID CONTRACT AND CLAIM CREDIT FOR TAX DEDUCTED AT SOURC E. A STRONG PLEA WAS RAISED THAT THE SECTION DOES NOT STATE THAT THE TAX SHOULD HAVE BEEN PAID BY THE DEDUCTOR ALONE AS THE TAX MAY ACTUALLY BE PA ID BY THE DEDUCTOR OR THE DEDUCTEE. THE LD. COUNSEL FOR THE ASSESSEE FUR THER CONTENDED THAT THE DEPARTMENT CANNOT RECOVER TAX ONCE AGAIN FROM T HE DEDUCTOR WHEN THE SAME HAS ALREADY BEEN PAID BY THE DEDUCTEE. TH E LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION IN CIT V. ADID AS INDIA MARKETING PRIVATE LIMITED; 288 ITR 379 (DEL); CIT V. TRANS BH ARAT AVIATION PRIVATE LIMITED; 225 CTR 415 (DEL) HINDUSTAN COCA COLA BEV ERAGES PRIVATE LIMITED V. CIT; 293 ITR 226 (SC) ITO V. EMERALD CO NSTRUCTION CO. PRIVATE LIMITED; 116 TTJ 904 (JD) AND MLV TEXTILE I NSTITUTES V. ACIT; DISCUSSED IN ITO V. SOOD ENTERPRISES; 41 ITD 234 (D EL). 3. ON THE OTHER HAND THE LEARNED SENIOR DEPARTMEN TAL REPRESENTATIVE SHRI PRADEEP KUMAR MITRA STRONGLY DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT CHARGING OF INTER EST IS MANDATORY THEREFORE THE CASES RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT APPEALS. IT WAS SUBMITTED THAT ONCE THE NON-DEDUCTION OF TDS IS PROVED CHARGING O F INTEREST U/S 201(1A) IS AUTOMATIC AND MANDATORY. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON 4 RECORD. BRIEF FACTS ARE THAT THE ASSESSEE IS A CHI EF EXECUTIVE OFFICER OF JILA PANCHAYAT NEEMUCH WAS ALLOTTED FUNDS FOR CAR RYING OUT LIFT IRRIGATION WORK AT BARKHEDA AND DEWARI SOMAIYA. TH E JILA PANCHAYAT IN TURN AWARDED THE SAID WORK TO M/S DEWAS UDHYOG A UNIT OF M.P. STATE INDUSTRIAL CORPORATION AND MADE PAYMENTS FOR CARRYI NG OUT THE WORK OF LIFE IRRIGATION TO M/S DEWAS UDHYOG. AS PER THE TE RMS OF CONTRACT DATED 18 TH JUNE 1998 SHRI SANJAY SOMANI (PROPRIETOR BHAGWATI ENTERPRISES) WAS APPOINTED AS IN-CHARGE OF THE UNIT M/S DEWAS UD HOG FOR A PERIOD OF 20 YEARS. AS PER THIS AGREEMENT SHRI SANJAY SOMAN I WAS TO GIVE A BANK GUARANTEE OF RS.6 56 000/- TO MPSIC FOR USE OF ASSET OF M/S DEWAS UDHYOG THE OWNERSHIP OF WHICH WAS TO CONTINU E WITH MPSIC. IN ADDITION SHRI SANJAY SOMANI WAS REQUIRED TO PAY RS .51 000/- P.M. PLUS 10% OF PROFIT AS MAY BE EARNED BY SHRI SANJAY SOMAN I FROM THE MANAGEMENT OF M/S DEWAS UDHYOG. THE ITO (TDS) RAT LAM DURING SURVEY PROCEEDINGS ON 14.12.2006 FOUND THAT THE ASS ESSEE COMMITTED DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE FROM THE PAYMENTS MADE TO M/S DEWAS UDHOG THEREFORE VIDE ORDER DATED 28.3.2 007 A TDS DEMAND OF RS.81 53 899/- FOR THE ASSESSMENT YEARS 2 001-02 TO 2004- 05 ALONG WITH INTEREST OF RS.51 02 412/- U/S 201(1A ) WAS CREATED ON THE TOTAL PAYMENTS MADE BY JILA PANCHAYAT TO DEWAS UDHY OG ON THE TOTAL PAYMENTS OF RS.37 69 49 734/- (DETAILS AVAILABLE AT PAGES 4 AND 11 OF THE COMPILATION). THUS THE ITO TDS RAISED A TOTA L DEMAND OF 5 RS.1 32 53 311/-. THE TDS DEMAND OF RS.81 53 899/- PLUS RS.7 22 433/- (ASSESSMENT YEAR 2007-08) TOTAL RS.88 96 332/- WAS PAID BY THE ASSESSEE ON 30 TH MARCH 2007 (PAGES 5 AND 6 OF THE PAPER BOOK). THE TRO ALSO RECOVERED RS.58 16 750/-(RS.51 02 412/-AND RS.7 14 338/- - ASSESSMENT YEAR 2007-08) AS INTEREST U/S 201(1A) FO R THE SAID FOUR YEARS ON 28.7.2008 (PAGES 7 AND 8 OF THE PAPER BOOK). 5. THE PRESENT APPEALS BEFORE US ARE AGAINST LEVY A ND RECOVERY OF INTEREST OF RS.51 02 412/- U/S 201(1A) OF THE AC T. UNDER THE AFOREMENTIONED FACTS NOW THE QUESTION ARISES WHETH ER CHARGING OF INTEREST IS JUSTIFIED? ON QUESTIONING BY THE BENCH ABOUT THE TDS LIABILITY OF THE ASSESSEE IT WAS FAIRLY AGREED BY THE LD. CO UNSEL FOR THE ASSESSEE THAT THE ASSESSEE WAS SUPPOSED TO DEDUCT TDS ON THE AMOUNT PAID TO M/S DEWAS UDHYOG. IN VIEW OF THIS ADMISSION AND TH E FACTS AVAILABLE BEFORE US WE ARE OF THE CONSIDERED OPINION THAT SE CTION 201 ENACTS A THREE FOLD LIABILITY ON A PERSON INCLUDING A COMPAN Y BOUND TO DEDUCT AT SOURCE AND DEFAULTING TO DO SO AFTER HAVING DEDUCT ED DEFAULTING IN MAKING PAYMENT THEREOF TO THE STATE EXCHEQUER. FIR STLY THE DEFAULTER IS TREATED AS AN ASSESSEE IN DEFAULT AND IS LIABLE TO PAY PENALTY U/S 221 OF THE ACT. SECONDLY HE IS LIABLE TO PAY INTEREST ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX IS DEDUCTABLE TO TH E DATE WHEN SUCH TAX IS ACTUALLY PAID. THE FIRST CONSEQUENCE IS THAT IT CREATED A STATUTORY CHARGE UPON ALL ASSETS OF THE DEFAULTER FOR THE AMO UNT OF TAX DEDUCTED 6 AND NOT PAID PLUS THE AMOUNT OF INTEREST LEVIABLE U/S 201(1A). LEVY OF PENALTY U/AND LEVY OF INTEREST U/S 201(1A) ARE ENTI RELY DIFFERENT. EVEN IF PENALTY PROCEEDINGS ARE DROPPED U/S 201 THE ASSESS EE CANNOT ESCAPE HIS LIABILITY TO PAY INTEREST U/S 201(1A) OF THE AC T. UNDER SECTION 201(1A) LIABILITY ARISES IMMEDIATELY UPON EACH DEFAULT AND CAN BE COMPUTER WITH REFERENCE TO THE LAW AS IT THEN STOOD. SECTION 201 (1A) MAKES THE PAYMENT OF SIMPLE INTEREST MANDATORY. THE PAYMENT O F INTEREST UNDER THAT PROVISION IS NOT A PENAL PROVISION. THERE IS THEREFORE NO QUESTION OF WAIVER OF SUCH INTEREST ON THE BASIS OF THAT DEF AULT WAS NOT INTENTIONAL OR ON ANY OTHER BASIS. OUR VIEW FINDS SUPPORT FROM THE RATIO LAID DOWN IN IN MARTIN & HARRIS (T) LIMITED V. CIT; 73 TAXMAN 55 5 (CAL) KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATIO N V. CIT; 308 ITR 297 (KARN) BENNET COLEMAN & COMPANY V. ITO; 157 IT R 812 (BOM) CIT V. DHANLAXMI WEAVING WORKS; 245 ITR 13 (KER) C IT V. K.K. ENGG. COMPANY; 116 TAXMAN 390 (KER) CIT V. ASSAM SMALL I NDUSTRIES DEV. CORPN. LTD.; 219 ITR 324/88 TAXMAN 1(GAU) AND CIT V . PREMNATH MOTORS PVT. LTD.; 120 TAXMAN 584 (DEL). 6. AS FAR AS THE ARGUMENT OF THE LD. COUNSEL FOR TH E ASSESSEE THAT THE ASSESSEE WAS UNDER A REASONABLE BELIEF THA T THE ASSESSEE WAS NOT REQUIRED TO DEDUCT AND DEPOSIT TDS ON THE PAYME NTS MADE TO DEWAS UDHYOG BEING THE UNIT OF MP STATE INDUSTRIAL CORPORATION WE ARE OF THE VIEW THAT THE QUESTION WHETHER THE ASSESSEE HAD ANY BONAFIDE 7 BELIEF OR REASONABLE CAUSE FOR NOT MAKING THE DEDUC TION AT SOURCE IS NOT A CONVINCING ARGUMENT BECAUSE IT IS ONLY FOR THE PU RPOSES OF LEVY OF PENALTY AS CONTEMPLATED U/S 201 READ WITH 221. THE SUFFICIENCY OF REASON FOR FAILURE TO DEDUCT TAX OR TO PAY THE TAX ASSUME IMPORTANCE. EVEN U/S 273B THE REASONABLENESS OF THE CAUSE FOR I MPOSITION OF PENALTY IS RELEVANT ONLY IN RELATION TO THE PROVISIONS REFE RRED TO IN THAT SECTION. LEVY OF INTEREST U/S 201(1A) IS NEITHER TREATED AS PENALTY NOR HAS THE SAID PROVISION BEEN INCLUDED IN SECTION 273B TO MAKE RE ASONABLENESS OF THE CAUSE FOR THE FAILURE TO DEDUCT THE RELEVANT CONSI DERATION. THIS VIEW IS SUPPORTED BY THE DECISION IN CIT V. MAJESTIC HOTEL LIMITED; 155 TAXMAN 447 (DEL) AND CIT VS. MUNNI LAL & COMPANY ; 157 TAX MAN 466 (RAJ.). AS FAR AS COMPUTATION OF INTEREST U/S 201(1A) IS C ONCERNED COMPUTATION OF INTEREST U/S 201(1A) PERIOD OF DEFA ULT STARTS FROM THE DATE OF DEDUCTIBILITY OF TAX TILL THE DATE OF ACTUAL PAY MENT BY CONCERNED PERSON THEREFORE THE LEVY OF INTEREST HAS TO BE R ESTRICTED TO SUCH PERIOD ONLY. OUR VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE APEX COURT IN CIT V. ELIU LILLY & COMPANY (INDIA) (P) LIMITED; 31 2 ITR 225 (SC). 7. AS FAR AS THE CASES RELIED UPON BY THE LD. COUNS EL FOR THE ASSESSEE ARE OF NOT MUCH HELP BEING ON DIFFERENT FA CTS. DURING HEARING THE LD. COUNSEL FOR THE ASSESSEE SPECIFICALLY PLACE D EMPHASIS ON THE DECISION OF THE JODHPUR BENCH OF THE TRIBUNAL IN TH E CASE OF ITO V. EMERALD CONSTRUCTION COMPANY LIMITED (SUPRA). WE F IND THAT IN THAT 8 CASE THE INTEREST WAS HELD TO BE NOT CHARGEABLE BEC AUSE THE ASSESSEE HAS ALREADY PAID THE TAX LEAVING NOTHING FOR THE P AYER AND THAT TOO IN TIME WHEREAS IN THE PRESENT APPEAL DURING SURVEY PR OCEEDINGS ON 14.12.2006 THE ITO TDS RATLAM FOUND THAT THE ASS ESSEE COMMITTED DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE FROM THE PAYMENTS MADE TO M/S DEWAS UDHYOG AND RATHER VIDE ORDER DATED 28.3.2 007 HE CREATED DEMAND ALONG WITH INTEREST ON THE TOTAL PAYMENTS MA DE BY THE ASSESSEE. IT IS NOT THE CASE THAT THE ASSESSEE DED UCTED TAX. HOWEVER THE ASSESSEE FAIRLY AGREED THAT THERE IS A DEFAULT OF NON-DEDUCTION OF TDS THEREFORE AS DISCUSSED ABOVE ONCE THE DEFAUL T IS ESTABLISHED THEN CHARGING OF INTEREST U/S 210(1A) OF THE ACT IS AUTOMATIC AND MANDATORY THEREFORE THE CASES RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE OF NO HELP. FINALLY THESE APPEALS OF THE ASSESSEE ARE DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 21 ST MARCH 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2.3. 2.2011 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE DN/-