Income Tax Appellate Tribunal - Allahabad
Ito(Tds),, Allahabad vs Lok Sewa Ayog,, Allahabad on 26 March, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL,
ALLAHABAD BENCH, ALLAHABAD
(THROUGH VIRTUAL COURT)
BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER
AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
ITA No. 329/ALLD/2017
Assessment Year: 2013-14
ITA No. 330/ALLD/2017
Assessment Year: 2014-15
The ITO (TDS), v. Public Service Commission
38, M.G. Marg, Civil Lines, (Lok Sewa Aayog),
Allahabad,UP Uttar Pradesh,
Stanley Road,
Allahabad,UP
TAN: ALDL00365B
(Appellant) (Respondent)
ITA No. 10/ALLD/2018
Assessment Year: 2013-14
ITA No. 11/ALLD/2018
Assessment Year: 2014-15
The Secretary, v. The Income Tax Officer (TDS),
Public Service Commission Aaykar Bhawan,
(Lok Sewa Aayog), 38, M.G. Marg,
Uttar Pradesh, Allahabad,UP
Stanley Road
Allahabad,UP
TAN: ALDL00365B
(Appellant) (Respondent)
Appellant by: Shri A.K. Singh, Sr. DR
Respondent by: Shri Sanjay Kumar, Adv.
Date of hearing: 03. 02. 2021
Date of pronouncement: 26.03. 2021
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018
Assessment Years: 2013-14 & 2014-15
Public Service Commission
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 separate order(s) dated 01.02.2016 passed by learned Assessing Officer( hereinafter called " the AO") u/s. 201 (1)/201 (1A) of the Income Tax Act, 1961 (hereinafter called "the Act") . We have heard both the parties through video conferencing mode through virtual court.
2. The grounds of appeals raised by Revenue in its appeal in ITA No. 329 and 330/Alld/2017 for ay : 2013-14 and 2014-15 and by assessee in its appeal(s) in ITA No. 10 and 11 /Alld/2018 , for ay 2013-14 and 2014-15 respectively, in memo of appeal filed with Income-Tax Appellate Tribunal, Allahabad (hereinafter called " the tribunal") , reads as under :
The Revenue has raised the following grounds of appeal in its appeal for ay: 2013- 14 and 2014-15 in memo of appeal filed with the tribunal:2
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission Revenues Appeal in ITA no. 329/Alld/2017 for ay:2013-14( the grounds are common in both the years and only amounts are varying) "1. That the ld CIT(A) has erred in passing a non-speaking order while reducing the amount of tax default of Rs. 36,40,063/- (Rs. 33,40,285/- in ay: 2014-15) to only Rs. 67,600/-(Rs. 74,300/- in ay: 2014-15) on account of the assessee's failure to deduct tax at source u/s 194J on the various payments made under the head 'honorarium', without stating any cogent reason/material therefor.
2. That the ld CIT(A) has erred in passing a non-speaking order while reducing the amount of tax default of Rs. 6,97,816/- (Rs. 6,97,816/- in ay: 2014-15) to only Rs. 49,950/-(Rs. 28,422/- in 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 'Stationary & Forms', without stating any cogent reason/material therefor.
3. That the ld CIT(A) has erred in passing a non-speaking order while reducing the amount of tax default of Rs. 7,00,000/-(Rs. 7,05,745/- in ay:2014-15) to only Rs. 48,596/-(Rs. 29,797/- in 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 'Office furniture & Equipment's', without stating any cogent reason/material therefor.
4. That the ld CIT(A) has erred in passing a non-speaking order while reducing the amount of tax default of Rs. 9,57,218/- (Rs. 5,40,000/- in ay: 2014-15) to only Rs. 99,286/-(Rs. 1,42,243/- in 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.3
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission
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 Rs. 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 Rs. 32,158/-.
2. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding that the payments of Rs. 1,69,00,000/- made under the head "Suspense Service Expenses" which are Confidential in nature, is subject to deduction of tax at source.
2.1 That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in ignoring the submissions made by the Appellant that in accordance with the Financial Hand Book issued by the State Government, the Authorities incurring expenditure under the head "Gupt Seva Ke Vyay" (Confidential Service Expenditure), are duty bound not to disclose the details of payments made under this head.
2.2 That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding that payments made under this head are subject to deduction of tax at source @20%, as specified u/s 206AA on account of non furnishing of PAN of the payee.4
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission
3. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding that the payments made under the head "Honorarium" are subject to deduction of tax at source u/s 194J of the Act.
3.1 That the Appellant had under mistaken belief, admitted during Appellate proceedings, in cases where payment to each person exceeded Rs. 30,000/-, that the provision of section 194J were applicable and therefore there was non deduction of tax at source.
4. 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 "Stationery & Forms" are subject to deduction of tax at source u/s 194C of the Act. 4.1 Appellant had under mistaken belief, admitted during Appellate proceeding, that the payments were covered u/s 194C was applicable.
5. 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.
5.1 That the Appellant had under mistaken belief, admitted during Appellate proceedings, 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 "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 5 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission there was a short deduction of Rs. 1,17,646/- under the head "Rent & Other Charges" as against Rs. 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 the time of hearing."
Assessee's Appeal in ITA no. 11/Alld/2018 for ay:2014-15 "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 Rs. 91,631/- 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 Rs. 91,631/-.
2. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding that the payments of Rs. 3,69,00,000/- made under the head "Suspense Service Expenses" which are Confidential in nature, is subject to deduction of tax at source.
2.1 That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in ignoring the submissions made by the Appellant that in accordance with the 6 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission Financial Hand Book issued by the State Government, the Authorities incurring expenditure under the head "Gupt Seva Ke Vyay" (Confidential Service Expenditure), are duty bound not to disclose the details of payments made under this head.
2.2 That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding that payments made under this head are subject to deduction of tax at source @20%, as specified u/s 206AAon account of non furnishing of PAN of the payee.
3. Without Prejudice to the above ground, the learned Commissioner of Income Tax(Appeals) erred in enhancing the demand on account of non deduction of tax at source at Rs. 73,80,000/- as against Rs.51,19,731/- determined by the Assessing Officer, without giving a proper show cause notice to the appellant.
4. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding that the payments made under the head "Honorarium" are subject to deduction of tax at source u/s 194J of the Act.
4.1 That the Appellant had under mistaken belief, admitted during Appellate proceedings, in cases where payment to each person exceeded Rs. 30,000/-, that the provision of section 194J were applicable and therefore there was non deduction of tax at source.
5. 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 "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.
7ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission
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 Income-tax (Appeals) erred in holding that there was a short deduction of Rs. 1,81,007/- under the head "Rent & Other Charges" as against Rs. 5,99,677/- 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.
10. 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.
11.Without Prejudice, the learned Commissioner of Income Tax(Appeals) ought to have directed the Assessing Officer to follow the judgment of the Supreme Court in the case Hindustan Coca Cola Beverages P Ltd. Vs CIT 211 CTR 545.8
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission That the Appellant craves leave to add, alter, modify, vary, delete any ground of appeal before or at the time of hearing."
4. The brief facts of the case are that the assessee is a State Organization being an autonomous body which came into existent by the power conferred in Article 315 to 323 of the Constitution of India and is known as Uttar Pradesh Service Commission . The assessee was established to conduct examination and selection of candidates for the purpose of Provincial Services. These four appeals are cross appeals for ay: 2013- 14 and 2014-15 respectively which are filed by the assessee as well by revenue and they are concerned with the default in deducting of income tax at source while making payments for expenditure incurred by the assessee , under various provisions of Chapter XVIIB of the 1961 Act , as alleged by revenue vide separate orders both dated 01.02.2016 passed by AO u/s 201(1) and 201(1A) of the 1961 Act for ay: 2013-14 and 2014-15 respectively .
5. We will first take up the issues arising in cross appeals for ay: 2013-14.
5.2The Assessing Officer observed that the assessee had made payment of Special Services and there was a short deduction of income tax at source while making payments which was at lower rates than the rates prescribed under the provision of section 194J of the Act and in one case, no income tax was deducted at source, 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 Rs. 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 9 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission 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 Rs. 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 the assessee has not deducted income tax at source on payment of Rs. 2,35,00,000/- made for Suspense Service Expenses and the assessee ought to have deducted income tax at source@20% amounting to Rs. 47,00,000/- and the asessessee was held to be in default for non deduction of income tax at source within the provision of section 201 (1) and also for payment of interest u/s 201(1A) of the Act. The assessee on its part had not furnished any details in compliance of notice dated 18.12.2015 issued by the AO.
5.4Further, the Assessing Officer observed that the assessee made payment of honorarium which are paid for availing services which are professional in nature and the assessee has not deducted income tax at source on payment of Rs. 1,82,45,316/- and also the AO observed that the assessee has not furnished PAN of the payees/deductees , on which income tax at source @ 20% u/s 194J read with Section 206AA ought to have been deducted, which led Assessing Officer to hold that the assessee has defaulted u/s 201 (1) of the Act to the tune of Rs. 36,49,063/- and also 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.
5.5The A.O. further observed that the assessee has made payment of Rs. 34,89,081/- towards Stationary and Forms which payments are contractual in nature on which income-tax at source u/s 194C ought to have been deducted , but no such TDS was 10 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission deducted at source by assessee and further the assessee has not furnished the PAN of the payee/deductee, which led A.O. to hold that the assessee is in default to the tune of Rs. 6,97,816/- for non deduction of income tax at source u/s 194C of the 1961 Act read with Section 206AA of the 1961 Act, within the provisions of section 201 (1) of the Act and also 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.
5.6Further, it was observed by the A.O. that the assessee has made payments towards office Furniture and Equipment to the tune of Rs.35,00,000/- , which payments are covered by provisions of Section 194C of the 1961 Act , but the assessee has not deducted income-tax at source while making payment to the payees nor the assesse 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 Rs. 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 Rs. 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 Rs. 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 18.12.2015 issued by the AO.
11ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission 5.8 The AO further observed that the assessee has made payments towards rent and other charges to the tune of Rs. 12,99,951/- and the assessee has not deducted income tax at source within the provisions of Chapter XVIIB of the 1961 Act and further the assessee has not furnished PAN as is required u/s 206AA of the 1961 Act, which led AO to hold that the assessee is in default for non deduction of income-tax at source to the tune of Rs. 2,59,990/- under the provisions of Section 201(1) of the 1961 Act and further , the AO observed that the assessee is also liable for interest under the provisions of Section 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.
6. Aggrieved by an order dated 01.02.2016 passed by the AO u/s 201(1) and 201(1A) of the 1961 Act, the assessee filed first appeal with Ld. CIT (A). The assessee on its part submitted that the assessee is a State Government Department and making expenditure on the basis of available budget and sanctioned heads by the Government. The assessee submitted before ld. CIT(A) that the assessee had made expenditure under different heads as sanctioned and had also deducted income-tax at source from payments made to various persons/organizations by following the provisions of the 1961 Act. It was submitted by the assessee before ld. CIT(A) that the assessee being State Govt. almost the transactions were routed through treasury offices and the treasury has deducted income tax at source as applicable for deduction under the provisions of the 1961 Act. The assessee submitted before ld. CIT(A) that the TDS return have been filed for the relevant period on which income tax was deducted at source, which can be verified. The copies of TDS returns were furnished by assessee before ld. CIT(A). The assessee submitted head-wise details for payments made under various heads.
6.2Payment of Special Services. The assessee submitted that payments were made for legal services and the assessee admitted before ld. CIT(A) its liability/demand 12 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission for short deduction of income tax deduction at source to the tune of Rs. 32,158/- , as raised by the A.O..
6.3Payment of Suspense Service Expenses-With respect to Suspense Service Expenses, the assessee submitted that the assessee is a Public Service Commission, Uttar 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 Rs. 2,35,00,000/- was incurred by the assessee , it was submitted that the actual expenditure incurred under this head was Rs. 1,69,00,000/- . It was submitted that with the object to maintain secrecy and confidentiality, no income-tax was deducted at source on the whole expenditure. It was submitted that if TDS was to be deducted then the requirement of PAN and filing of quarterly TDS returns would have arisen and the whole purpose of secrecy and confidentiality would have been lost. Thus, it was submitted that these expenses cannot be disclosed anywhere and a separate Govt. budget is allocated, it cannot be categorized for expenses which are covered under the purview of TDS and hence no default should be attributable against this allocation. The assessee also submitted that A.O. has applied rate of 20% for deduction of income-tax at source on the grounds that the assessee has not furnished 13 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission PAN of the payees/deductees which is not justified . It was submitted that the assessee has not deducted any income tax at source on these payments made under the head Suspense Service Expenses on the grounds that confidentiality has to be maintained due to nature of these expenses and State Government Policy and hence TDS rate as stipulated u/s 206AA cannot be applied on the grounds that PAN of the payee/deductee was not submitted and even if the rates of TDS is to be applied, then the applicable rates under provisions of Section 194C/194J should be applied.
6.4 Honorarium The assessee submitted before ld. CIT(A) that the total expenditure made during the relevant period under the head honorarium was Rs. 34,99,720/- whereas the A.O. has wrongly mentioned the said amount in its order that the total expenditure was Rs. 1,82,45,316/-. It was submitted that no income tax was deducted at source under this head as the total remuneration paid to the individual examiner was too less to be covered under the purview of TDS liabilities u/s 194J. The assessee submitted before ld. CIT(A) complete detail of payment of Rs. 34,99,720/- made by assessee under this head during the year under consideration. It was submitted by assessee before ld. CIT(A) that only in 5 instances, the payments made to an individual were in excess of Rs. 30,000/- in the year. The assessee submitted that total of default in these five instances aggregates to an amount of Rs. 2,46,000/- and thus TDS liability will arise only to the tune of Rs.24,600/- @ 10% of the total amount u/s 194J. The assessee also pleaded that the Assessing Officer has applied rate of 20% as PAN of the payee was not 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.
14ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission 6.5 Stationery & Forms The assessee submitted before ld. CIT(A) that the total expenditure made during the relevant period under consideration was Rs. 35,00,000/- , whereas the A.O. has wrongly mentioned in its order that the total expenditure of Rs. 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 person in a year in aggregate is upto Rs. 50,000/- , or less that Rs. 20,000/- in single payment. The assessee submitted before ld. CIT(A) payee wise details of income tax deducted at source which are reproduced in appellate order passed by ld. CIT(A) at page 5 and 6 and the same is reproduced hereunder:-
Name of supplier Amount of Payment TDS PAN
Bharti Moharwala 16751.00 NA Not required
Gaurav Traders 78686.00 1412.00 AMXPD7123J
Government Press 989289.00 NA GOVT DEPPT
Hightech Graphics 1106557.00 24787.00 AACCH9917Q
Jai Shree Enterprises 96823.00 1880.00 AGYPM2841H
Jyoti Infotech 34395.00 552.00 Not available
Kohli Enterprises 5660.00 NA Not required
Naini Gramodyog 116845.00 2442.00 AAATN5270H
Panchayat Udyog 11525.00 258.00 AAUPU2199N
Pravin Paper Products 193225.00 4328.00 AAFFP1861K
15
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018
Assessment Years: 2013-14 & 2014-15
Public Service Commission
Radha Krishna Traders 129778.00 1936.00 Not available
Rajesh Corporation 353904.00 7928.00 ABLPS5207K
Ramco Trading Co. 108600.00 2433.00 AALPR3401K
SCJ Scanning 117800.00 2639.00 AAOCS8547B
SKD Commercial Co. 29787.00 667.00 ADQPV1600A
Sunny Enterprises 110375.00 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 (Rs. 34395+129778+110375= Rs. 274548) i.e. Rs. 54,910/- less TDS already deducted at source on these payments to the tune of Rs. 4960/- , which comes to Rs. 49,950/- The assessee submitted that default raised by AO was to the tune of Rs. 6,97,816/- which should be limited to Rs. 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 Rs. 10,99,921/- , whereas the A.O. wrongly mentioned the amount of expenditure in its order as Rs. 35,00,000/-. The assessee submitted that the TDS was deducted on all the payments at the time of passing bill by treasury. It was submitted by assessee before ld. CIT(A) that PAN was also provided by assessee before the Ld. ITO(TDS) at the time of regular proceedings. The assessee submitted list of relevant payments along with PAN and TDS amount before Ld. CIT (A) for verification. The details submitted are reproduced by ld. CIT(A) in his appellate order, as under:
Name of supplier Amount of Payment TDS PAN
16
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018
Assessment Years: 2013-14 & 2014-15
Public Service Commission
Excel Interior 7196.00 NA Not required
Gaurav Traders 1215.00 NA Not required
Java Enterprises 13544.00 NA Not required
JAZ Enterprises 111626.00 2385.00 Not available
London Bombay Co 20927.00 225.00 AEJPK9485N
Prayag Enterprises 152900.00 3425.00 ACYPL8741R
Priya Service Network 4800.00 NA Not required
Radha Krishna 31145.00 698.00 Not available
SKD Commercial Co. 138341.00 3099.00 ADQPV1600A
SPS Enterprises 4256.00 NA Not required
Three Star Traders 123887.00 2324.00 AUOPS0194F
UPICA 490084.00 10978.00 AAACU1872D
TOTAL 1099921.00 23134.00
The assessee submitted that the head of expenditure is covered u/s 194C and the applicable rate of TDS is 1% for individual and 2% for other than individual. The assessee submitted that exemption limit for non deduction of TDS for any person is aggregate amount of Rs. 50,000/- in a year or less , and that Rs. 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 (Rs. 31145 + Rs.111626), which comes to Rs. 25,471/- . It was submitted that the AO erroneously held assessee to be in default for Rs. 7,00,000/- along with interest, while the default should be restricted to Rs. 25,471/- and interest thereon.
6.7 Advertisement, Sales & Services The assessee submitted that the total expenditure made during the relevant period was Rs. 2,35,00,000/-, whereas the A.O. has wrongly mentioned in its 17 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission order that the total expenditure was Rs. 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 all the payments were made only after deduction of income tax at source, the default raised by I.T.O. (TDS) for Rs. 9,57,218/- cannot be justified and should be deleted.
6.8Rent and other charges The assessee submitted before ld. CIT(A) that the total expenditure made during the year was Rs. 82,75,175/-, whereas the A.O. has wrongly mentioned in its order that the total amount of expenditure was Rs. 12,99,951/-. It was submitted by assessee before ld. CIT(A) that the expenditure of Rs. 82,75,175/- was paid towards house tax and water tax and no other payment was made to any other person/body corporate. The details of expenditure was submitted by assessee before ld. CIT(A), which are reproduced as under:-
Water Tax Dept, Lucknow 3,50,680/-
Water Tax Dept. Allahabad 31,38,401/-
Nagar Nigam, Allahabad (House Tax) 44,16,957/-
Nagar Nigam, Lucknow (House Tax) 3,69,137/-
TOTAL 82,75,175/-
It was submitted that the above payments were made by assessee towards taxes and local duties to municipal bodies and hence no liability towards deduction of income tax at source will arise. The assessee submitted before ld.
18ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission CIT(A) that TDS liability of Rs. 2,59,990/- along with interest as raised by AO is totally unjustified and should be deleted.
6.9 The assessee also submitted before ld. CIT(A) that provisions of Section 206AA can be invoked when PAN of the deductee is not available , but penal TDS rate @20% as provided u/s 206AA can be invoked only in the cases when deduction of income tax at source was made and the same cannot be invoked when no deduction of income tax at source was made at all by the assessee on the expenditure incurred.
7.The ld. CIT(A) was pleased to forward the submissions of the assessee to the ITO(TDS) for seeking remand report from the AO on the contentions of the assessee on various issues.
8. The ld. ITO(TDS) was pleased to submit its report to ld. CIT(A), vide letter dated 31.08.2017 , which is reproduced hereunder:
"2. In this connection, as per your honor's direction, the deductor was required to produce all relevant cash books and other documents relating to expenditure under different 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 19 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission respect of 26Q after affording several opportunities vide his letters dated 18.05.2015, 17.06.2015, 10.07.2015, 04.09.2015, 06.10.2015 18.11.2015 and show cause notice dated 18.12.2015. As per record, the deductor furnished only part information through its letter dated 23.07.2015. Thereafter, any compliance to the aforesaid letters and show cause notice was not made except the submission that the information is being collected from different sections of the UPPSC. The then TDS AO, in his orders u/s 201(1)/201(1A) for A.Y. 2013-14 & 2014-15 dated 01.02.2016 considered the figures of the expenditure, under different heads in question , on the basis of the information furnished in the treasury , Allahabad . During the course of proceedings , the deductor had never raised any question as regards to the figures of the expenditure under different heads , despite of the fact that show cause notice, containing the figures of the expenditure was duly served to the deductor.
5. The figures of the expenditure under different heads in question considered by the then AO on the basis of the information provided by Treasury and that as per grant-wise scheme-wise expenditure statement furnished by the deductor are given in the table below.
F.Y Expenditure head Amount of Amount of exp. as Remark
exp. as per per grant-wise
AO (Based on scheme-wise
treasury expenditure
information) statement
furnished
2012-13 Suspense service 2,35,00,000 1,69,00,000 The difference in
figure is due to
misprint in the
head wise
information
provided by the
Treasury
Honorarium 1,82,45,316 34,99,720 -.-do- -
Stationary& form 34,89,081 35,00,000 --- do--- -
Office 35,00,000 10,99,921 -- -do--- -
furniture & Equip
Advt. sales & 47,86,094 2,35,00,000 -.-- do-- -
services
20
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018
Assessment Years: 2013-14 & 2014-15
Public Service Commission
Rent &,other 12,99,951 47,86,094 ----do----
charges
2013-14 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 & 35,28,729 34,42,134 ----- .do--- -
Equip
Advt. sales & 27,00,000 2,55,98,658 -- -do--- -
services
Rent & other 29,98,438 27,00,000 .---do--
charges
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 RS. 32518/- by applying TDS rate of 10% in cases where the deductor had done TDS at lesser rate The aforesaid short charge has been admitted by the deductor in its submission before your honor. Similarly, for the F.Y. 2013-14 relevant to A.Y. 2014-15, the then TDS AO had worked out short charge of Rs. 91631/- which has also been admitted by the deductor in its submission before your honor.
(ii) Suspense Service expenses:
So far as the verification and identification of payments under this major head and is various sub heads are concerned, the deductor has not furnished any cash book or any details/ documents before the undersigned except the following submissions vide its reply dated 11.08.2017 which reads as under:21
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission As per 11-C register, the bill wise details of the amounts transferred to confidential A/c are as under:-
F.Y. 2012-13 04.08.2012 Rs. 1,00,00,000
16.01.2013 Rs. 69,00,000
Total Rs. 1,69,00,000
F.Y. 2013-14 05.08.2013 Rs. 75,00,000
26.11.2013 Rs. 1,50,00,000
08.01.2014 Rs. 1,44,00,000
Total Rs. 3,69,00,000
To ascertain the applicability of TDS provisions on payments under the Suspense head & it's sub-heads, the deductor was requested, vide order sheet entry dated 24.08.2017, to furnish a bill wise list of payment amount without disclosing the names and PANs of the parties to maintain confidentiality. On the request of the deductor's representative, the date was fixed for 30.08.2017 but on the said date, no compliance has been made in this regard.
The deductor was under statutory obligation to make TDS due to non- possession of no deduction certificate from the payees; on payments at the prescribed rates depending on nature of the payments or at a higher rate us per section 206AA but failed to do so. It has also been admitted by the deductor in its submission before your honor that TDS on payments under the head Suspense Service has not been done at all. Therefore, the then AO has rightly calculated the short charge under this 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 22 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission 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 Rs. 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 Tax Tax deducted Short paid deductible by the deduction @ 20% deductor 2012-13 G P Dixit, Lucknow 31000 6200 NIL 6200 G C Srivaastav, New 70000 14000 NIL 14000 Delhi Hari Shankar 85000 17000 NIL 17000 Mishra, Luck now G D Mehrotra, Lucknow 32000 6400 NIL 6400 Maheshwari 57000 11400 NIL 11400 Prasad, Varanasl R P Singh, Allahabad 31000 6200 NIL 6200 R P Singh, Varanasi 32000 6400 Nil. 6400 2013-14 D N Verma Faizabad 45000 9000 NIL 9000 Farhat Ali, Allahabad 34500 6900 NIL 6900 Gaya Prasad 37000 7400 NIL 7400 Sharma, Saharanpur Hausala Prasad Singh, 91500 18300 NIL 18300 Allahabad Pradeep Sharma, 73500 14700 NIL 14700 Allahabad 23 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission Ram Krishna Jaiswal, 59500 11900 NIL 11900 Faizabad G C Srivaastav, New Delhi 30500 6100 NIL 6100
(iv) Stationary & Forms:
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 Rs. 35,00,000/- for F.Y. 2012-13 and Rs. 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 Tax Tax Short Remarks
paid deductible deducted by deduction
@ 20% the
deductor
2012-13 Jyoti Infotech 34395 6879 552 6327 Not in 26Q
Radha Krishna 129778 25956 1936 24020 Not in 26Q
Traders
Sunny Enterprises 110375 22075 2472 19603 Not in 26Q
2013-14 Sunny Enterprises 159550 31910 3488 28422 Not in 26Q
(v) Office furniture & Equipments:
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 Rs. 10,99,921/- for F.Y. 2012-13 and Rs. 34,50,000/- for F.Y. 2013-14, furnished before your honor as well the undersigned, match with details of 11-C registers but not with monthly DDO reconciliation statement of Treasury (difference of Rs. 7866/-). The payments under this head, being contractual in nature, are covered u/s 194C of the I.T. Act, 1961. On verification, it is 24 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission 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 payee 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 payments works out as under:-
F.Y. Name of the Party Amount Tax Tax Short Remarks
paid deductible deducted deduction
@ 20% by the
deductor
2012-13 Jaz Enterprises 111626 22325 2113 20212 Not in 26Q
Radha Krishna 31145 6629 698 5931 Not in 26Q
Traders
Three Star Traders 123887 24777 2324 22453 Not in 26Q
(PAN do not relate)
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 Rs. 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 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 payees are in the status of Firm/Company on which TDS rate of 2% is applicable.
F.Y. Name PAN Amount Tax Tax Short Remarks
of the paid deductibl deducted deducti
party e @ 2% by the on
deductor
2012- Adnec AAGFA4655H 3581015 71620 40179 31441 Covered in
13 Adv 26Q &
Short
25
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018
Assessment Years: 2013-14 & 2014-15
Public Service Commission
charge
demand
already
raised by
CPC
Anu AACCA0278K 7727345 154547 86702 67845 ---do---
Adv.
2013- Adnec AAGFA4655H 1895615 37912 22627 15285 ---do---
14 Adv.
Anu AACCA0278K 8717279 176346 97806 78540 ---do---
Adv.
Inter AAACI2834D 1329757 26595 14920 11675 ---do---
Ads
RD AACCR4712P 4184866 83692 46954 36743 ---do---
Advt. Except on
payment
of Rs.
1248749/-
(vii) Rent & other charges:
From the details & documents furnished before the undersigned, it is found that payments under this head are in the nature of house tax only, on which provisions of TDS are not attracted.
7. Apart from the above, on verification 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 Amount Tax Tax Short Remarks
party paid deductible deducted deduction
@ 20% by the
deductor
2012-13 Jaz Enterprises 402358 80472 6875 73597 Not in 26Q
Java 73153 14630 1418 13212 Not in 26Q
Enterprises
Three Star 173155 34631 3794 30837 Not in 26Q
Traders
2013-14 Jaz enterprises 418736 83747 8760 74987 Not in 26Q
Java 596980 119396 13376 106020 Not in 26Q
26
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018
Assessment Years: 2013-14 & 2014-15
Public Service Commission
enterprises
9. The ld. CIT(A) was pleased to adjudicate the appeal filed by assessee on each of the issues , vide appellate order dated 21.09.2017
9.2 Payment of Special Services So far as the payment towards special services made by assessee is concerned, the Ld. CIT (A) observed that the assessee has accepted short deduction of income-tax at source of an amount aggregating to Rs. 32,158/- on payments made for special services, and hence consequently the same were confirmed by Ld. CIT (A) .
9.3 Suspense Service expenses So far as the payments towards suspense service expenses are concerned, the Ld. CIT (A) observed that the Assessing Officer has mentioned in the order that the assessee has not produced the details of suspense service expenses. The ld. CIT(A) observed that the AO has given a categorical finding that the assessee has not submitted the details of nature of payment and PAN of the recipients and based on these facts, the AO calculated short deduction @20% of the payment which comes to Rs. 47,00,000/- . The ld. CIT(A) observed that the assessee during the course of appellate proceedings submitted that actual payments made under this head Suspense Services Expenses were to the tune of Rs. 1,69,00,000/- and not as was mentioned by the Assessing Officer in its order u/s 201(1) and Section 201(1A). The ld. CIT(A) observed that It was stated by the assessee that due to the secrecy and confidentiality, no income- tax was deducted at source on the total expenditure under this head as these are secret funds , if TDS and PAN are uploaded the whole confidentiality will be compromised. The ld. CIT(A) observed that even during remand proceedings before the AO at the direction of ld. CIT(A), the assessee had not submitted 27 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission details as to nature of services and PAN of the recipients . It was observed by ld. CIT(A) that even during counter to the remand report, the assessee has repeated the same arguments., which it filed before the AO. The Ld. CIT (A) observed that 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 has defaulted by not deducting income-tax at source @20% of the amount of Rs. 1,69,00,000/- paid under the head 'Suspense services expenses', which comes to Rs. 33,80,000/-
9.4 Honorarium The Ld. CIT (A) observed that the assessee has agreed that the income-tax should have been deducted at source on payments made towards honorarium and the assessee having failed to deduct income tax at source. Further , the Ld. CIT (A) observed that since no PAN has been furnished by assessee of the payees , the applicable rate of income tax to be deducted at source will be 20%, 28 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission as is provided u/s 206AA of the 1961 Act . The ld. CIT(A) observed that there was short deduction to the tune of Rs. 67,600/- which was confirmed by ld.
CIT(A) and the balance amount was deleted by ld. CIT(A).
9.5Stationery & Forms The ld. CIT(A) observed that the assessee has agreed with the finding of the ITO(TDS) and, therefore , the addition to the extent of Rs. 49,956/- on account of short deduction of income-tax at source was confirmed by ld. CIT(A) and the balance amount was ordered to be deleted by ld. CIT(A) 9.6 Office Furniture & Equipment The Ld. CIT (A) observed that the assessee and the AO have agreed that there is short deduction of income-tax at source to the tune of Rs. 48,596/- under this head and the ld. CIT(A) was pleased to confirm additions of short deduction of income-tax at source to this extent of Rs. 48,596/- and the balance amount was ordered to be deleted by ld. CIT(A) 9.7 Advertisement, Sales & Services The Ld. CIT (A) observed that the A.O. has recomputed the short deduction of income-tax at source to the tune of Rs. 99,286/- and the assessee agreed for the same , which stood confirmed by ld. CIT(A).
9.8 Rent & Other charges The Ld. CIT (A) observed that A.O. has computed the short deduction of Rs. 1,17,646/- which was confirmed by Ld. CIT (A).
10.Aggrieved by appellate order dated 21.09.2017 passed by ld. CIT(A), both the assessee as well Revenue are before us and cross appeals are filed. We have heard both the parties through video conferencing through Virtual Court. The ld. Counsel for the assessee submitted that written submission/paper book 29 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission is filed with the tribunal on 02.02.2021 containing in all 16 pages , which should be taken on record as the same are relied upon by assessee. The ld. 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 confidential in nature and hence no income tax was deducted at all on these payments . The payments to the tune of Rs. 1.69 crores were made towards such confidential services. It was submitted that these are payments for printing of examination papers for appointment of candidates for various posts in UP Govt. It was submitted that the papers , ink, etc. are supplied by the vendor who print the examination paper on behalf of the assessee which is then supplied at various locations as per instruction of the assessee. It was submitted that this supply of pre-printed examination paper is sale and not work contract. The reliance was placed by ld. Counsel for the assessee on the decision of ITAT, Delhi in the case of I.T.O. v.
30ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission Board of School Education Haryana in ITA no. 5349-5352/Del/2012, vide orders dated 04.01.2013 and it was submitted that supply of examination papers by printers is a contract of sale and not work contract , as the said printers use their own paper, ink etc. for printing examination paper which is then supplied to the assessee in finished form by the printers. Thus, it is claimed that there is no liability to deduct income tax at source on the supply of examination paper by printer to the assessee as it is a contract of sale and not work contract. Our attention was drawn to written submissions/ paper book (containing 16 pages in all) filed on 02.02.2021 , and it was submitted that in letters dated 25.5.2012 and 17.7.2012 for sanction of budget by UP government, there is allocation of Secret Service Expenses(pb/8-11 of w.s./ paper book). With respect to Ground No. 7, it is pleaded that the payments are towards house tax and water tax and hence , no income tax was deducted at source on these payments. It was submitted that the ld. CIT(A) confirmed additions to the tune of Rs.1.17 lacs which is not correct. With respect to the ground number 8, it was submitted that the said ground is raised without prejudice to the other grounds and is concerning invocation of Section 206AA of the 1961 Act. It was submitted that for ay: 2014-15, similar issues have arisen as were for ay: 2013-14 and only ground number 2.1, 8 & 9 are pressed , while for other grounds, it was prayed that the said grounds be dismissed. The ld. DR submitted that these documents which are placed in paper book for sanction of budget by UP Government which also contains allocation for Secret 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.
31ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission 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 number 2, 2.1 and 2.2 as well Ground No. 7 and 8 raised in memo of appeal filed by assessee with tribunal. The other grounds raised by assessee in its appeal filed with tribunal for ay:2013-14 are already dismissed by us in para number 10 of this order. We will proceed to adjudicate assessee's appeal ground wise of the ground now pressed before us:
11.2 Ground No. 2, 2.1 and 2.2-Assessee's Appeal All the aforesaid three grounds are connected with each other and revolves around payments made by assessee towards suspense service charges to the tune of Rs. 1,69,00,000/-, as upheld by ld. CIT(A). The assessee has claimed that these are payments of confidential/secret nature and the details of payees and other details cannot be disclosed. It is claimed that no income tax was deducted at source while making payments under this head as otherwise confidentiality would have been breached if the PAN and other details such as of payees etc are uploaded into the system while filing TDS returns. It is claimed that the assessee is an autonomous body under the State Government and concerns itself with various appointments of personnel with State Government for which it conducts examination , hold interviews etc. . It is 32 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission claimed that the expenses under this head were incurred towards printing of examination paper and payments were made to printers who have supplied pre-printed examination paper to the assessee and the printers have used their own paper , ink etc while supplying pre-printed examination papers to the assessee and hence it is a contract of sale and not work contract . Thus, it claimed that provisions of Section 194C of the 1961 Act has no applicability . It is claimed that there was no liability for deduction of income tax at source with in provisions of Chapter XVII-B of the 1961 Act as supplying of preprinted examination paper is contract of sale is not covered under the provisions of 1961 Act entailing deduction of income tax at source. It is also claimed that budget for expenses approved for assessee by U.P. Government includes provision for expenses towards secret services, for which evidence by way of budget approved by UP Government is placed on record (page 8-11 of written submission/paper book filed on 02.02.2021). The ld. DR submitted that these are additional evidences placed for the first time before the tribunal and the same need verification 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 33 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission 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 . So far as contentions of the assessee that the nature of payments is for supplying of pre-printed examination paper which is contract of sale , the facts are not on record to substantiate the contention of the assessee and hence we are afraid that in the absence of basic factual details of contracts we are not in a position to grant relief.We are bound by the statutory provisions as are contained in the 1961 Act which mandates deduction of income tax at source by the deductor , if the payments falls within the four corners of Chapter XVII-B. In the case of the Board of School Education(supra) relied upon by assessee, the factual aspect of the payment was before the tribunal and after going through the factual aspect of the contract executed, the tribunal held that the same was sale of contract and not work contract and hence no income tax was required to be deducted at source under the provisions of Chapter XVII-B. Further, in that case of Board of School Education(supra ) relied upon by assessee, there was evidence on record that the tax-payer has obtained affidavits from the printers that they will include this income in their return of income filed with department and due taxes paid. But, in the instant case before us none of these facts are emerging from the record before us, and there is only an bald assertion made that the amount was spent for supply of pre-printed examination papers while there are no evidence on record before us to hold that these payments were made for the aforesaid purposes. Even affidavit from Secretary , Lok Seva Aayog , U.P.(UP Public Service Commission) averring the nature of expenses incurred has not been filed. It is equally true that the assessee has got allocation from UP State Government for expenditure for secret services. 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 34 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission 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 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 in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should 35 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission
(a) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;
(b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs."
Keeping in view totality of the facts and circumstances as discussed above, we are of the considered view, that one more opportunity need to be granted to the assessee and the issue is restored to the file of the AO for fresh adjudication. We clarify that all the contentions are kept open. The AO shall give proper and adequate opportunity 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. This will dispose of ground number 2, 2.1 and 2.2 of the assessee's appeal. These grounds are allowed for statistical purposes. We order accordingly.
11.3 Ground No. 7-Assessee's Appeal This ground concerns with default in deduction of income tax at source on payments made towards Rent and other charges. The assessee is claiming that these are payments towards house tax and water tax, but we have observed that apart from house tax and water tax payments , there were further payments as discovered by AO during proceedings conducted for submission of remand report to ld. CIT(A) during the appellate proceedings , which facts is stated by AO in its remand report that payments to the parties covered under the head 'Rent and other charges ' were also made from other heads of expenditure , on which no income tax was deducted at source. The relevant para of the AO in its remand report submitted to ld. CIT(A) is produced as hereunder:
"(vii) Rent & other charges:36
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission *** ***
7. Apart from the above, on verification 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 Amount Tax Tax Short Remarks
party paid deductible deducted deduction
@ 20% by the
deductor
2012-13 Jaz Enterprises 402358 80472 6875 73597 Not in 26Q
Java 73153 14630 1418 13212 Not in 26Q
Enterprises
Three Star 173155 34631 3794 30837 Not in 26Q
Traders
2013-14 Jaz enterprises 418736 83747 8760 74987 Not in 26Q
Java 596980 119396 13376 106020 Not in 26Q
enterprises
The ld. CIT(A) held the assessee to be in default to the tune of Rs. 117646/- for not deducting income-tax at source on the above payments based upon the above details submittted by AO in its remand report submitted to ld. CIT(A) , which were by way of enhancement by ld. CIT(A). We have observed that complete details of the payee, nature of payment , rent agreement details, premises hired details etc. are neither specified by AO in its remand report nor by ld. CIT(A) in its appellate order. Thus, complete facts are not emerging from the orders passed by the authorities below as the orders passed are cryptic in nature and we are of the considered view that the matter need to be restored to the file of the AO for fresh adjudication of the issue on merits 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. Needless to say that the AO shall 37 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission grant proper and adequate opportunity of hearing to the assessee in accordance with principles of natural justice in accordance with law in set aside/denovo proceedings. This will dispose of ground number 7 of the assessee's appeal. This ground is allowed for statistical purposes. We order accordingly.
11.4 Ground No. 8-Assessee's Appeal The assessee is challenging vide ground number 8 raised in its appeal the invocation of provisions of Section 206AA of the 1961 Act. The said ground is raised by assessee without prejudice to other grounds raised by it. Since, we have already restored the issue back to the file of the AO for denovo adjudication of the issues concerning deduction of income-tax at source on payments made towards Suspense Service Expenses as well on Rent and other charges as above , since this issue is interlinked with the above issues, it will be appropriate that this 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 38 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission 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 deduction of income tax at source under aforesaid heads as computed by AO in its remand report submitted by AO to ld. CIT(A) in appellate proceedings vis-à-vis default originally computed by AO in its order dated 01.02.2016 passed u/s 201(1) and 201(1A). It is admitted by AO during remand proceedings vide para 4 of remand report dated 31.08.2017 submitted by AO to ld. CIT(A) that originally the AO while passing its order u/s 201(1) and 201(1A), dated 01.02.2016 has considered the figures of expenditure under different heads based on the treasury information, but since the assessee raised its grievance before ld. CIT(A) that wrong amounts of expenditure were considered by AO while passing its order dated 01.02.2016, the AO during remand report proceedings verified the amounts from 11-C register maintained by the assessee and accordingly correct amounts were considered by the AO for computing default in deduction of income tax at source , which led to reduction of default amount for non deduction of income tax at source under aforesaid heads. We are of the considered view that now no grievance is left with Revenue, as ld. CIT(A) appellate order is based on the amounts of expenditure under aforesaid heads considered by AO itself in its remand report submitted to ld. CIT(A) during appellate proceedings. We donot find any merit in the appeal filed by the Revenue. However, if at any stage , it is found by Revenue that the AO has considered wrong amounts of expenditure under different heads while submitting remand report dated 31.08.2017 to ld CIT(A) during appellate proceedings , liberty is hereby granted to Revenue to file MA for recall of this order in ITA no. 329/Alld./2017 for ay:2013-14, provided it is based on cogent evidence/reasons. Thus, Grounds of Appeal bearing number 1 39 ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018 Assessment Years: 2013-14 & 2014-15 Public Service Commission to 6 raised by Revenue in its appeal in ITA no. 329/Alld/2017 for ay:2013-14 stands dismissed with aforesaid directions. Thus, in nutshell the Revenue appeal for ay: 2013-14 stands dismissed. We order accordingly.
13. Thus, in the result appeal filed by assessee in ITA no. 10/Alld/2018 for ay:
2013-14 stand partly allowed for statistical purposes , while Revenue Appeal in ITA no. 329/Alld/2017 for ay: 2013-14 stands dismissed.
14. The issues in cross appeals filed by assessee ( ITA no. 11/Alld/2018) and Revenue (ITA no. 330/Alld/2017) for ay: 2014-15 are identical and our decision in assessee's as well Revenue appeal for ay: 2013-14 shall apply mutatis mutandis to the appeal filed by assessee and revenue for ay: 2014-15. We order accordingly.
15. In the result, appeal filed by revenue in ITA no. 330/Alld/2017 for ay:
2014-15 stands dismissed , while the assessee's appeal filed with tribunal in ITA No. 11/Alld./2018 for ay: 2014-15 stands partly allowed for statistical purposes. We order accordingly.
16. In the result, appeals filed by revenue with tribunal in ITA no. 330- 331/Alld/2017 for ay: 2013-14 and 2014-15 stands dismissed , while the assessee's appeals filed with tribunal in ITA No. 10-11/Alld./2018 for ay: 2013-14 and 2014- 15 stands partly allowed for statistical purposes. We order accordingly.
Order pronounced on 26/03/2021 at Allahabad.
Sd/- Sd/-
[VIJAY PAL RAO] [RAMIT KOCHAR]
JUDICIAL MEMBER ACCOUNTANT MEMBER
DATED: 26/03/2021
A.K., PS
40
ITA Nos. 329-330/ALLD/2017 & 10-11/ALLD/2018
Assessment Years: 2013-14 & 2014-15
Public Service Commission
Copy forwarded to:
1. Appellant - The Secretary, U.P. Public Services Commission(Lok Seva Aayog), Allahabad
2. Respondent - ITO(TDS), Allahabad
3. CIT(A) -Allahabad, U.P.
4. CIT
5. DR -
By order (I.T.A.T. Allahabad) 41