Karnataka High Court
The Commissioner Of Income-Tax vs M/S Kingfisher Airlines Ltd on 15 July, 2014
Bench: N.Kumar, B.Manohar
IN THE HIGH COURT OF KARNATAKA, BANGALORE
Dated this the 15th day of July, 2014
PRESENT:
THE HON'BLE Mr. JUSTICE N.KUMAR
AND
THE HON'BLE Mr. JUSTICE B. MANOHAR
ITA No.165/2012
C/W
ITA Nos.164/2012, 166/2012, 239/2012,
240/2012 & 241/2012
In ITA NO.165 OF 2012:
BETWEEN
1. THE COMMISSIONER OF INCOME-TAX
TDS, NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32
2. THE ASSISTANT COMMISSIONER
OF INCOME-TAX
TDS, CIRCLE - 16 (2)
NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32 ... APPELLANTS
(By Sri K V ARAVIND, ADV.,)
2
AND
M/s. KINGFISHER AIRLINES LTD.,
# 35/2, CUNNINGHAM ROAD
BANGALORE-560 052 ... RESPONDENT
(By Smt. S R ANURADHA, ADV.,)
THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,
1961, ARISING OUT OF ORDER DATED 25/05/2012
PASSED IN ITA NO.370/BANG/2012, FOR THE
ASSESSMENT YEARS 2011-2012, PRAYING TO
FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED THEREIN AND ALLOW THE APPEAL AND SET
ASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE
IN ITA NO.370/BANG/2012 DATED 25/05/2012 AND
CONFIRM THE ORDER OF THE APPELLATE
COMMISSIONER CONFIRMING THE ORDER PASSED BY
THE ASSISTANT COMMISSIONER OF INCOME TAX (TDS),
CIRCLE-16(2), BANGALORE, IN THE INTEREST OF
JUSTICE AND EQUITY.
In ITA NO.164 OF 2012:
BETWEEN
1. THE COMMISSIONER OF INCOME-TAX
TDS, NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32
2. THE ASSISTANT COMMISSIONER OF INCOME-TAX
TDS, CIRCLE - 16 (2)
NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32 ... APPELLANTS
(By Sri K V ARAVIND, ADV.,)
3
AND
M/s. KINGFISHER AIRLINES LTD.,
# 35/2, CUNNINGHAM ROAD
BANGALORE-560 052 ... RESPONDENT
(By Smt. S R ANURADHA, ADV.,)
THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,
1961, ARISING OUT OF ORDER DATED 25/05/2012
PASSED IN ITA NO.369/BANG/2012, FOR THE
ASSESSMENT YEARS 2010-2011, PRAYING TO
FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED THEREIN AND ALLOW THE APPEAL AND SET
ASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE
IN ITA NO.369/BANG/2012 DATED 25/05/2012 AND
CONFIRM THE ORDER OF THE APPELLATE
COMMISSIONER CONFIRMING THE ORDER PASSED BY
THE ASSISTANT COMMISSIONER OF INCOME TAX (TDS),
CIRCLE-16(2), BANGALORE, IN THE INTEREST OF
JUSTICE AND EQUITY.
In ITA NO.166 OF 2012:
BETWEEN
1. THE COMMISSIONER OF INCOME-TAX
TDS, NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32
2. THE ASSISTANT COMMISSIONER OF INCOME-TAX
TDS, CIRCLE - 16 (2)
NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32 ... APPELLANTS
(By Sri K V ARAVIND, ADV.,)
4
AND
M/s. KINGFISHER AIRLINES LTD.,
# 35/2, CUNNINGHAM ROAD
BANGALORE-560 052 ... RESPONDENT
(By Smt. S R ANURADHA, ADV.,)
THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,
1961, ARISING OUT OF ORDER DATED 25/05/2012
PASSED IN ITA NO.371/BANG/2012, FOR THE
ASSESSMENT YEARS 2012-2013, PRAYING TO
FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED THEREIN AND ALLOW THE APPEAL AND SET
ASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE
IN ITA NO.371/BANG/2012 DATED 25/05/2012 AND
CONFIRM THE ORDER OF THE APPELLATE
COMMISSIONER CONFIRMING THE ORDER PASSED BY
THE ASSISTANT COMMISSIONER OF INCOME TAX (TDS),
CIRCLE-16(2), BANGALORE, IN THE INTEREST OF
JUSTICE AND EQUITY.
In ITA NO.239 OF 2012:
BETWEEN
M/s. KINGFISHER AIRLINES LTD.,
# 35/2, CUNNINGHAM ROAD
BANGALORE-560 052
REPRESENTED BY ITS
AUTHORIZED SIGNATORY
Sri AJAY VIJAY ... APPELLANT
(By Smt. S R ANURADHA, ADV.,)
AND
1. THE COMMISSIONER OF INCOME-TAX (TDS)
NO.59, HMT BHAVAN
5
BELLARY ROAD, GANGANAGAR
BANGALORE-32
2. THE ASSISTANT COMMISSIONER OF INCOME-TAX
(TDS), CIRCLE - 16 (2)
NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32 ... RESPONDENTS
(By Sri K V ARAVIND, ADV.,)
THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,
1961, ARISING OUT OF ORDER DATED 25/05/2012
PASSED IN ITA NO.369/BANG/2012, FOR THE
ASSESSMENT YEARS 2009-2010, PRAYING TO
FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED THEREIN AND ALLOW THE APPEAL AND SET
ASIDE THE ORDER DATED 25/05/2012 PASSED BY THE
ITAT, BANGALORE IN ITA NO.369/BANG/2012, IN SO FAR
AS IT RELATES TO THE ISSUE OF JURISDICTION HELD IN
FAVOUR OF REVENUE AND AGAINST THE ASSESSEE, IN
THE INTEREST OF JUSTICE AND EQUITY.
In ITA NO.240 OF 2012:
BETWEEN
M/s. KINGFISHER AIRLINES LTD.,
# 35/2, CUNNINGHAM ROAD
BANGALORE-560 052
REPRESENTED BY ITS
AUTHORIZED SIGNATORY
Sri AJAY VIJAY ... APPELLANT
(By Smt. S R ANURADHA, ADV.,)
6
AND
1. THE COMMISSIONER OF INCOME-TAX (TDS)
NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32
2. THE ASSISTANT COMMISSIONER OF INCOME-TAX
(TDS), CIRCLE - 16 (2)
NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32 ... RESPONDENTS
(By Sri K V ARAVIND, ADV.,)
THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,
1961, ARISING OUT OF ORDER DATED 25/05/2012
PASSED IN ITA NO.370/BANG/2012, FOR THE
ASSESSMENT YEARS 2010-2011, PRAYING TO
FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED THEREIN AND ALLOW THE APPEAL AND SET
ASIDE THE ORDER DATED 25/05/2012 PASSED BY THE
ITAT, BANGALORE IN ITA NO.370/BANG/2012, IN SO FAR
AS IT RELATES TO THE ISSUE OF JURISDICTION HELD IN
FAVOUR OF REVENUE AND AGAINST THE ASSESSEE, IN
THE INTEREST OF JUSTICE AND EQUITY.
In ITA NO.241 OF 2012:
BETWEEN
M/s. KINGFISHER AIRLINES LTD.,
# 35/2, CUNNINGHAM ROAD
BANGALORE-560 052
REPRESENTED BY ITS
AUTHORIZED SIGNATORY
Sri AJAY VIJAY ... APPELLANT
7
(By Smt. S R ANURADHA, ADV.,)
AND
1. THE COMMISSIONER OF INCOME-TAX (TDS)
NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32
2. THE ASSISTANT COMMISSIONER OF INCOME-TAX
(TDS), CIRCLE - 16 (2)
NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32 ... RESPONDENTS
(By Sri K V ARAVIND, ADV.,)
THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,
1961, ARISING OUT OF ORDER DATED 25/05/2012
PASSED IN ITA NO.371/BANG/2012, FOR THE
ASSESSMENT YEARS 2011-2012, PRAYING TO
FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED THEREIN AND ALLOW THE APPEAL AND SET
ASIDE THE ORDER DATED 25/05/2012 PASSED BY THE
ITAT, BANGALORE IN ITA NO.371/BANG/2012, IN SO FAR
AS IT RELATES TO THE ISSUE OF JURISDICTION HELD IN
FAVOUR OF REVENUE AND AGAINST THE ASSESSEE, IN
THE INTEREST OF JUSTICE AND EQUITY.
THESE ITAs COMING ON FOR FINAL HEARING, THIS
DAY, N.KUMAR, J., DELIVERED THE FOLLOWING:
8
JUDGMENT
As all these appeals relate to the same assessee but for the different assessment years and a common order is passed by the Tribunal, all these appeals are taken up for consideration together and disposed of by this common order.
2. The Assessee Company-M/s. Kingfisher Airlines Limited is engaged in the business and operating as a schedule passenger airline in India. A survey under Section 133A was conducted in the assessee's premises on 18.3.2011, in order to verify TDS compliance. The survey revealed that the assessee was not remitting the taxes deducted by it at source to Government account within the due dates as prescribed in the Income Tax Act, 1961 (for short, hereinafter referred to as the 'Act').
3. During the course of verification of the TDS compliances it was noticed that for the financial year 2009- 9 2010, a sum of Rs.74,94,21,701/-; for the financial year 2010-2011, a sum of Rs.139,43,81,410/- and for the financial year 2011-2012 up to September 2011, a sum of Rs.89,79,76,212/- was deducted from the salaries paid to the employees and payments under other heads for the above mentioned assessment years but the same was not remitted to the Government Account. Therefore, show-cause notices were issued dated 13.12.2011 for the assessment year 2010-2011; notice dated 16.12.2011 for the assessment year 2011-2012 and notice dated 21.12.2011 for the assessment year 2009-2010 under Section 201(1) of the Act. The notices were duly served on the assessee. The assessee was called upon to explain as to why they should not be treated as an assessee-in-default and was asked to furnish its submissions, if any. In two cases there was no response. In one case, time was sought for filing response. The assessing authority passed an order on 30.12.2011 directing the assessee to pay the amount deducted with interest and 10 issued a demand notice. The order was passed to initiate penalty proceedings under Section 221(1) separately.
4. Aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-V, Bengaluru. The First Appellate Authority after considering the arguments canvassed by both the parties held that the assessee has never denied the fact that taxes have been deducted from the salaries paid to its employees. Therefore, the argument of the assessee that the taxes should be collected from the deductees is not acceptable. The amount withheld by the assessee in reality belongs to the Government of India as per law. Therefore, the assessee cannot plead financial crunch as the reason for not remitting the TDS to the Government Account. The assessee had no right to withhold the tax deducted from payments without paying it to the Government Account. Because of this action of the assessee, the deductees are not in a position to claim the credit for tax deducted in their cases. Therefore, he 11 confirmed the order passed by the assessing authority. Aggrieved by the said order, the assessee preferred appeals before the Income Tax Appellate Tribunal, Bangalore.
5. The Tribunal after considering the rival contentions was of the view that the main grievance of the assessee was that proper opportunity of being heard was not given to the assessee. In order to answer the said question, it looked into the notice issued; the date on which it is served coupled with the fact that the assessee did not file the response as the time given was too short and an order holding that the assessee-in-default would have serious consequences, it was of the view that sufficient opportunity should have been given to the assessee. The same having not been given, it set aside the orders passed by both the authorities and remanded the matter to the assessing authority for fresh adjudication in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Aggrieved by the said order, the revenue has 12 preferred three appeals. Similarly, the assessee has also preferred three appeals.
6. In the light of the aforesaid facts, the substantial questions of law that arise for our consideration in ITA Nos.165/2012; 164/2012 & 166/2012 are as under:-
"1. Whether the Tribunal was correct in setting aside the order u/s. 201(1) r.w.s. 201(1A) of the Act to give the assessee an opportunity of hearing when the entire liability with interest is admitted and worked out and given by the assessee themselves and the question of fresh adjudication on remand will not arise as there is no dispute as to the liability?
2. Whether the Tribunal was correct in holding that section 201(1) r.w.s. 201(1A) of the Act was penal proceedings when the scheme to deduct tax at source vests the deductor with an obligation under statute in a fiduciary capacity and to pass on the deducted tax to the Central Government failing which interest is levied which is compensatory in nature?13
3. Whether the Tribunal was correct in holding that the notice had not been served, the assessee was not heard, no sufficient opportunity was granted and the officer has to be satisfied that there was good and sufficient reason for not making TDS when the material on record showed to the contrary and consequently recorded a perverse finding?
4. Whether the Tribunal was correct in holding when granting interim order that the assessee was in dire financial difficulties having admitted the liability and an opportunity should be granted to repay the amount in installments proceeded to completely ignore this finding and set aside the impugned order on imaginary grounds and recorded a perverse finding?
7. The substantial questions of law that arise for our consideration in ITA Nos.239/2012; 240/2012 & 241/2012 are as under:-
1. Whether the Tribunal was correct in remanding the matter back to the file of the Assessing Officer when the order under Section 14 201 read with Section 201(1A) of the Act suffers from inherent lack of jurisdiction and therefore the said order is void, inoperative and nullity in the eyes of law?
2. Whether the Tribunal committed a grave error of law in not appreciating that legislative scheme of the Act which is bound up with the Rules make it abundantly clear that DGIT (Systems) is the competent authority for making an order Section 201 of the Act and therefore the Assessing Officer lacked jurisdiction to make an order under Section 201 of the Act?
3. Whether the Tribunal was correct in not appreciating that the power exercisable under Section 201 has to be read in conjunction with Section 200(3) and Section 200A of the Act as the liability under Section 201 is intrinsically linked with the processing of statement under Section 200A of the Act?
8. Sri D.L.N.Rao, learned Senior Counsel appearing for the assessee, contended that, the assessing 15 authority is not the prescribed officer under the Act, who is competent to pass the impugned order and therefore the entire proceeding is vitiated. Secondly, he contended though notices were issued, either the notices were served after passing of the order or sufficient opportunity was not given before passing the order and therefore there is violation of principles of natural justice and the Tribunal has rightly set aside the order and remanded the matter back for fresh consideration which cannot be found fault with. He submitted that as is clear from the survey report that the amount outstanding from the assessee is not found therein. Unless the Department ascertain and state what is the exact amount due by the assessee, the Assessing Authority will have no jurisdiction to proceed with the matter, because it is a jurisdictional fact. In the instant case, till now, what is the amount actually due has not been stated. If and when they would put forth the claim, the assessee would have shown payment of the said amount. Therefore, he submits that the entire proceeding was conducted without jurisdictional fact 16 being ascertained. The impugned order passed by the assessing authority is one without jurisdiction and the Tribunal was justified in setting aside the orders passed by the authorities and remanding the matter back to the Assessing Authority for deciding the case afresh. He also submitted that the documents produced before this Court at the time of hearing of these appeals shows asseessees have filed return though belatedly and made payments. The prescribed authority under the Act has passed orders calling upon the assessee to pay certain sum of money, which according to him was the deficient. Unless these amounts are taken into consideration, the liability, if any of the assessee cannot be fixed and those orders are not passed by the assessing authority but by the prescribed authority under the Act. Even otherwise as the Tribunal has not decided the case on merits, in the event the Court were to set aside the order of remand, the matter has to be remitted to the Tribunal to consider the case on merits and pass appropriate orders.
17
9. Per contra, learned Counsel appearing for the Revenue Sri K. V. Aravind submitted that, the prescribed authority's duty is to receive the statement on file, look into the contents and if there is any deficiency they have to communicate to the assessee for compliance. In these cases, the amount collected as TDS is not paid, no Returns are filed and therefore it is for the assessing authority who is the competent authority to pass an order under Section 201. Therefore the order passed is valid and legal. Before issuance of notice under Section 201 of the Act, after survey, there was a correspondence between the parties wherein the assessee was called upon to produce the statements and accounts which he did and the amount reflected in the notice is taken from those correspondences and therefore it is too late in the day for them to contend that the jurisdictional facts were not ascertained before proceeding with the matter. Secondly, he contended the claim was not in dispute. Notice was issued. Sufficient opportunity was granted. When no explanation is offered, payment is not 18 made, the orders are passed. After passing of the order, accepting the order, the Managing Director of the Assessing Company in several letters has pleaded for time to make payment in installments. Parallelly, he has filed an appeal, which came to be dismissed. Before, the First Appellate Authority, the assessee did not make any efforts either to offer an explanation to the notice issued or to produce documents to show that he has paid money. Therefore, it was not open to him to contend before the Tribunal that the principles of natural justice is violated. The Tribunal without appreciating the difference between Section 201 and Section 221, set aside the impugned order on the ground that the requirements of Section 221 is not complied with, which has no application to the facts of this case. Therefore, the order of remand is illegal and liable to be set aside. He also submitted that even on merits, the liability is admitted and therefore the question of remitting the matter to the Tribunal would not arise. However, it is open to the assessee to produce the particulars of the amount deposited and if it is 19 proved that he has remitted the money, certainly he would be entitled for deduction of the amount paid by him. For that purpose, no remand is required.
10. In the light of the aforesaid facts and rival contentions, the points that arise for our consideration in these appeals are:
(i) Whether the entire proceedings initiated by the Assessing Authority when the jurisdictional fact being ascertained, is one without jurisdiction?
(ii) Whether the impugned orders passed by the Assessing Authority and the First Appellate Authority offends principles of natural justice as held by the Tribunal and therefore no case for interference, if such an order is made out?20
(iii) Whether in a proceeding under Section 201 of the Income Tax Act, who is a competent authority who is vested with the power to declare the assessee as assessee in default and order passed by the Assessing Authority can be said to be one without jurisdiction?
JURISDICTIONAL FACT
11. The learned Senior Counsel relying upon a judgment of Allahabad High Court in the case of JAGRAN PRAKASHAN LIMITED v/s DEPUTY COMMISSIONER OF INCOME TAX reported in (2012) 345 ITR 288 contended that existence of jurisdictional fact is sine qua non or condition precedent for exercising the power by the court of limited jurisdiction. The jurisdictional fact is a fact which must exist before a Court, a Tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of 21 which depends on the jurisdiction of a Court, a Tribunal or an Authority. It is the fact upon which an administrative agency's power to act depends. If the jurisdictional fact does not exist, then the Court, authority or officer cannot act. If a Court or authority wrongly assumes existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming the existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess. There cannot be any quarrel with the aforesaid legal position.
12. In the instant case, the assessee was served with three notices dated 13-12-2011, 16-12-2011 and 21-12- 2011 claiming amounts mentioned therein and calling upon the assessee to show cause why the assessee should not be treated as an assessee in default under Section 201(1) of the Act in respect of the sum mentioned in the notice. Further, the assessee was also requested to furnish the above details 22 month wise in the format mentioned in the said notice to enable the office to verify the TDS compliance and calculations of interest under Section 201(1A). In case, the month wise details is not furnished, the interest under Section 201(1A) will be calculated from 01-04-2010. The format was also mentioned in the said notice. Now the argument is, the amount mentioned as having been deducted by the assessee and has not been remitted to the Government Account in accordance with the provisions of Section 200 is devoid of particulars and not supported by any supporting documents. Neither before the First Appellate Authority nor before the Tribunal nor before this Court, the particulars are forthcoming nor furnished. Therefore in the absence of those particulars, the jurisdictional fact does not exist and the entire proceedings is vitiated.
13. The materials on record disclose that on 18-03- 2011, a survey was conducted in the assessee's premises in 23 order to verify the TDS compliance. The said survey revealed that the assessee was not remitting taxes deducted by it at source to Government account within the due dates as prescribed in the Income Tax Act. Therefore, several letters were sent to the assessee vide letter dated 22-3-2011, 21-6- 2011, 24-08-2011 and 09-09-2011 asking the assessee to furnish the details regarding the heads of expenditure from which, the TDS was deducted, the rate of deduction and dates on which payments became due, for each financial year separately. However, there was no response. Since the assessee failed to furnish the information called for, verification was conducted at the business premises of the assessee. Consequently and after severe pursuance, Rs.21,04,64,384/- was collected by the office. The assessee was further asked to give the payment plan and accordingly the assessee vide letter dated 17-11-2011 filed a commitment letter and had undertaken to pay the outstanding TDS liabilities for the financial year 2010-11 and clear the entire outstanding liabilities by the end of the 24 current financial year i.e. 31-03-2012. After repeated telephonic conversation with Shri Venkatadri, AVP, Taxation of M/s. Kingfisher Airlines Limited furnished the details regarding outstanding TDS liabilities for the financial year 2010-11 which was received by Fax. After taking into consideration the payments made by the assessee-company as ascertained from Ms.Rekha, Assistant Manager Accounts, the details of the outstanding TDS liabilities for the financial year 2010-11 was set out as under:
F.Y Nature of Section Amount
Payment
2010-11 Contractors 194C Rs. 8,98,98,548
Interest 194A Rs. 14,68,18,191
Rent 194I Rs. 4,99,35,917
Commission 194H Rs. 18,78,27,914
Professional 194J Rs. 5,90,96,159
Salaries - Local 192 Rs. 88,08,15,311
Total Rs.141,43,92,040
14. Further a letter dated 15-12-2011 was sent calling upon the assessee to furnish the outstanding TDS liabilities for the financial year 2011-12, the details was 25 received vide fax on 16-12-2011. The outstanding TDS liabilities for the financial year 2011-12 upto September 2011 as furnished by the assessee is as under:
Section Rs. in Crores
192B 47.00
194C 5.00
194A 6.00
194I 7.00
194H 11.00
194J 14.00
TOTAL 90.00
15. A letter was also sent to the assessee to furnish the details month-wise so as to enable the office for calculations of interest under Section 201(1A) of the Act for the Financial years 2010-11 and 2011-12 and was also informed that if the details are not furnished, interest under Section 201(1A) will be calculated from 11-4-2010/01-04- 2011 without considering the payments already made by the assessee. The letters were also sent to the assessee on the complaints received from some of the former employees regarding non issue of TDS Certificates for the financial year 26 2009-10. On 21-12-2011, a fax was received wherein the outstanding TDS liability for the financial year 2009-10 was sent by the assessee-company. The details of which are as under:
192B Rs.74,94,21,701
16. The materials on record also disclose that the audit report under Section 44AB of the Act along with audited Profit and Loss Account for the year ended on 31st March 2010, the audited balance sheet as at 31st March 2010 and the documents declared by the relevant Act to be part of or annexed to the Profit and Loss Account and Balance Sheet were also furnished which are dated 01st October 2010.
17. In column No.27, as against the query whether the assessee had complied with the provisions of Chapter XVII-B regarding deduction of tax at source and regarding payment thereof to the credit of the Central Government, the 27 auditors have remarked that they had verified the compliance with the provisions of Chapter XVII-B regarding deduction of tax at source and regarding the payment thereof to the credit of the Central Government in accordance with the Auditing Standards generally accepted in India which include test checks and the concept of materiality. The non-compliance revealed during such audit procedures are as mentioned in clause(b). Then they had set out non-compliance. Insofar as tax deducted but not paid to the credit of the Central Government is concerned, they have enclosed Annexure-IX. Annexure-IX shows the tax deducted for the months under various provisions of the Income Tax Act as well as the due dates and wherever the payment has been made, the date of payment is given. Wherever no such payment is made, the column is left blank. The said annexure also shows the amount of tax which is deducted and not paid. Based on this information and correspondence, the notice was issued under Section 201 of the Act. The demand was made as required under 28 Section 201 of the Act. Therefore, the contention that the amount claimed in the notice has no basis and how the said amount is arrived at is not made known and therefore, the assessee did not have an opportunity to meet the case of Department is without any substance. Therefore, we do not see any merit in the said contention.
18. Insofar as the contention that there is violation of principles of natural justice is concerned, as is seen from the aforesaid facts, after survey, before issuing notice under Section 201 of the Act, the authorities had made enquiries calling upon the assessee to furnish the particulars. The assessee reluctantly has furnished the particulars. Therefore, in this background when there was total non- cooperation on the part of the assessee, the Department was left with no alternative than to issue those notices calling upon them to appear and show cause why the assessee should not be declared as 'assessee in default' in respect of the tax mentioned in the said notice.
29
19. The argument is there was no sufficient opportunity for the assessee to appear and contest the matter. In support of their contention, it was contended that notice dated 21-12-2011 which called upon the assessee to appear on 26-12-2011 was served on the assessee on 29-12-2011 whereas the order of assessment was passed on 30-12-2011. The assessee has made available to us all the three notices received by them. In the notice dated 21-12-2011, 29-12-2011 it is mentioned as the date on which it was served, however, the assessee was called upon to appear on 26-12-2011. Hence, it was argued that the said notice is vitiated and at any rate a reasonable opportunity was not given. The notice dated 29-12-2011 is put by the assessee's official with their seal. In fact, in the notice dated 13-12-2011 which is said to have been received by the assessee on 16-12-2011, we do not see any such date being put. But in that particular case, they engaged the services of a leading Chartered Accountant, who made a 30 request for time by three weeks, which was not granted and therefore, the order came to be passed on 30-12-2011. Even in pursuance of the notice dated 16-12-2011, no objections are filed. Therefore, in all the three cases, in spite of notice under law has been issued, duly served, but no steps were taken to file any objections or furnish the particulars and contest the matter. The question is whether the principles of natural justice is violated in the aforesaid circumstances.
20. Now, it is not in dispute that on 30-12-2011 for all the three years, the assessment orders came to be passed by the Assessing Authority. We have to see the conduct of the assessee. Immediately after issue of notice on 13-12- 2011 and 16-12-2011 before the issuance of notice on 21- 12-2011, the assessee addressed a letter to the Assessing Authority undertaking to pay a sum of Rs.130 crores. The said letter is dated 17th November 2011, which reads as under:
31
AIRLINES 17th November, 2011 The Asst. Commissioner of Income Tax(TDS) Circle -16(2), 59, HMT Bhavan, 4th Floor, Ganga Nagar, Bangalore - 560 032.
Dear Madam, Sub: Liquidation of TDS dues.
The assessee company is a premier airline company having a huge market share in India. The business of running airlines in India is a very tough task inview of the unfriendly and deteriorating macro economic situation. The existing Civil Aviation Policy and Tax Policy has been the cause for huge financial losses incurred by the assessee company. The losses have also caused tremendous financial strain on the company and attendant liquidity problems. Inview of the foregoing genuine circumstances beyond the control of the assessee the assessee is having difficulty in timely payment of Tax deducted at source. However, the assessee has in the last few years have made every effort possible to remit large amount of sum towards TDS. For the current year the 32 assessee is making effort to expeditiously remit the TDS. However it is often constrained by the insufficient working capital limit sanctioned by the assessee's bankers. Having regard to the present financial situation and after reviewing the likely enhancement of working capital limits, the assessee plans to pay as under:
1) For the Month of December Rs.30 Crores
2) For the Month of January Rs.30 Crores
3) For the Month of February Rs.30 Crores
4) For the Month of March Rs.40 Crores ] --------------------
Total Rs.130 Crores
--------------------
In view of the genuine difficulty faced by the assessee it is requested that the assessee may not be declared as in default and request that in this connection no other proceeding be initiated against the assessee in the interest of justice and oblige.
Thanking you, 33 Yours Faithfully.
For Kingfisher Airlines Limited Sd/-
Authorised Signatory
21. After the order came to be passed and on coming to know of the same, the assessee addressed a letter to the Assessing Authority dated 5-1-2012 seeking stay of collection of demand of Rs.372,09,45,786/- for the assessment years 2010-11, 2011-12 and 2012-13. The said letter reads as under:
AIRLINES Date: 05.01.2011 The Asst. Commissioner Of Income Tax (TDS) Circle -16(2), Bangalore.
Madam, 34 Sub: Stay of Collection of Demand of Rs.372,09,45,786/- For AY:
2010-11, 2011-12 & 2012-13.
Vide orders passed u/s.201(1)201(1A) of the Act dated 30.12.2011 for the above mentioned assessment years the following demands have been raised.
Ass. Year Demand Interest Total Demand
u/s.201(1) u/s.201(1A)
2010-2011 74,94,21,701 28,70,53,151 103,64,74,852
2011-2012 139,43,80,410 30,63,48,835 170,07,29,245
2012-2013 89,79,76,212 8,57,64,477 98,37,40,689
TOTAL 304,17,78,323 67,91,66,463 372,09,44,786
Further even the time limit for making the above payment has been reduced from 30 days to 7 days without giving any valid and sustainable reasons. While passing the orders, the payments made directly by the recipients u/s.191 of the Act read with Board Circular No.275/201-95-IT(B) has not been considered.35
For the last few years, due to global spurt in crude prices, aviation turbine fuel prices continued to shoot up and coupled with the exorbitant rates of taxes on aviation turbine fuel in India, put the civil aviation industry under severe pressure. The rising fuel costs during the period and increase in other operating costs further added to the problems of the company. Further the depreciation of the rupee against the dollar has also caused tremendous hardship on the operations of the company. The resultant increases in fares and fuel surcharges that the airlines had to implement, resulted in a slowdown in air travel, both in India and worldwide.
The domestic carries in the country continued to add capacity, the growth in capacity was far in excess of the growth in traffic in the domestic market. This continued overcapacity situation led to stiff competition putting pressure on yields.
All these factors combined to cause an operating loss for the six months period ending 30th September, 2011 at Rs.1,083 Crores and the accumulated losses till 30th September, 2011 is Rs.6,080 Crores.
Ongoing recession in economics worldwide and the economic meltdown culminating in the collapse of 36 financial markets and the slump in the aviation industry worldwide (with quite a few airlines filing for bankruptcy), has further aggravated the situation, with avenues for funding temporarily blocked. The banks and financial institutions in the country being new to this business and considering the current state of aviation sector, are having constraints in financing aviation industry, which poses further constraints in raising additional funds.
The company's case is under the active consideration by consortium of Banks led by State Bank of India for restructuring the operations and to provide adequate working capital. Further the company is also in the process of finalizing plans for raising additional equity funds. It is expected that the liquidity of the company would substantially improve when these plans materialize. The company has already let the Financial Institutions know the quantum of statutory liability and in the revamp plan the liability is already considered. The company submits it will make all efforts to discharge its liability at the earliest occasion and no sooner the long term funds as stated materialize, till then the acute shortage of liquidity renders the company helpless in meeting the liability. The delay in remittances is 37 unintentional and due to circumstances beyond the capacity of the company.
The financial stringency experienced by the assessee is also known to the department as it is in the public domain and is in the news regularly. It has been held in many cases that financial stringency amounts to good and sufficient reason for granting stay.
The company is preferring appeal before the CIT(A) against the arbitrary orders passed u/s.201(1) and levy of interest u/s.201(1A) of the Act. Further, the company does not have such huge liquid and readily disposable funds to pay such huge demand raised consequent to the arbitrary orders. The liquid funds available with company is not even sufficient to meet its day to day operations, hence the question of payment of the same will put further strain and effect the operations of the company.
In view of the foregoing, the company prefers this petition for complete stay of collection of the demand until the disposal of the appeals. The company further requests your honour to treat the company as not being in default in respect of the tax arrears in appeal 38 as per the provisions of section 220(6) of the I.T Act in the interest of justice.
It may be noted that the company's request is in line with the conditions stated in the circulars/instructions for grant of stay and requests that absolute stay be granted till the disposal of the appeals. It has been so held by Rajasthan High Court, Jaipur Bench in 223 ITR 192 and recently by Delhi High Court in Soul v DCIT - 14 DTR 267, Subhash Chandra Sehgal v DCIT in 6 DTR 53, and Valvoline Cummins Ltd v. DCIT - 8 DTR 145. Hence we pray for staying the collection of the entire demand until the disposal of the appeal in the interests of justice.
The Company prays for a personal hearing before disposal of the stay petition.
Thanking You, Yours truly, For Kingfisher Airlines Ltd., Sd/-
Authorised Signatory.39
22. In the entire letter they have not expressed their grievance that they have neither been heard nor violation of principles of natural justice. But they pleaded difficulties experienced by them for making the said payment and they also made it clear that they are preferring an appeal before the Commissioner of Income Tax (Appeals). Thereafter, on 27-01-2012, the Chairman & Managing Director of the assessee-Company who is also a Member of Parliament addressed a letter to the Assessing Authority undertaking to liquidate the statutory liability towards TDS. The said letter reads as under:
AIRLINES Vijay Mallya Member of Parliament Chairman and Managing Director January 27, 2012 The Assistant Commissioner of Income Tax (TDS) Circle -16(2), 59, HMT Bhavan, 4th Floor, Ganganagar, Bangalore 560 032.40
Dear Madam, Sub: Liquidation of TDS Dues.
I am aware that the company has given an undertaking dated 17.11.2011, committing to liquidate the TDS dues in installments. I would like to reiterate that we will make every possible effort to honour the commitment at the earliest. SBI Caps is in the process of completing a viability report of the Airline and we are closely working with our consortium of bankers and other prospective investors to infuse long term finance into the company based on the viability report. All statutory dues have been factored in the cash flow projections submitted to SBI Caps. No sooner the long term bank finance is arranged equity infusion is made, we will be liquidating our statutory liability towards TDS.
I thank you for your co-operation and
understanding.
Yours Sincerely,
Sd/-
Vijay Mallya
Chairman and Managing Director
Kingfisher Airlines Limited.
41
23. It was followed by another letter dated 14-2-
2012 by the Chairman & Managing Director requesting for some time and he assured to show his commitment he would arrange to make payment of Rs.20.00 crores in the coming week. The said letter reads as under:
AIRLINES Vijay Mallya Member of Parliament Chairman and Managing Director February 14, 2012 The Assistant Commissioner of Income Tax (TDS), Circle -16(2), 59, HMT Bhavan, 4th Floor, Ganganagar, Bangalore 560 032.
Dear Madam, Sub: Liquidation of TDS Dues.
Further to my letter of January 27, 2012 I would like to inform you that a meeting of our consortium of 42 bankers is scheduled to be held in Mumbai on Friday, 17th February 2012. This meeting is expected to throw some clarity on the long term bank finance requested for by the company to its consortium of bankers.
As already mentioned in my earlier letter, we are making progress in our efforts for equity infusion and no sooner the long term bank finance/equity infusion is completed we will be in a position to give you a firm payment plan for liquidation of our TDS dues.
However to show our commitment, we will arrange to make a payment of Rupees Twenty Crores in the coming week and follow it up with a payment plan. While I thank you for your co-operation and understanding, I would earnestly request you to please bear with us and do not resort to any coercive steps towards liquidation of our TDS dues. Your sincerely.
Sd/-
43
24. One more letter came to be addressed by the Chairman & Managing Director on 2-3-2012 pointing out that as against the claim of Rs.302 crores plus interest of Rs.70.00 crores, on February 22nd, IATA remitted Rs.15.15 crores to the IT Department, reducing the principal due to Rs.286.85 crores and a proposal was given for making the balance amount. The said letter was addressed to the Chairman, CBDT, Government of India which reads as under:
AIRLINES Vijay Mallya Member of Parliament Chairman and Managing Director March 02, 2012 Mr.Laxman Das, Chairman - CBDT, Government of India, New Delhi.
Dear Sir, 44 Our company is undergoing serious financial stress mainly on account of the high oil prices, punitive State Sales Taxes and various other factors. The Income Tax authorities attached all our bank accounts and our main IATA collection account with the result that we are completely crippled and have been unable to make any payments to any party including salaries to 8000 + employees.
The Government of India are reportedly taking several policy initiatives to help the stressed aviation sector. This will help the industry and also Kingfisher Airlines. We are in active discussion with serious investors and are confident that we can introduce fresh equity and recapitalize Kingfisher Airlines in the near future.
We have also applied to our Consortium of Bankers for additional working capital.
We are submitting below a payment plan over 8 months for your kind consideration. If we raise fresh equity and/ or secure additional working capital we will voluntarily increase our payments and liquidate our net dues towards TDS, some of which are under appeal.45
The IT Department, Bangalore, claims that an amount of Rs.302 crs is due plus interest of Rs.70 crs.
On February 22nd, IATA remitted Rs.15.15 crs to the IT Department, reducing the principal due to Rs.286.85 crs.
Our proposal would be to pay as follows based on seasonal cash flow affordability and minimal operating requirements:
" To pay Rs.14.85 crs to Income Tax department from the currently attached IATA account. This will make a total of Rs.30 crs paid in the past 15 days. " For the balance Rs.272 crs of past dues, we propose to pay as follows over 8 months: March - Rs.14.85 crores (from IATA account - Total Rs.30 crores)
1. April - Rs.16.00 crores
2. May - Rs.16.00 crores
3. June - Rs.20.00 crores
4. July - Rs.35.00 crores
5. August - Rs.50.00 crores
6. September - Rs.60.00 crores
7. October - Rs.75.00 crores Total - Rs.272 crores.46
- We will pay the interest dues in 4 equal monthly installments thereafter.
In view of the above payment proposal, we request the attachment of our IATA and bank accounts be lifted with immediate effect as we cannot continue operations in this crippled state. We would be most grateful for your kind acceptance of our proposal.
Thanking you, Yours faithfully, Sd/-
Vijay Mallya.
cc: Mr.R.S.Gujral, Secretary - Revenue Government of India, New Delhi.
25. It was followed by one more letter dated 9-3- 2012 making a proposal to pay Rs.356.85 crores in eight equal monthly installments of Rs.45.60 crores, which reads as under:
47
AIRLINES Vijay Mallya Member of Parliament Chairman and Managing Director March 09, 2012 Mr.Laxman Das, Chairman - CBDT, Government of India, New Delhi.
MOST URGENT Dear Sir, This is further to my letter dated March 02, 2012 to you.
Our Company is undergoing serious financial stress mainly on account of the high oil prices, punitive State Sales Taxes and various other factors.
The Income tax authorities attached all our bank accounts and our main IATA collection account with the result that we are completely crippled and have been unable to make any payments to any party including salaries to 8000 + employees.48
The Government of India are reportedly taking several policy initiatives to help the stressed aviation sector. This will help the industry and also Kingfisher Airlines. We are in active discussion with serious investors and are confident that we can introduce fresh equity and recapitalize Kingfisher Airlines in the near future.
We have also applied to our Consortium of Bankers for additional working capital.
We are submitting below a payment plan over 8 months for your kind consideration. If we raise fresh equity and or secured additional working capital we will voluntarily increase our payments and liquidate our net dues towards TDS. Some of which are under appeal.
The IT Department, Bangalore, claims that an amount of Rs.302 crs is due plus interest of Rs.70 crs.
On February 22nd, IATA remitted Rs.15.15 crs to the IT Department, reducing the amount due to Rs.356.85 crs.
Our proposal would be to pay Rs.356.85 crs in eight monthly installments of Rs.44.60 crs.49
In view of the above payment proposal, we request the attachment of our IATA and bank accounts be lifted with immediate effect as we cannot continue operations in this seriously crippled state.
We would be most grateful for your kind and urgent acceptance of our proposal.
Thanking you, Yours faithfully, Sd/-
Vijay Mallya.
cc: Mr.R.S.Gujral Secretary - Revenue, Government of India, New Delhi.
26. From the aforesaid letters, it is clear that the assessee never complained of violation of principles of natural justice, on the contrary the liability was admitted and their difficulties in making the payment was expressed. They wanted to make payments in installments and a part of the amount was also paid. However, in the appeal filed, all the facts set up by them were made a ground. For the first 50 time they contended that the order is in violation of principles of natural justice. The argument was that they have made payments and there was no opportunity for them to show the said payments and also that the amounts claimed are without any basis. If there is any substance in the said contention, it was open to the assessee to produce before the First Appellate Authority along with the appeal memorandum the particulars such as, number of employees employed by them, salary paid to them, the TDS deductions made from the salary, what is the total amount of TDS deduction which came to their hands and what is the amount they have to pay and requested the First Appellate Authority to set aside the order of the Assessing Authority on the basis of such factual position which was in their possession.
27. Section 106 of the Evidence Act, 1872 which deals with the burden of proving the fact, especially within knowledge, provides that when any fact is established within 51 the knowledge of any person the burden of proving that fact is upon to him. The amount collected as TDS is the amount deducted from the salary of the employees of the assessee. The assessee has failed to furnish particulars such as the number of employees employed by them, the amount of salary paid to them, the amount of TDS deducted out of their salary and if any payment has been made to the Central Government. These are all facts which are within the knowledge of the assessee and they cannot expect the Department to furnish all these particulars. The Department is acting on the basis of the information furnished by the assessee as set out above. The assessee in their correspondence has stated what is the amount due which is reflected in the annexures. The Department has gathered the figures from the materials available on record. If that is wrong, it was open to the assessee to produce their accounts and point out to the Appellate Authority that, that is not the amount due. But no such exercise has been done. 52
28. In this regard, it is useful to refer to the scope of enquiry under the Income Tax Act before the First Appellate Authority. This Court after reviewing the entire case law on the point in the case of CIT v/s M.N.DASTUR AND COMPANY in ITA No.2335/2005 decided on 14th July 2010, has held as under:
There can be no analogy or parallel between a tax appeal and an appeal, sat, in civil cases. A civil appeal, like a law suit in the court of first instance out of which it arises is really and truly an adversary proceeding, that is to say, a controversy or tussle over mutual rights and obligations between contesting litigants ranged against each other as opponents. A tax appeal is quite different. Even as the assessing authority is not the tax-payer's "opponent", in the strictly procedural sense of the term, so too the appellate authority sitting in appeal over the assessing authority's order of assessment is not strictly an arbitral tribunal deciding a contested issue between two litigants ranged on opposite sides. In a tax appeal, the Appellate Authority is very much committed to the assessment process. The 53 Appellate Authority can itself enter the arena of assessment, either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the tax-payer's appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. The appellate authorities are in the nature of revising authorities not in the narrow sense of revising those matters about which the assessee has a grievance, but a revising authority in the sense that, once the appeal is before him he can revise not only the ultimate computation arrived at by the (assessing officer), but he can revise every process which led to the ultimate computation or assessment. An appellate authority under the taxing enactments sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the 54 law laid down by the legislature. An appeal is a continuation of the process of assessment, and an assessment is nothing but another name for adjustment of the tax liability to accord with the taxable event in the particulars tax payer's case.
29. Therefore, if the grievance of the assessee is that Assessing Authority did not give sufficient opportunity to place their version and to produce receipts showing payments of money, they were not afforded with an opportunity to produce the documents to show that the assessee has not deducted the tax from the salary of its employees, it was open to the assessee to produce all those documents before the First Appellate Authority whose powers are co-extensive with that of the Assessing Authority. He was empowered in law to do what the Assessing Officer failed to do and request the Authority to grant the relief to which he was entitled to in law. The assessee was assisted by able Chartered Accountant. The assessee was in possession of audit report and the books of account were in 55 his possession. No effort was made before the First Appellate Authority to produce those documents to substantiate the defence, if they have any. On the contrary, the conduct of the assessee shows, they are corresponding with the Assessing Authority admitting the total liability of the tax payable requesting him to grant some time or liberty to pay in instalment. They have also made partial payment. Therefore, at no point of time, the liability was in dispute. The grievance was because of cash crunch, difficult times the assessee was undergoing, he is not able to raise requisite funds, he wanted accommodation. It is in this background, the First Appellate Authority in one of the case has clearly set out the ground urged before him, where difficulties are pleaded. The First Appellate Authority was of the view that the amount payable by the assessee to the Department is not tax due by him. He has deducted the tax payable by his employees or to whom he has made payment, collected tax due to the Government on behalf of Government, instead of remitting the same he has appropriated the same for his 56 benefit. Therefore, it was held, none of those causes put forth for not remitting the said amount would constitute sufficient cause. Therefore, the assessee was not entitled to relief.
30. In appeal, the Tribunal has completely misdirected itself and proceeded on the assumption that the assessee has not been given a reasonable opportunity of putting forth his case and therefore, it set aside the order. Before coming to that conclusion, the Tribunal has not looked into the material on record. It has also not taken into consideration the scope of enquiry before the First Appellate Authority. It has also not taken into consideration that the assessee did not make any efforts to produce documents and statements in support of their contention, though a ground was raised in the appeal memo. When we look at the order passed by the First Appellate Authority, the said ground appears to have not been urged. Even otherwise, if assessee wanted an opportunity to produce statement, nothing 57 prevented the assessee from producing them along with the appeal or file an application to the First Appellate Authority requesting them to take note of the same and then frame an order of assessment. The Tribunal has proceeded on the assumption that the assessee has been denied a reasonable opportunity by the Assessing Officer and therefore, the order requires to be set aside. The approach of the Tribunal is not in accordance with law and it has not borne in mind the distinction between the jurisdiction of the First Appellate Authority in taxation laws as compared to other jurisdiction. The powers of the First Appellate Authority are co-extensive with that of the Assessing Officer. Therefore, the order of the Tribunal cannot be sustained and accordingly, it is set aside. JURISDICTION
31. The argument of the learned Senior Counsel appearing for the assessee is that, it is clear from Section 200 of the Act, the order under Section 201 is to be passed by the prescribed Income Tax Authority, which is prescribed 58 under Rule 31, which is the Director General of Income Tax (Systems). Indeed, the said Authority has not passed the order. The entire proceedings initiated and the orders passed are without jurisdiction and requires to be set aside. Therefore, the question to be answered is that who is the Authority which is competent to pass the order under Section 201 of the Act declaring an assessee in default. It was pointed out, in order to find an answer to the said question, Sections 200, 200-A and 201 have to be read together.
32. Section 200 of the Act reads as under:
"Duty of person deducting tax (1) Any person deducting any sum in accordance with the foregoing provisions of this Chapter shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs.59
(2) Any person being an employer, referred to in sub-section (1A) of section 192 shall pay, within the prescribed time, the tax to the credit of the Central Government or as the Board directs.
(3) Any person deducting any sum on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in sub-section (1A) of section 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time, prepare such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed."
33. The aforesaid provision mandates that any person deducting any sum under Chapter 17 which deals with deduction at source and advance payment shall be paid within the prescribed time, the sum so deducted to the credit 60 of the Central Government. After paying the said amount, prepare such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed Income Tax Authority, such statement in such form and verify in such manner and setting forth such particulars and within such time as may be prescribed after such payment is made and statement is delivered.
34. Section 200-A provided for processing of statement of tax deducted at source which reads as under:
"Processing of statements of tax deducted at source (1) Where a statement of tax deduction at source has been made by a person deducting any sum (hereafter referred to in this section as deductor) under section 200, such statement shall be processed in the following manner, namely:--61
(a) the sums deductible under this Chapter shall be computed after making the following adjustments, namely:--
(i) any arithmetical error in the statement; or
(ii) an incorrect claim, apparent from any information in the statement;
(b) the interest, if any, shall be computed on the basis of the sums deductible as computed in the statement;
(c) the sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of amount computed under clause (b) against any amount paid under section 200 and section 201, and any amount paid otherwise by way of tax or interest;
(d) an intimation shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (c); and 62
(e) the amount of refund due to the deductor in pursuance of the determination under clause (c) shall be granted to the deductor :
Provided that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the statement is filed.
(i) of an item, which is inconsistent with another entry of the same or some other item in such statement;
(ii) in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act.
(2) For the purposes of processing of statements under sub-section (1), the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said sub-
section."
63
35. Section 200A provides for a procedure for processing such statement. Sub-section (2) of 200A provided for the purposes of processing of statements under sub- section (1), the Board may make a scheme for centralized processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to the deductor as required under the said sub-section. Therefore, what follows is, after tax is paid, statement is delivered on the basis of particulars furnished in the statement and an intimation is given to the deductor, satisfying the sum determined, payable or the amount of refund due to him under Clause (c) and also correct the incorrect line apparent from information in the statement and call upon the deductor to correct the same. Once the assessee complies with such request and pays any tax which is a short fall and also pay interest, if not paid, the liability of the assessee under the Act ceases to exists. 64
36. Section 201 deals with consequence of failure to deduct or pay. It reads as under:
"Consequences of failure to deduct or pay.
(1) Where any person, including the principal officer of a company,--
(a) who is required to deduct any sum in accordance with the provisions of this Act; or
(b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax:
Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of 65 a resident shall not be deemed to be an assessee in default in respect of such tax if such resident--
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in such return of income; and
(iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:
Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.
(1A) Without prejudice to the provisions of sub-
section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by 66 or under this Act, he or it shall be liable to pay simple interest,--
(i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and
(ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200:
Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident but is not deemed to be an assessee in default under the first proviso to sub-section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the 67 date of furnishing of return of income by such resident.
(2) Where the tax has not been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in sub-section (1).
(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of--
(i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed;
(ii) six years from the end of the financial year in which payment is made or credit is given, in any other case :
Provided that such order for a financial year commencing on or before the 1st day of April, 68 2007 may be passed at any time on or before the 31st day of March, 2011.
(4) The provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 153 shall, so far as may, apply to the time limit prescribed in sub-section (3)."
37. If an assessee who is required to deduct any sum in accordance with the provisions of the Act does not deduct or does not pay or after so deducting fails to pay the whole or any part of the tax as required by or under the Act, then such person shall be deemed to be an assessee in default in respect of such tax.
38. Sub-section (3) of Section 201 declares no order shall be made under Sub-section (1) deeming a person to be an assessee in default in failing to deduct the whole or any part of the taxes from a person resident in India at any time, after the expiry prescribed therein. As this order declaring 69 an assessee to be in default would have serious consequence and the statute does not exclude issue of notice before passing such an order, principles of natural justice requires before passing an order, the assessee should be heard. Therefore, notice is issued to the assessee before passing such order. This order declaring an assessee as in default, is not an order which is contemplated under Section 200-A, where the prescribed Authority who is processing the return is a Director General of Income Tax (Systems). The Authority which is competent to pass an order under Section 201(3) is the Assessing Officer, who has the jurisdiction on the assessee on TDS matters under the provisions of the Income Tax Act. Though the word "Assessing Authority" is not stipulated in Sub-section (3) or in sub-section (1) of Section 201, the proviso to Section 201 throws some light on who is the competent authority to pass such orders. The second proviso provides that no penalty shall be charged under Section 201 from such person meaning the assessee in default, unless the Assessing Officer is satisfied that such 70 person without good and sufficient reasons has failed to deduct and pay such tax. Therefore, not only the Assessing Officer is competent to declare an assessee in default, by virtue of Section 221 which empowers an Assessing Officer to impose penalty payable when tax is in default, authorizes the Assessing Authority also to impose penalty for failure to comply with Section 200. Therefore, if we read the aforesaid three provisions together in a harmonious way, after deducting and payment of tax, if the statement is filed under Section 200-A, it is the Director General of Income Tax (Systems) who is a competent authority to look into the said statements and find out whether the liability under Section 200 has been complied or not. If no such deduction is made, no such payment is made, no such statement is filed, then under Section 201, it is the Assessing Authority who is competent to declare him as the "assessee in default" and levy tax, interest and penalty and take appropriate steps to recover the said amount. Therefore in the light of the aforesaid discussion, we are of the view that order passed 71 under Section 201 of the Act by the Assessing Authority is a valid order and Assessing Authority is the competent person to pass such orders. Therefore, the said question of law is answered in favour of the revenue and against the assessee.
39. The learned Senior Counsel produced in the course of arguments, the statements showing the intimation under Section 200-A of the Act received by the assessee for various periods. The orders are passed by the Deputy Commissioner of Income Tax, Centralized Tax Deducted at Source. They are dated 20.11.2013, 16.11.2013, 13.12.2013, 20.11.2013, 17.12.2013, 31.12.2013, 16.11.2013, 24.1.2014, 13.11.2013, 6.10.2013, 6.12.2013, 26.10.2013 and 4.2.2014. The said orders also disclose that the statements were filed on 28.7.2012, 27.12.2012, 4.4.2013 and 19.12.2013. Some of the orders are passed under Section 200-A of the Income Tax Act, whereas, the majority were intimation under Section 154 of the Income Tax Act, 1961. These documents are undisputed and produced before 72 us, clearly demonstrate that those statements had not been filed as and when required to be filed under law. If these statements are filed after the orders are passed, it only means the assessee has admitted the liability. In order to avoid future consequence of nonpayment of interest and penalty, these payments are made. Therefore, the liability is not in dispute. Deduction of the amount is not in dispute. Non-crediting the said amount to the Central Government account is not in dispute. Non-filing of statement is not in dispute. However, today, when they filed the statement, they have complied with the requirement of law. All the payments made as aforesaid are to be deducted out of the total amount due to the assessee if not deducted and only for the balance amount, the Authorities have to proceed, if any amount is due. That exercise shall be done by the Assessing Authority by giving effect to the orders which we have passed. In that view of the matter, we pass the following 73 ORDER
1. All the appeals filed by the Revenue are allowed.
2. All the appeals filed by the assessee are dismissed.
3. However, the assessee shall produce before the Assessing Authority all the payments which they have made subsequent to the order of the Assessing Authority. They are also at liberty to produce receipts showing payments prior to the order passed by the Assessing Authority, if such payment are not taken into consideration. It is also open to the assessee to file a statement as directed by the Assessing Authority in the notice issued at the first instance in the form showing the serial number, nature of payment, amount credited, amount of tax deducted at source 74 if any, due date for remittance, TDS amount deducted, number of months delay, interest amount and if amounts are made subsequent to the assessment orders, the particulars of the same.
4. The Assessing Authority shall take note of all these payments and if he is convinced about the said payments, give credit to the said payments.
5. If such payment do not discharge the entire amount due by the assessee, then recover the balance in accordance with law.
6. If the assessee has not deducted the amount and the employees have made the payment, then that also should be taken into consideration.
7. The assessee is to be given an opportunity to produce all such documents showing 75 such payments within the period of four months from today.
All the interim orders passed in these proceedings shall stand discharged.
Sd/-
JUDGE Sd/-
JUDGE cp/mpk/ahb