IT: Where assessee did not deposit TDS on perquisites in terms of order of High Court wherein validity of rule 3 of Income-tax Rules, 1962 was questioned and same was still pending for finality, recovery of TDS amount to be postponed till finality of judgment of High Court
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[2013] 40 taxmann.com 72 (Nagpur - Trib.)
IN THE ITAT NAGPUR BENCH 'E'
Deputy Commissioner of Income-tax (TDS)
v.
Power Grid Corpn. of India Ltd.*
R.K. GUPTA, JUDICIAL MEMBER
AND D. KARUNAKARA RAO, ACCOUNTANT MEMBER
AND D. KARUNAKARA RAO, ACCOUNTANT MEMBER
IT APPEAL NOS. 99 TO 105 (NAG.) OF 2012
[ASSESSMENT YEARS 2005-06 TO 2011-12]
[ASSESSMENT YEARS 2005-06 TO 2011-12]
MAY 1, 2013
Section 192, read with section 201 of the Income-tax Act, 1961 - Deduction of tax at source - Salary [Perquisites] - Assessment years 2005-06 to 2010-11 - Tax deduction at source was made on certain perquisites accrued to employees of assessee but said tax deducted at source amounts were not deposited to Government of India account following direction of Calcutta High Court, vide Writ Petition No. 5642(W) of 2002, dated 27-3-2002 wherein validity of rule 3 of Income-tax Rules, 1962 was questioned and same was still pending for finality - Assessing Officer, however, raised demand of such TDS amount with interest under section 201 - Commissioner (Appeals) directed Assessing Officer to wait till finality of judgment of High Court of Calcutta, before recovering tax deducted at source and interest - Whether since in terms of interim order of Calcutta High Court, assessee had opened a separate account for parking tax deduction at source made by assessee and said direction was scrupulously followed by assessee for all these assessment years, direction given in this regard by Commissioner (Appeals) vide impugned order was fair and reasonable and same did not call for any interference - Held, yes [Para 11] [In favour of assessee]
Prakash Mane for the Appellant. G.R. Raja Gopalan for the Respondent.
ORDER
1. There are seven appeals under consideration. All the seven appeals are filed by the Revenue against the common order of the Commissioner of Income-tax (Appeals)-II, Nagpur, dated December 22, 2011, for the assessment years 2005-06 to 2010-11, respectively. For the sake of convenience, all the seven appeals are being clubbed and adjudicated in this consolidated order. The appeal-wise and ground-wise adjudication is given in the following paragraphs.
2. In all the seven appeals, the Revenue has raised identical grounds. Therefore, firstly, we shall take up the grounds raised in I. T. A. No. 99/ NAG/2012 for the assessment year 2005-06 which read as under :
| "1. | Whether, on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals)-II, Nagpur, is correct in law in directing the Assessing Officer to wait till finality of the order of the Calcutta High Court for recovery of tax deducted at source and interest ? | |
| 2. | Whether, on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals)-II, Nagpur, is correct in law in stopping the Department from recovering the tax and interest, particularly when no order under section 221 has been passed and the possibility of recovery in future is not appealable under section 246A of the Income-tax Act, 1961 ?" |
3. Briefly stated, the relevant facts of the case are that the Revenue in all these years, from 2005-06 to 2010-11, is aggrieved against the direction of the Commissioner of Income-tax (Appeals), who directed the Assessing Officer to wait till finality of the judgment of the hon'ble High Court of Calcutta, before recovering the tax deducted at source and interest. Thus, the Commissioner of Income-tax (Appeals) prevented the Assessing Officer from recovering the tax deduction at source made by the deductor. The Assessing Officer based on the provisions of section 201(1) and (1A) read with section 192 of the Act, raised the demand as per the table given below :
| Assessment year | Amount of TDS demand by IT Dept. (Rs.) | Interest under section 201 (Rs.) | Total demand (Rs.) |
| 2005-06 | 83,69,522 | 66,66,136 | 1,50,35,658 |
| 2006-07 | 81,80,231 | 56,96,760 | 1,38,76,991 |
| 2007-08 | 74,87,258 | 41,50,526 | 1,16,37,784 |
| 2008-09 | 25,82,769 | 10,96,999 | 36,79,768 |
| 2009-10 | 27,97,886 | 8,11,742 | 36,09,628 |
| 2010-11 | 34,36,131 | 5,81,335 | 40,17,466 |
| 2011-12 | 20,44,538 | 1,56,311 | 22,00,849 |
4. Aggrieved with the orders of the Assessing Officer, the assessee filed an appeal before the first appellate authority.
5. During the proceedings before the Commissioner of Income-tax (Appeals), the assessee submitted that in fact, tax deduction at source was made on certain perquisites accrued to the employees of the assessee and the said tax deducted at source amounts were not deposited to the Government of India account following the directions of the hon'ble Calcutta High Court, vide Writ Petition No. 5642(W) of 2002, dated March 27, 2002. In the said writ petition, the validity of rule 3 of the Income-tax Rule, 1962, was questioned and the same is still pending for finality. However, the hon'ble High Court of Calcutta passed an interim order, whereby the assessee was directed by the court that "the tax deducted at source amounts, if any, deducted would be kept in a separate account by the authority until further orders of this court". The assessee followed the same and the amount deducted was accordingly kept in a separate account about which there is no dispute. The Commissioner of Income-tax (Appeals) considered the above submissions of the assessee and also considered the binding judgment of the hon'ble Bombay High Court, which upheld the validity of the said rule 3 of the Income-tax Rules, 1962, and confirmed the decision of the Assessing Officer in raising the demand in principle. Paragraphs 5 and 5.1 of the Commissioner of Income-tax (Appeals)'s order are relevant in this regard. However, considering the direction of the hon'ble High Court of Calcutta for opening a separate account and depositing the tax deducted at source, including interest, done by the assessee in the said separate account until further orders of the hon'ble High Court, the Commissioner of Income-tax (Appeals) held that the recoveries and the levy of penalty, if any, are subjected to the final outcome of the judgment of the hon'ble High Court of Calcutta. Paragraph 5.2 of the Commissioner of Income-tax (Appeals)'s order is relevant in this regard. In the abovesaid factual matrix of the case and aggrieved by the said direction of the Commissioner of Income-tax (Appeals), the Revenue filed an appeal before the Tribunal.
6. During the e-court proceedings before us, the learned Departmental representative mentioned the facts of the case that lead to the abovesaid direction of the Commissioner of Income-tax (Appeals), which is now being decided. The learned Departmental representative relied on the order of the Assessing Officer and pleaded for vacating the direction of the Commissioner of Income-tax (Appeals). He further mentioned that both the amounts could be calculated with interest.
7. On the other hand, Shri R. Raja Gopalan, learned counsel for the assessee, brought to our notice the development before the Delhi Bench of the Income-tax Appellate Tribunal, wherein an identical issue came up for adjudication, vide I. T. A. Nos. 5001 to 5005/Del/2012 (assessment years 2007-08, 2010-11 and 2011-12). Reasonably, in the said order of the Tribunal it is decided that the assessee has a reasonable cause in view of the judgment of the hon'ble Calcutta High Court and paragraph 5 of the said order is relevant in this regard.
8. We have heard both the parties, perused the orders of the Revenue authorities and the paper book placed before us, containing the relevant orders of the hon'ble Calcutta High Court as well as the Delhi Bench of this Tribunal. To start with the interim order of the hon'ble Calcutta High Court dated March 27, 2002, reads as under :
"I have only to add that if any deduction is made that will be kept in a separate account by the authority concerned until further orders of this court."
9. The decision of the Commissioner of Income-tax (Appeals), vide paragraphs 5 to 5.2 that lead to the issue of directions to the Revenue to await the finality of the judgment of the hon'ble High Court to recover the tax deducted at source with interest and the said paragraphs are reproduced as under :
"5. The orders of the Assessing Officer are under section 201(1) and 201(1A), i.e., for tax deducted at source, which the appellant has deducted in the case of the employees and which has not been deposited in the Central Government account and it is in respect of compensatory interest which become due on late depositing of tax deducted at source. The orders of the Assessing Officer are not penal in nature and it is merely for recovery of tax deducted at source and compensatory interest thereon. The Assessing Officer has raised the aforesaid demands strictly in accordance with the Act under the due procedure established by law. He has raised demands, which otherwise should have been deposited in accordance with law. Had the appellant been not restrained by the hon'ble High Court of Calcutta from doing so as claimed by the appellant before the Assessing Officer and before me and it is clear from the hon'ble High Court order filed before me.
5.1. It is clear that these demand are raised in respect of the employees of appellant, who are working in Maharashtra and they are under the jurisdictional hon'ble High Court of Mumbai and the hon'ble High Court of Bombay has dismissed the petition of All India LIC Employees Federation and others as mentioned by the Assessing Officer above. Hence, in the case of employees of the appellant, who are within the jurisdiction of the Bombay High Court, the said ruling has become final. Hence, the Assessing Officer's action in this regard is upheld.
5.2. However, I hasten to add that the appellant has quoted the order of the hon'ble High Court of Calcutta regarding non-depositing tax deducted at source and consequential interest thereon. The Assessing Officer has to wait till the finality of order of the Calcutta High Court for recovery of tax deducted at source and interest. It may not be out of place to mention that in respect of Power Grid employees, the Kolkata High Court in the case of Assistant Commissioner of Income-tax, Circle-3, Purnia has observed that 'respondent given liberty to apply for vacation and/or vacation of the interim order upon notice to the writ petitioner and the Grid Power Corporation'. Hence, the Assessing Officer is free to take action as deem fit in view of the above directions of the hon'ble High Court. The Assessing Officer's order regarding interest is also as per law and is also upheld but it will be circumcised by the final order of the hon'ble Calcutta High Court as the said amount was deposited in a particular bank the Assessing Officer on the direction of the hon'ble High Court and apparent contention that no interest can be demanded under section 201(1A) of the Income-tax Act is correct as it is prevented by the order of the hon'ble High Court from depositing the said amount in Government account, hence, the amount of interest if any payable by the appellant as mentioned above will be subject to the final order of the hon'ble Calcutta High Court in the matter."
10. Further, we have examined the order of the Delhi Bench of the Tribunal, vide I.T.A. Nos. 5001 to 5005/Del/2012 (supra), dated November 22, 2012, and paragraph 5 of the said order is relevant as it contains the discussion of the "existence of reasonable cause" which reads as under :
"5. We have heard the rival submissions and perused the relevant material available on record. We find merit in the argument of the authorised representative of the assessee. The amount in question was deposited in a separate bank account, as directed by the competent jurisdictional High court, i.e., the hon'ble Calcutta High Court. The assessee having acted under the court order, the Commissioner of Income-tax (Appeals) has rightly deleted the interest. His orders are upheld."
11. From the above extracts, the interim order of the hon'ble Calcutta High Court, it is evident that the assessee has opened a separate account for parking the tax deduction at source made by the assessee and the said direction is scrupulously followed by the assessee for all these assessment years. The said direction cannot be ignored in view of the jurisdictional High Court judgment. Therefore, we are of the considered opinion that the direction given in this regard by the Commissioner of Income-tax (Appeals), vide paragraph 5.2 of the impugned order, is fair and reasonable and the same does not call for any interference. Accordingly, grounds raised by the Revenue in all the seven appeals are dismissed.
12. In the result, all the seven appeals filed by the Revenue are dismissed.
Regards
Prarthana Jalan
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