Case Law Details
Pandharpur Municipal Council Vs DCIT (CPC)–TDS (ITAT Pune)
ITAT Pune held that interest u/s 201(1A) was charged on account of ex-facie delay in depositing the deducted tax within the stipulated due dates and such levy is automatic and without escapement.
Facts-
For the assessment years under consideration, the appellant assessee e-filed its returns of TDS for various quarters, which were e-processed by the CPC TDS determining the interest liability u/s 201(1A) for delayed payment of tax (TDS) to the credit of ex‑chequer and consequential levy of interest thereon u/s 220(2) of the Act, and further levying fees for delayed filing of TDS-Returns u/s 234E of the Act.
Aggrieved by the orders of intimation served u/s 154 of the Act, the assessee challenged the levy of interest u/s 201(1A) & u/s 220(2) and levy of late fees u/s 234E of the Act, before the first appellate authority wherein partial relief was provided.
Aggrieved by the orders, the appellant carried the matter before this Tribunal.
Conclusion-
In the present case, admittedly there was ex‑facie delay in depositing the deducted tax (TDS) within the stipulated due dates, for the reasons interest u/s 201(1A) of the Act found charged and such levy being automatic and without escapement.
Held that since the said default de jure is outside the exclusion carved out by the proviso to section 201(1) of the Act and the levy of interest u/s 201(1 A) for the aforestated default being automatic & liability of interest u/s 220(2) being consequential one, finds no shelter, for the reasons the orders of tax authorities below being flawless, needs to be sustained.
FULL TEXT OF THE ORDER OF ITAT PUNE
The present bunch of eleven appeals is challenged against the separate orders of Commissioner of Income Tax (Appeals), Pune [for short “CIT(A)”] passed u/s 250 of Income-Tax Act, 1961 [for short “the Act”], which risen out of separate orders of intimation passed u/s 154 of the Act, by DCIT-CPC, TDS Ghaziabad [for short “CPC-TDS”], for five assessment years [for short “AY”] 2011-12 to 201 5-16.
2. Since the legal issue involved in these bunch of appeals is identical, with the agreement of both the parties, the matter is heard together for a consolidated order, resultantly the adjudication in lead case ITA/305/PUN/2020 positioned in succeeding paragraphs, shall mutatis mutandis apply to ITA/306 to 315/PUN/2020.
3. Before travelling to facts, it’s necessary to reproduce the identical grounds assailed by the appellant in all these appeals as;
1. On the facts and in the circumstances of the case and in law learned A.O. erred in levying the interest on payment defaults u/s 201(1A) for sum of Rs x,xx,xxx/- be disregarding appellant’s contention.
2. On the facts and in the circumstances of the case and in law learned A.O. erred in levying the interest on payment defaults u/s 220 for sum of Rs x,xx,xxx/- be disregarding appellant’s contention.
The appellant craves for leave, add, alter, modify, delete above ground of appeal before or at the time of hearing, in the interest of natural justice
4. The common facts borne out of records applicable to entire bunch of appeals, pithily stated are;
4.1 The assessee is a Municipal Council established under the State Municipal Council Act, set up under the ‘Constitution of India’, and functioning as a Local Authority and assessed to income tax as such.
4.2 For the assessment years under consideration, the appellant assessee e-filed its returns of tax deduction at source [for short “TDS–Return”] for various quarters, which were e-processed by the CPC‑TDS determining the interest liability u/s 201(1A) for delayed payment of tax (TDS) to the credit of ex‑chequer and consequential levy of interest thereon u/s 220(2) of the Act, and further levying fees for delayed filing of TDS-Returns u/s 234E of the Act.
4.3 Aggrieved by the orders of intimation served u/s 154 of the Act, the assessee challenged the levy of interest u/s 201(1A) & u/s 220(2) and levy of late fees u/s 234E of the Act, before the first appellate authority [for short “FAA”] wherein arguendo it was submitted that, the non-compliance of TDS provision is solely attributed to inadequate or insufficient trained manpower with the assessee, and in so far as the delayed payment of TDS is concerned, it is prayed that, the assessee be exonerated from the application of section 201(1) for the reasons that, large contractors / payees from whose payments tax (TDS) was deducted, must have declared the payments (including tax) as their income in the income tax returns filed by them, which can be witnessed from Form No 26AS. The said submission however, did not inspire the Ld. CIT(A), who in turn reverberating the factual matrix in the light of judicial pronouncement confirmed the statutory levy of interest u/s 201 (1 A) & 220(2) of the Act, apropos the Ld. FAA granted partial relief by deleting late fees levied u/s 234E in the light of amendment brought in by Finance Act, 2015.
4.4 Aggrieved by the orders of FAA, the appellant carried the matter before this Tribunal on the grounds set out in para 3 hereinbefore.
5. During the course of physical hearing, the learned counsel for the appellant [for short “AR”] pressing into service the first proviso to section 201(1), r.w.e to section 191 of the Act and decision of Hon’ble Apex Court in “Hindustan Coca-Cola Beverages Pvt. Ltd.” reported in 293 ITR 226(SC), contended that, since more or less all the contractors from whose accounts TDS was deducted, must have disclosed the said receipts as income in their respective returns and paid the taxes due thereon, hence assessee should not be treated as ‘assessee in default’ u/s 201(1) of the Act, resultantly holding so, there leaves no scope for application of section 201(1A) & consequential liability u/s 220(2) of the Act. Au contraire the learned departmental representative [for short “DR”] submitted that, the levy of interest u/s 201 (1 A) for delayed payment of tax (TDS) after collecting them from the contractors / payees, is automatic and is not protected by the proviso to section 201(1) of the Act, whereas the liability of interest u/s 220(2) is consequential in nature, hence the action of FAA is perfectly justified in confirming the liability computed under intimation and be withstood as such.
6. After hearing to the rival contentions of both the parties; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [for short “ITAT, Rules”] perused the material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue.
7. The only substantive question to be adjudicated under the present bunch of appeals relates, as to ‘whether default or failure to pay the TDS within prescribed time limit is sufficient to hold the appellant as an ‘assessee in default’ within the ambit of section 201(1) of the Act?’ Conversely ‘whether levy of interest for delayed payment of TDS is protected by the first proviso to section 201(1) of the Act?’ and in reaching the answer hereto, it is apt to quote the provision in verbatim which reads as;
“201. 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 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 maybe 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 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 subsection (3) of section 200.
Provided . . . . . . .”
(Emphasis Supplied)
8. At the outset it is suffice to state that, the proceedings u/s 201 are default proceedings that are initiated only when any default is committed by the person, either in non-deducting tax (TDS), or in not paying the tax (TDS) or in deducting but not depositing or short deduction or short deposit thereof as required by or under the Act. In the event of any such failure the proceedings are launched against the person responsible and an inquiry is conducted and if at the conclusion of such proceedings, it is found that the person responsible for paying has either failed to deduct any tax (TDS) or has failed to deposit the same after its deduction as required by or under the Act (i.e. chapter XVII of the Act), then such person is deemed to be an ‘assessee-in default’ with respect to such tax u/s 201(1) of the Act, subject to prescription of explanation to section 191.
9. In this context, on a plain reading of provision of section 201 aforesaid, it uncloudly inflicts that, a person by a fiction is deemed as an ‘assessee in default’ exclusively for two reasons vis-à-vis occasions such as; firstly when the person fails to deduct tax (TDS) i.e. on failure to deduct the taxes at source and secondly when the person fails to pay the tax (TDS) after such deduction to the credit of ex‑ chequer as required by or under the Act. Nevertheless, the first proviso appended to section 201(1) of the Act excludes certain person from the application of deeming fiction subject to compliance of certain conditions; however such exclusion does not enumerate both the situations endorsed by section 201(1) of the Act. Nota bene, the exclusion by virtue of first proviso is restricted to first situation or occasion or the category of person that is to say, the person who fails to deduct tax (TDS) and not the latter category of person who after such deduction of tax (TDS) fails to pay either whole or part of deducted tax (TDS) as required by or under the Act, and such failure de‑facto triggers the compensatory provision laid u/s 201(1A) which are inexorable for the said default committed.
10. At this juncture, it shall be necessary to make it clear that, failure to pay the deducted tax (TDS) as required by or under the Act envisages two situations such as; one, complete absence of payment of deducted tax and two, delay in payment of tax (TDS) beyond the prescribed due dates.
11. Panoramically, in the present impugned case, it remained an undisputed fact that, the appellant after deducting the tax (TDS) from the payment due to large number of contractors or payees etc., was failed to pay such deducted tax (TDS) to the credit of Central Government within the due date prescribed in the respective provisions of chapter XVII of the Act, consequently the CPC-TDS initiated the proceedings identifying the delays in payment of deducted tax (TDS) on the basis of information supplied by the appellant while filing the respective TDS returns, more particularly ‘Form No 26Q’ quarterly returns and considering the online representation, e-processed the TDS-returns. For reason of delay in paying the amount of deducted tax (TDS) to the ex-chequer, the CPC-TDS by an order u/s 154 of the Act, held the appellant as the ‘assessee in default’ in terms of provision of section 201(1) r.w.e. to 191 of the Act and consequently computed the compensatory interest u/s 201(1A) of the Act, which remained uncontroverted by the appellant during the proceedings before CPC-TDS as well before both the appellate proceedings.
12. Thus, in the present case, admittedly there was ex‑facie delay in depositing the deducted tax (TDS) within the stipulated due dates, for the reasons interest u/s 201(1A) of the Act found charged and such levy being automatic and without escapement finds force in para 10 of very same decision of Hon’ble Supreme Court in “Hindustan Coca-Cola Beverages Pvt. Ltd.” (supra), which was relied by the Ld. AR and which reads as under;
“10. . . . However this will not alter the liability to charge interest under section 201(1A) of the Act till the date of payment of taxes by the deductee-assessee”
(Emphasis supplied)
13. Since the said default de jure is outside the exclusion carved out by the proviso to section 201(1) of the Act and the levy of interest u/s 20 1(1 A) for the aforestated default being automatic & liability of interest u/s 220(2) being consequential one, finds no shelter, for the reasons the orders of tax authorities below being flawless, needs to be sustained.
14. In view of the aforesaid discussion, we find no merit in the grounds raised by the appellant; consequently there remained no iota of doubt in confirming the orders appealed against in pleno, ergo ordered accordingly.
15. Resultantly, the bunch of appeals of the appellant assessee is dismissed in aforestated terms.
In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Friday 09th day of September, 2022.
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