Case Law Details
Patwa Abhikarna Private Limited Vs ACIT (ITAT Indore)
ITAT Indore held that TDS on salary is deductible on the basis of ‘net salary’ i.e. gross salary (-) deduction under Chapter VI-A. Therefore, demanding amount on short-deduction of TDS calculated on gross salary is unsustainable.
Facts-
The assessee has made deduction of TDS out of salary paid to two employees, viz. Mr. Hemant Kumar Patwa and Mr. Jayant Kumar Patwa and the revenue has computed shortage in TDS of Rs. 57640/- and interest thereon Rs. 28,590/-.
The assessee’s submitted that the actual TDS was Rs. 2,05,000/- and Rs. 3,00,000/- out of salary paid to Mr. Hemand Kumar Patwa and Mr. Jayant Kumar Patwa respectively, although the TDS deductible was Rs. 2,71,951/-and Rs. 2,88,390/- respectively. Therefore, according to assessee, the TDS actually deducted was in fact more than the TDS deductible and hence there was no short-deduction.
It is also observed that the controversy of short-deduction between the revenue and assessee is for the reason that the revenue has computed deductible amount of TDS on “gross salary”, whereas the assessee has computed TDS deductible on the basis of “net salary” i.e. gross salary (-) deductions under Chapter VI-A.
Conclusion-
We observe that the approach of assessee is in accordance with the provisions of TDS as prescribed in Income-tax Act, 1961, which permit the consideration of deductions under Chapter-VIA while computing deductible amount of TDS. Therefore, we do not find any mistake in assessee’s action. That brings us to observe that the revenue authorities have wrongly computed short-deduction of Rs. 56,650/- and consequently interest thereon of Rs. 28,590/-. We do not find any merit in these demands created by revenue which are not as per law. Therefore, we delete these demands.
FULL TEXT OF THE ORDER OF ITAT INDORE
The instant appeals filed by the assessee are directed against the orders all dated 19.12.2018 passed by the Ld. Commissioner of Income Tax (Appeals)-I, Indore (in short ‘CIT(A)’ ), arising out of the orders all dated 31.07.2017 passed by the ACIT-TDS-CPC, Ghaziabad under section 200A of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Years 2010-11, 2013-14 & 2014-15.
2. There was a delay for 2 yrs. 5days in preferring the appeal before us by the assessee. In support of explanation rendered by the assessee for condonation of delay, an affidavit has been filed, perusal of which shows that the notice was not served upon the assessee. The same was received by the staff and not reported to the assessee. The explanation rendered by the assessee by way of affidavit seems to be genuine and hence, delay is condoned.
ITA Nos .59/Ind/2021 & 60/Ind/2021 for A.Ys. 2013-14 2014-15
3. We have heard both the parties and perused the materials available on record.
4. The issue relates to addition under Section 234E of the Act which has stated to be covered by the order passed by the Co-ordinate Bench in ITA Nos. 510/Ind/2019 in case of M/s. Keshav Industries Pvt. Ltd. & ITA Nos. 500 to 508/Ind/2019 Mr. Rajendra Prasad Tiwari order dated 14.07.2020. The copy whereof has already been submitted before us. On perusal of which, the contentions made by the Ld.AR is correct. Ld.AR has not been objected seriously by the Ld.DR with all his fairness.
4. We have perused the Co-ordinate Bench order alongwith appeal preferred by the assessee. The Co-ordinate Bench has been pleased to observe as follows:
“10. We also observe that the Co-ordinate Bench Agra in the case of Sudershan Goyal Vs DCIT (TDS) ITA No.442/Agra/2017 order dated 09.04.2018 considering the similar issue deciding in favour of the assessee observed as follows:-
“The issue involved in this appeal is as to whether late filing fee u/s 234E of the IT Act has rightly been charged in the intimation dated 10.11.2013 issued u/s 200A of the Act while processing the TDS returns/statement, the enabling clause (c) having been inserted in the section w.e.f. 01.06.2015. Before 01.06.2015, there was no enabling provision in the Act u/s 200A for raising demand in respect of levy of fee u/s 234E. As such, as per the assessee, in respect of TDS statement filed for
a period prior to 01.06.2015, no late fee could be levied in the intimation issued u/s 200A of the Act.
3. The ld. CIT(A), while deciding the matter against the assessee, has placed reliance on ‘Rajesh Kaurani vs. UOI’, 83 Taxmann.com 137 (Guj), wherein, it has been held that section 200A of the Act is a machinery provision providing the mechanism for processing a statement of deduction of tax at source and for making adjustments. The ld. CIT(A) has held that this decision was I.T.A No. 442/Agra/2017 & S.A. No. 01/Agra/2018 delivered after considering numerous ITAT/High Court decisions and so, this decision in ‘Rajesh Kaurani’ (supra) holds the field.
4. We do not find the view taken by the ld. CIT(A) to be correct in law. As against ‘Rajesh Kaurani’ (supra), ‘ShriFatehrajSinghvi and Others vs.UOI’, 73 com 252 (Ker), as also admitted by the ld. CIT(A) himself, decides the issue in favour of the assessee. The only objection of the ld. CIT(A) is that this decision and others to the same effect have been taken into consideration by the Hon’ble Gujarat High Court while passing ‘Rajesh Kaurani’ (supra). However, while observing so, the ld. CIT(A) has failed to take into consideration the settled law that where there is a cleavage of opinion between different High Courts on an issue, the one in favour of the assessee needs to be followed. It has so been held by the Hon’ble Supreme Court in ‘CIT vs. Vegetable Products Ltd.‘, 88 ITR 192 (SC). It is also not a case where the decision against the assessee has been rendered by the Jurisdictional High Court qua the assessee.
5. In ‘Shri Fatehraj Singhvi and Others’ (supra) it has been held, inter alia, as follows:
“22. It is hardly required to be stated that, as per the well established principles of interpretation of statute, I.T.A No. 442/Agra/2017 & S.A. No. 01/Agra/2018 unless it is expressly provided or impliedly demonstrated, any provision of statute is to be read as having prospective effect and not retrospective effect. Under the circumstances, we find that substitution made by clause (c) to (f) of sub-section (1) of Section 200A can be read as having prospective effect and not having retroactive character or effect.
Resultantly, the demand under Section 200A for computation and intimation for the payment of fee under Section 234E could not be made in purported exercise of power under Section 200A by the respondent for the period of the respective assessment year prior to 1.6.2015. However, we make it clear that, if any deductor has already paid the fee after intimation received under Section 200A, the aforesaid view will not permit the deductor to reopen the said question unless he has made payment under protest.”
6. In view of the above, respectfully following ‘Shri Fatehraj Singhvi and Others’ (supra), ‘Sibia Healthcare Pvt. Ltd. vs. DCIT (TDS)’, order dated 09.06.2015 passed in ITA No.90/ASR/2015, for A.Y.2013-14, by the Amritsar Bench of the Tribunal, and ‘Shri Kaur Chand Jain vs. DCIT, CPC (TDS) Ghaziabad’, order dated 15.09.2016, in ITA No.378/ASR/2015, for A.Y. 2012-13, I.T.A No. 442/Agra/2017 & S.A. No. 01/Agra/2018 the grievance of the assessee is accepted as justified. The order under appeal is reversed. The levy of the fee is cancelled.”
11. We, therefore respectfully following above decisions are of the opinion that in the given set of facts of the instant appeals wherein fee u/s 234E of the Act was levied in the statements processed u/s 200A of the Act before 01.06.2015 i.e. before the amendment brought into effect from 01.06.2015 in section 200A of the Act thereby enabling the revenue authorities to raise demand in respect of levy of fees u/s 234E of the Act, Ld. CIT(A) erred in confirming the levy of late fees u/s 234E of the Act by the assessing officer. Accordingly findings of Ld. CIT(A) in all these 10 appeals are reversed as we have recently taken a considered view against the revenue on earlier orders of Ld. CIT(A) wherein the identical orders by respective CIT(A) were passed and accordingly the revenue is directed to delete the levy of fees u/s 234E of the Act in all these 10 cases. Thus, common issue raised in these bunch of appeals is decided in favour of the assessee(s).
12. In the result, all 10 appeals at the instance of assessee(s) are allowed.”
It appears that the issue is covered and thus the relief as prayed for by the assessee is hereby allowed. In that view of the matter, the impugned levy of fee under Section 234E of the Act is hereby quashed.
5. In the result, assessee’s appeal for A.Y. 2013-14 is allowed.
6. This issue is also involved in the other appeal preferred by the assessee in ITA No.60/Ind/2021 for A.Y. 2014-15 and the same shall apply mutatis mutandis. Thus, assessee’s appeal for A.Y. 2014-15 is also allowed.
ITA No.58/Ind/2021 for A.Y. 2010-11
7. The was a delay about 6 months in preferring the appeal before the Ld.CIT(A). In support of which, the assessee filed submissions for condonation of the same, however, the explanation rendered by the assessee not found acceptable by the Ld.CIT(A) and the delay was, therefore, not condoned. Before us, the Ld.AR explained such delay and preferring the said appeal before the Ld.CIT(A) and the reason was rendered is found to be acceptable and thus, we condone the delay in preferring the appeal before the first appellate authority.
8. The assessee has raised following grounds in this appeal:
(1) On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in considering the case unfit for the condonation of delay in filing of the appeal. The Appellant prays that the said appeal be admitted and adjudicated on merits.
(2) On the facts that Salary was paid to Mr. Hemant Kumar Patwa and Mr. Jayant Kumar Patwa and TDS deductible on taxable Salary of Rs. 271951 and Rs. 288390 respectively. However actual TDS deducted and paid was Rs. 275000/-and Rs. 300000/- respectively, which was also supported by Form 16 and 26AS enclosed therewith. Thus TDS was already deposited in excess by Rs. 3049/-and 11610/-. The Appellant prays that the said appeal be admitted and adjudicated on merits.
(3) On the facts and in the circumstances of the case, the Ld. CIT (A) was not justified in not adjudicating the grounds of appeal given by the Appellant’s giving complete reasons along with supporting. The Appellant prays that the said appeal be admitted and adjudicated on merits.
(4) On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition made by the AO of an amount of Rs.57640/-on account of short deduction and Rs. 28590/- on account of interest on same u/s 201 of IT Act. The Appellant prays that the said appeal be admitted and adjudicated on merits.
(5) On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition made by the AO of an amount of Rs. 14410/-on account of default in payment of Interest on TDS u/s 201 of IT Act, 1961. The Appellant prays that the said appeal be admitted and adjudicated on merits.
(6) That the sec. 200A of the Act does not permit processing of TDS statement for default in payment of late fees, except any arithmetical error, or incorrect claim, or default in payment of interest on any TDS payable or refundable etc. Hence late fees for TDS quarterly statement cannot be recovered by way of processing under sec 200A. Therefore demand notice cannot be issued under this section, but if issued, then it is illegal. Hence liable to be cancelled. The Appellant prays that the said appeal be admitted and adjudicated on merits.
9. In Ground No. 1, the assessee claims that the Ld. CIT(A) was not justified in not condoning delay in filing first-appeal before him. Referring to Para No. 4 of the order of Ld. CIT(A), Ld. AR pointed out that there was a delay of about 51/2 months in filing first-appeal. Ld. AR submitted that the order appealed against before Ld. CIT(A) was received by some clerical staff who omitted to report the same to the responsible person and that is the precise and only reason that the first-appeal could not be filed in time, otherwise there was neither any malafide intention not deliberate attempt on the part of assessee in making delay. Ld. AR requested that there is a sufficient cause explained by assessee which should be taken into account and the delay in filing first-appeal should be excused. Additionally, Ld. AR also requested that the issues involved in present appeal are petty, quantum-wise and nature-wise, therefore it would be judicious and appropriate if the litigation is closed by adjudicating the issues at this stage by ITAT itself rather than referring back to Ld. CIT(A). After perusal of records, we find much weightage in the submission of Ld. AR and looking into the nature / quantum of issues and to achieve the objective to impart speedy justice, we thought it fit to adjudicate the issues finally. Accordingly, we proceeded to decide the remaining grounds.
10. In Ground No. 2 to 4, the assessee is aggrieved by the demand created by Ld. AO on account of short-deduction of TDS of Rs. 57,640/- plus interest of Rs. 28,590/- thereon u/s 201 of the Act.
11. We straight-away refer the submission made by assessee during first-appeal which is noted by Ld. CIT(A) in his order, relevant portion is reproduced below:
“….. Your Honour, according to the Ld. Income Tax Officer the amount paid to Hemant Kumar Patwa and Jayant Kumar Patwa is Rs.14,06,428 and Rs.14,36,297 respectively which is contrary to the provisions of Section 192B of Income Tax Act. TDS deductible of such amount of payment amount to Rs. 3,35,706 and 3,44,935 respectively and therefore, short deduction demand is raised amounting to Rs. 36,706/- and 29,935 respectively by Ld. AO. In regard to this we strongly disagree with the demand raised. It is respectfully submitted that the net income of deductees i.e. Hemant Kumar Patwa and Jayant Kumar Patwa from Patwa Abhikaran Pvt. ltd. was Rs.12,00,100 and Rs. 12,53,297 respectively which are supported by form 16 and computation of their income tax return enclosed herewith for your kind perusal. TDS deductible on such amount of payment was Rs.2,71,951 and 2,88,390 respectively. However actual TDS deducted and paid was Rs.2,75,000 and Rs.3,00,000 which is also supported by 26AS enclosed herewith of Hemant Kumar Patwa and Jayant Kumar Patwas respectively which means TDS was already deposited in excess. Further the evidences regarding payment of self-assessment tax challans are also enclosed for your kind perusal since the deductees i.e. Hemant Kumar Patwa and Jayant Kumar Patwa had also paid the amount of self-assessment tax on other income before filing of Income Tax returns.”
“That as per Sec. 192B of Income-tax Act, TDS is required to be deducted on amount of salary paid to dedcutee after deducting the amount of deductions under Chapter VI-A i.e. on income chargeable to tax and not on gross salary”.
12. Before us, Ld. AR reiterated the same submission as made before Ld. CIT(A). After a careful consideration, we observe that the assessee has made deduction of TDS out of salary paid to two employees, viz. Mr. Hemant Kumar Patwa and Mr. Jayant Kumar Patwa and the revenue has computed shortage in TDS of Rs. 57640/- and interest thereon Rs. 28,590/-. But the assessee’s submission is that the actual TDS was Rs. 2,05,000/- and Rs. 3,00,000/- out of salary paid to Mr. Hemand Kumar Patwa and Mr. Jayant Kumar Patwa respectively, although the TDS deductible was Rs. 2,71,951/-and Rs. 2,88,390/- respectively. Therefore, according to assessee, the TDS actually deducted was in fact more than the TDS deductible and hence there was no short-deduction. It is also observed that the controversy of short-deduction between the revenue and assessee is for the reason that the revenue has computed deductible amount of TDS on “gross salary”, whereas the assessee has computed TDS deductible on the basis of “net salary” i.e. gross salary (-) deductions under Chapter VI-A. We observe that the approach of assessee is in accordance with the provisions of TDS as prescribed in Income-tax Act, 1961, which permit the consideration of deductions under Chapter-VIA while computing deductible amount of TDS. Therefore, we do not find any mistake in assessee’s action. That brings us to observe that the revenue authorities have wrongly computed short-deduction of Rs. 56,650/- and consequently interest thereon of Rs. 28,590/-. We do not find any merit in these demands created by revenue which are not as per law. Therefore, we delete these demands. Resultantly, Ground No. 2 to 4 are allowed.
13. In Ground No. 5, the assessee has challenged the demand of interest of Rs. 14,410/- created by revenue on account of default in timely payment of TDS u/s 201 of the Act. In this regard, the assessee had submitted before Ld. CIT(A) as under:
“With reference to the demand of Rs. 14,410 which was raised towards default on payment of interest of TDS u/s 201 of IT Act 1961. It is respectfully submitted that the delay in depositing the tax deducted at source was due to some unavoidable circumstances, may be due to unavailability of the officer authorized to sign the cheques or to authorize the cash payment or sometimes for paucity of funds owing to large payments to be made and salaries paid to the employees or due to some technical issued. Also it is submitted that the appellant did not have any mala fide intention in the matter using the amount for any personal gain.”
We observe that the assessee admits delay in payment of TDS, although the assessee has pleaded reasons for delay, which again are multiple and vague. We note that TDS once deducted is a money belonging to exchequer and timely payment to Govt. A/c is mandated under the provisions of Income-tax Act, 1961. Further, section 201 prescribes levy of interest in clear terms. Therefore, the levy of interest is statutory and the assessee has to bear the same and the reasons advanced by assessee cannot exonerate from levy of interest. Accordingly, we are not inclined to grant any relief to assessee on this account. Ground No. 5 is thus dismissed.
14. In Ground No. 6, the assessee has challenged levy of late fee. On perusal of record, we find that this ground, although raised by assessee, was not even before Ld. CIT(A) but the Ld. CIT(A) has also made a wrong mention of this grievance in concluding part of his order. It appears, therefore, this Ground has been taken by assessee too but the grievance of late fee does not emanate from the record. Therefore, we dismiss Ground No. 6.
15. In the result, this appeal is party allowed.
16. In the combined result, assessee’s appeal in ITA No. 58/Ind/2021 for A.Y. 2010-11 is partly allowed and other two appeals in ITA Nos. 59 & 60/Ind/2021 for A.Ys. 2013-14 & 2014-15 are allowed.
This Order pronounced in Open Court on 29/09/2022
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