2013 (6) TMI 744 - AT - Income Tax

Tribunal shifts burden of proof to revenue in tax appeal, emphasizing fair opportunity for assessee.

ICICI Bank Ltd. Versus Deputy Commissioner of Income Tax TDS Range, Lucknow

ICICI Bank Ltd. Versus Deputy Commissioner of Income Tax TDS Range, Lucknow - TMI Issues:Challenge to correctness of CIT (A)'s order on tax withholding and interest liability u/s 201(1) and 201(1A) of Income Tax Act 1961.Detailed Analysis:Issue 1: Tax withholding liabilityThe appellant contested the liability for not deducting tax at source while making payments of interest to Indian Institute of Management, Lucknow. The Tribunal noted that a co-ordinate bench previously held the appellant to be in default for non-deduction of tax at source. However, it was highlighted that non-deduction of tax at source does not automatically lead to a valid demand under section 201(1) and 201(1A). The Tribunal referred to the judgment in Hindustan Coca Cola Beverages Pvt Ltd Vs CIT, emphasizing that taxes cannot be recovered from the payee if the recipient has already paid taxes on the income. The Tribunal, therefore, directed a fresh adjudication by the Assessing Officer to ascertain whether the recipient of income had paid taxes, shifting the burden of proof to the revenue to establish loss of revenue before invoking recovery provisions under section 201(1).Issue 2: Interest liabilityRegarding interest liability under section 201(1A), the Tribunal clarified that it is compensatory in nature and applicable regardless of fault. However, the interest is only levied for the period between when the tax was required to be deducted and when it was eventually paid. If the recipient had no tax liability on the payments, interest under section 201(1A) would not apply. The Tribunal directed the computation of interest to be redone based on this legal position.Conclusion:The Tribunal allowed the appeal for statistical purposes, restoring the matter to the Assessing Officer for fresh adjudication in line with the legal principles discussed. The decision highlighted the importance of ensuring that recovery provisions are invoked only when loss of revenue is established and emphasized the need for a fair opportunity of hearing to the assessee during the process. The Tribunal acknowledged the deviation from the previous year's decision but justified the change based on the legal precedents cited.