Court sets aside Certificates under Section 197, rejects alternative remedy, directs reassessment.

The court allowed the petition, setting aside the Certificates issued under Section 197 of the Income Tax Act due to the annulment of earlier orders holding the petitioner liable for tax liability. The court rejected the Revenue's suggestion to seek an alternative remedy under Section 264, emphasizing that the basis for the impugned Certificates had been set aside. The Assessing Officer was directed to reconsider the petitioner's application, instructing the petitioner's clients to continue deducting tax at the previous rate until a new decision was made.

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Issues:
Challenge to Certificates issued under Section 197 of the Income Tax Act, 1961 for determining tax deduction at source rates. Outstanding tax liability for Assessment Years 2017-18, 2018-19, and 2019-20. Petitioner's application for 'Nil' rate of tax deduction certificates. Alternative remedy under Section 264 of the Act. Approval for issuance of certificates at lower rates.

Analysis:

1. The petition challenges Certificates dated 10th September, 2019 issued under Section 197 of the Income Tax Act, determining tax deduction at source rates for different sections of the Act. The basis for rejecting the petitioner's application for 'Nil' rate certificates was an outstanding tax liability of approximately Rs. 94 Crores for Assessment Years 2017-18, 2018-19, and 2019-20, where the petitioner was held as an assessee-in-default under Sections 201(1) and 201(1A) of the Act by orders dated 9th September, 2019.

2. A separate Writ Petition challenged the orders holding the petitioner liable for the tax liability, and this petition was allowed, setting aside the orders dated 9th September, 2019. Consequently, the impugned Certificates dated 10th September, 2019 were required to be set aside due to the annulment of the earlier orders.

3. The Revenue suggested availing the alternative remedy under Section 264 of the Act, but the court rejected this, as the basis of the impugned Certificates had already been set aside. It was noted that the impugned Certificates were issued at lower rates without approval for 'Nil' rates from the Commissioner of Income Tax, making a revision under Section 264 futile.

4. The court emphasized that the impugned Certificates and the basis for their issuance were set aside, restoring the petitioner's application for fresh consideration by the Assessing Officer. The petitioner's clients/customers were instructed to continue deducting tax at the rate from a previous Certificate until a new decision was made.

5. It was clarified that if the Income Tax Officer found the petitioner liable to pay tax under Sections 201 and 201(1A) of the Act, the Certificates issued under Section 197 could be cancelled or substituted within two weeks of the court's order.

6. Ultimately, the petition was allowed, setting aside the impugned Certificates and the order sheet dated 9th September, 2019, based on the annulment of the earlier orders holding the petitioner liable for the tax liability.

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