2021 (3) TMI 1199 - AT - Income Tax

Tribunal partially allows assessee's appeals, dismisses Revenue's appeals, emphasizes proper verification

The ITO (TDS), Allahabad Versus Public Service Commission (Lok Sewa Aayog), The Secretary, Public Service Commission (Lok Sewa Aayog) Versus The Income Tax Officer (TDS), Allahabad

The Tribunal partly allowed the appeals filed by the assessee for statistical purposes and dismissed the appeals filed by the Revenue. Several issues were ... TDS u/s 194C OR 194J - Short deduction of tds - payment of Special Services - assessee in default u/s 201(1A) - assessee has claimed that these are payments of confidential/secret nature and the details of payees and other details cannot be disclosed and no income tax was deducted at source while making payments under this head as otherwise confidentiality would have been breached if the PAN and other details such as of payees etc are uploaded into the system while filing TDS returns - HELD THAT:- Only bald assertion made that the amount was spent for supply of pre-printed examination papers while there are no evidence on record before us to hold that these payments were made for the aforesaid purposes. Even affidavit from Secretary, Lok Seva Aayog, U.P.(UP Public Service Commission) averring the nature of expenses incurred has not been filed. It is equally true that the assessee has got allocation from UP State Government for expenditure for secret services. The assessee has to maintain secrecy and confidentiality of these payments and hence it is claimed that no income-tax was deducted at source as otherwise it will breach the confidentiality once PAN of the payee is uploaded while filing TDS returns. The assessee is facing genuine hardship as on the one hand it is bound to maintain complete secrecy of payments as is mandated by State Government as the nature of expenses is claimed to be for supply of pre-printed examination paper, while on the other hand, the provisions of the 1961 Act requires the deduction of income-tax at source under Chapter XVII-B if the payment falls under the said provisions. The assessee has not obtained any certificate from the AO for non deduction of TDS on these payments as is mandated under the provisions of Section 197 of the 1961 Act. Provisions of Section 119 empowers CBDT to grant exemption from rigours of provisions of the 1961 Act to redress genuine hardship of the taxpayers. The assessee has also filed additional evidences before tribunal(pb/page 8-11) by way of allocation of budget of the assessee by State Government which also contains allocation for Secret Services Expenses, these evidences are vital to resolve the issue but the same requires verification by the authorities below. It is equally well settled that the duty of all taxing authorities to assist taxpayers so that they get reliefs which they are entitled to. Reference is drawn to Circular issued by the Central Board of Direct Taxes Circular No: 14 (XL-35) dated April 11, 1955. We are of the considered view, that one more opportunity need to be granted to the assessee and the issue is restored to the file of the AO for fresh adjudication. We clarify that all the contentions are kept open. The AO shall give proper and adequate opportunity to the assessee in accordance with principles of natural justice in accordance with law. Default in deduction of income tax at source on payments made towards Rent and other charges - Assessee is claiming that these are payments towards house tax and water tax- HELD THAT:- As observed that apart from house tax and water tax payments, there were further payments as discovered by AO during proceedings conducted for submission of remand report to ld. CIT(A) during the appellate proceedings, which facts is stated by AO in its remand report that payments to the parties covered under the head ‘Rent and other charges ’ were also made from other heads of expenditure, on which no income tax was deducted at source. Complete details of the payee, nature of payment, rent agreement details, premises hired details etc. are neither specified by AO in its remand report nor by ld. CIT(A) in its appellate order. Thus, complete facts are not emerging from the orders passed by the authorities below as the orders passed are cryptic in nature and we are of the considered view that the matter need to be restored to the file of the AO for fresh adjudication of the issue on merits in accordance with law. The evidences filed by assessee in its support shall be admitted by AO and adjudicated on merits in accordance with law. The AO is directed to pass speaking and reasoned order. Invocation of provisions of Section 206AA - HELD THAT:- Since, we have already restored the issue back to the file of the AO for denovo adjudication of the issues concerning deduction of income-tax at source on payments made towards Suspense Service Expenses as well on Rent and other charges as above, since this issue is interlinked with the above issues, it will be appropriate that this issue is also restored back to the file of the AO for denovo adjudication on merits in accordance with law. Issues Involved:1. Short deduction of tax at source on payments for Special Services.2. Non-deduction of tax at source on Suspense Service Expenses.3. Deduction of tax at source on payments made under the head 'Honorarium'.4. Deduction of tax at source on payments made under the head 'Stationery & Forms'.5. Deduction of tax at source on payments made under the head 'Office Furniture & Equipment'.6. Deduction of tax at source on payments made under the head 'Advertisement, Sales & Services'.7. Deduction of tax at source on payments made under the head 'Rent & Other Charges'.8. Applicability of Section 206AA for non-furnishing of PAN by payees.Detailed Analysis:1. Short Deduction of Tax at Source on Payments for Special Services:The Assessing Officer (AO) observed that the assessee had made payments for Special Services with a short deduction of tax at source, which was lower than the prescribed rates under Section 194J of the Income Tax Act, 1961. The AO held the assessee liable for short deduction of tax amounting to Rs. 32,158/- for AY 2013-14 and Rs. 91,631/- for AY 2014-15. The assessee admitted the short deduction, and the Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the same.2. Non-Deduction of Tax at Source on Suspense Service Expenses:The AO found that the assessee made payments for Suspense Service Expenses without deducting tax at source as required under Section 194C of the Act. The AO calculated a tax liability of Rs. 47,00,000/- for AY 2013-14 and Rs. 73,80,000/- for AY 2014-15, applying a 20% TDS rate due to non-furnishing of PAN by the payees. The assessee argued that these payments were confidential and exempt from TDS, but the CIT(A) upheld the AO's findings, reducing the amount to Rs. 33,80,000/- for AY 2013-14.3. Deduction of Tax at Source on Payments Made Under the Head 'Honorarium':The AO observed that the assessee made payments under the head 'Honorarium' without deducting tax at source. The CIT(A) confirmed the short deduction of Rs. 67,600/- for AY 2013-14 and Rs. 74,300/- for AY 2014-15, applying a 20% TDS rate under Section 206AA due to non-furnishing of PAN by the payees.4. Deduction of Tax at Source on Payments Made Under the Head 'Stationery & Forms':The AO found that the assessee made payments for 'Stationery & Forms' without deducting tax at source under Section 194C. The CIT(A) confirmed the short deduction of Rs. 49,950/- for AY 2013-14 and Rs. 28,422/- for AY 2014-15, based on the AO's remand report.5. Deduction of Tax at Source on Payments Made Under the Head 'Office Furniture & Equipment':The AO observed that the assessee made payments for 'Office Furniture & Equipment' without deducting tax at source under Section 194C. The CIT(A) confirmed the short deduction of Rs. 48,596/- for AY 2013-14 and Rs. 29,797/- for AY 2014-15, based on the AO's remand report.6. Deduction of Tax at Source on Payments Made Under the Head 'Advertisement, Sales & Services':The AO found that the assessee made payments for 'Advertisement, Sales & Services' without deducting tax at source under Section 194C. The CIT(A) confirmed the short deduction of Rs. 99,286/- for AY 2013-14 and Rs. 1,42,243/- for AY 2014-15, based on the AO's remand report.7. Deduction of Tax at Source on Payments Made Under the Head 'Rent & Other Charges':The AO observed that the assessee made payments for 'Rent & Other Charges' without deducting tax at source. The CIT(A) confirmed the short deduction of Rs. 1,17,646/- for AY 2013-14 and Rs. 1,81,007/- for AY 2014-15, based on the AO's remand report.8. Applicability of Section 206AA for Non-Furnishing of PAN by Payees:The AO applied a 20% TDS rate under Section 206AA due to non-furnishing of PAN by the payees. The assessee argued that Section 206AA should not apply when no tax was deducted at all. The Tribunal restored the issue to the AO for fresh adjudication, considering the genuine hardship faced by the assessee in maintaining confidentiality.Conclusion:The Tribunal partly allowed the appeals filed by the assessee for statistical purposes and dismissed the appeals filed by the Revenue. The Tribunal restored several issues to the AO for fresh adjudication, emphasizing the need for proper verification and consideration of the assessee's contentions and additional evidence.