2022 (12) TMI 254 - AT - Income Tax

ITAT rules in favor of appellant, deleting demand under IT Act for TDS omission on freight charges.

The ITAT allowed the appeal of the appellant, directing the deletion of the demand under sections 201(1) and 201(1A) of the Income Tax Act, 1961. The ... Liability under section 201(1) as assessee in default - interest under section 201(1A) - application of section 194C and disallowance under section 40(a)(ia) - binding effect of Tribunal's earlier decision in assessee's own caseLiability under section 201(1) as assessee in default - interest under section 201(1A) - binding effect of Tribunal's earlier decision in assessee's own case - Whether the demand under section 201(1) and interest under section 201(1A) could be sustained where the disallowance under section 40(a)(ia) (for non deduction of TDS under section 194C) was deleted in the assessee's own quantum proceedings by the Tribunal. - HELD THAT: - The Tribunal noted that in the quantum proceedings for AY 2009-10 a Coordinate Bench of ITAT had deleted the disallowance made under section 40(a)(ia) on the basis that the payments to vehicle owners were not payments for carrying out work under a contract attracting section 194C, but were of the character of hire (no privity of contract or transfer of risk to the payees). The present TDS demand under section 201(1) and interest under section 201(1A) rested on the same factual and legal foundation as the deleted disallowance. Having found that the issue was already conclusively decided in favour of the assessee in the Tribunal's earlier order in the assessee's own case, the Tribunal applied that decision and held that there was no liability to deduct tax so as to make the assessee an assessee in default under section 201(1); consequently the impugned demand and interest were liable to be deleted. [Paras 5, 6]Demand under section 201(1) and interest under section 201(1A) for AY 2009-10 deleted, appeal allowed.Final Conclusion: The Tribunal allowed the assessee's appeal and deleted the demand under section 201(1) and interest under section 201(1A) for AY 2009-10, following the Tribunal's earlier decision in the assessee's own case that no TDS obligation arose under section 194C and the corresponding section 40(a)(ia) disallowance was to be deleted. Issues Involved:1. Treatment of the appellant as 'assessee in default' under section 201(1) and interest under section 201(1A) of the Income Tax Act, 1961.2. Ex-parte decision by the Commissioner of Income Tax (Appeals) [CIT(A)].Issue-wise Detailed Analysis:1. Treatment of the appellant as 'assessee in default' under section 201(1) and interest under section 201(1A):The primary issue revolves around the appellant being treated as an 'assessee in default' for not deducting Tax Deducted at Source (TDS) on freight charges amounting to Rs. 2,81,54,400/-. The Assessing Officer (AO) and CIT(A) confirmed the demand of Rs. 2,89,990/- under section 201(1) and interest of Rs. 2,08,800/- under section 201(1A) of the Income Tax Act, 1961.The appellant argued that they had filed Form 15-I and complied with the provisions of the Act. However, the AO noted that the appellant failed to furnish vehicle-wise Form 15-I and other required details. Consequently, the CIT(A) upheld the AO's action, finding no infirmity in the AO's decision.In the appeal before the ITAT, the appellant's counsel cited a previous ITAT order in the appellant's own case for the same assessment year, where it was held that there was no liability on the appellant to deduct taxes on payments made to transporters. The ITAT reviewed the relevant material and agreed that the issue was covered in favor of the appellant based on the earlier ITAT order. The ITAT concluded that there was no evidence to suggest that the appellant's payees had undertaken any risk involved in the transportation duty, thus invalidating the need for TDS under section 194C. Consequently, the ITAT directed that the demand under sections 201(1) and 201(1A) be deleted.2. Ex-parte decision by the Commissioner of Income Tax (Appeals) [CIT(A)]:The appellant also contended that the CIT(A) erred in deciding the appeal ex-parte. Despite several opportunities, none appeared on behalf of the appellant before the CIT(A), leading to the dismissal of the appeal.The ITAT did not delve deeply into this procedural issue, as the substantive issue regarding the TDS liability was decided in favor of the appellant based on the merits of the case and the precedent set by the earlier ITAT order.Conclusion:The ITAT allowed the appeal of the appellant, directing that the demand under sections 201(1) and 201(1A) be deleted, thereby resolving the primary issue in favor of the appellant. The procedural issue of the ex-parte decision by the CIT(A) was rendered moot by the substantive resolution of the TDS liability issue. Order Pronouncement:The appeal of the assessee was allowed, and the order was pronounced in the open court on 30-11-2022.