TaxTMI 
TaxTMI 
2014 (9) TMI 364
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....Act’). 3. During the course of verification of the TDS compliances it was noticed that for the financial year 2009-2010, a sum of Rs. 74,94,21,701/-; for the financial year 2010-2011, a sum of Rs. 139,43,81,410/- and for the financial year 2011-2012 up to September 2011, a sum of Rs. 89,79,76,212/- was deducted from the salaries paid to the employees and payments under other heads for the above mentioned assessment years but the same was not remitted to the Government Account. Therefore, show-cause notices were issued dated 13.12.2011 for the assessment year 2010-2011; notice dated 16.12.2011 for the assessment year 2011-2012 and notice dated 21.12.2011 for the assessment year 2009-2010 under Section 201(1) of the Act. The notices were duly served on the assessee. The assessee was called upon to explain as to why they should not be treated as an assessee-in-default and was asked to furnish its submissions, if any. In two cases there was no response. In one case, time was sought for filing response. The assessing authority passed an order on 30.12.2011 directing the assessee to pay the amount deducted with interest and issued a demand notice. The order was passed to initiate ....
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....sessee an opportunity of hearing when the entire liability with interest is admitted and worked out and given by the assessee themselves and the question of fresh adjudication on remand will not arise as there is no dispute as to the liability? 2. Whether the Tribunal was correct in holding that section 201(1) r.w.s. 201(1A) of the Act was penal proceedings when the scheme to deduct tax at source vests the deductor with an obligation under statute in a fiduciary capacity and to pass on the deducted tax to the Central Government failing which interest is levied which is compensatory in nature? 3. Whether the Tribunal was correct in holding that the notice had not been served, the assessee was not heard, no sufficient opportunity was granted and the officer has to be satisfied that there was good and sufficient reason for not making TDS when the material on record showed to the contrary and consequently recorded a perverse finding? 4. Whether the Tribunal was correct in holding when granting interim order that the assessee was in dire financial difficulties having admitted the liability and an opportunity should be granted to repay ....
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....shown payment of the said amount. Therefore, he submits that the entire proceeding was conducted without jurisdictional fact being ascertained. The impugned order passed by the assessing authority is one without jurisdiction and the Tribunal was justified in setting aside the orders passed by the authorities and remanding the matter back to the Assessing Authority for deciding the case afresh. He also submitted that the documents produced before this Court at the time of hearing of these appeals shows asseessees have filed return though belatedly and made payments. The prescribed authority under the Act has passed orders calling upon the assessee to pay certain sum of money, which according to him was the deficient. Unless these amounts are taken into consideration, the liability, if any of the assessee cannot be fixed and those orders are not passed by the assessing authority but by the prescribed authority under the Act. Even otherwise as the Tribunal has not decided the case on merits, in the event the Court were to set aside the order of remand, the matter has to be remitted to the Tribunal to consider the case on merits and pass appropriate orders. 9. Per contra, learned Co....
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....ntentions, the points that arise for our consideration in these appeals are: (i) Whether the entire proceedings initiated by the Assessing Authority when the jurisdictional fact being ascertained, is one without jurisdiction? (ii) Whether the impugned orders passed by the Assessing Authority and the First Appellate Authority offends principles of natural justice as held by the Tribunal and therefore no case for interference, if such an order is made out? (iii) Whether in a proceeding under Section 201 of the Income Tax Act, who is a competent authority who is vested with the power to declare the assessee as assessee in default and order passed by the Assessing Authority can be said to be one without jurisdiction? JURISDICTIONAL FACT 11. The learned Senior Counsel relying upon a judgment of Allahabad High Court in the case of JAGRAN PRAKASHAN LIMITED v/s DEPUTY COMMISSIONER OF INCOME TAX reported in (2012) 345 ITR 288 = contended that existence of jurisdictional fact is sine qua non or condition precedent for exercising the power by the court of limited jurisdiction. The jurisdictional fact is a fact which must exist ....
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....etter dated 22-3-2011, 21-6- 2011, 24-08-2011 and 09-09-2011 asking the assessee to furnish the details regarding the heads of expenditure from which, the TDS was deducted, the rate of deduction and dates on which payments became due, for each financial year separately. However, there was no response. Since the assessee failed to furnish the information called for, verification was conducted at the business premises of the assessee. Consequently and after severe pursuance, Rs. 21,04,64,384/- was collected by the office. The assessee was further asked to give the payment plan and accordingly the assessee vide letter dated 17-11-2011 filed a commitment letter and had undertaken to pay the outstanding TDS liabilities for the financial year 2010-11 and clear the entire outstanding liabilities by the end of the current financial year i.e. 31-03-2012. After repeated telephonic conversation with Shri Venkatadri, AVP, Taxation of M/s. Kingfisher Airlines Limited furnished the details regarding outstanding TDS liabilities for the financial year 2010-11 which was received by Fax. After taking into consideration the payments made by the assessee-company as ascertained from Ms.Rekha, Assistant....
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....Government, the auditors have remarked that they had verified the compliance with the provisions of Chapter XVII-B regarding deduction of tax at source and regarding the payment thereof to the credit of the Central Government in accordance with the Auditing Standards generally accepted in India which include test checks and the concept of materiality. The non-compliance revealed during such audit procedures are as mentioned in clause(b). Then they had set out non-compliance. Insofar as tax deducted but not paid to the credit of the Central Government is concerned, they have enclosed Annexure-IX. Annexure-IX shows the tax deducted for the months under various provisions of the Income Tax Act as well as the due dates and wherever the payment has been made, the date of payment is given. Wherever no such payment is made, the column is left blank. The said annexure also shows the amount of tax which is deducted and not paid. Based on this information and correspondence, the notice was issued under Section 201 of the Act. The demand was made as required under Section 201 of the Act. Therefore, the contention that the amount claimed in the notice has no basis and how the said amount is ar....
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....not in dispute that on 30-12-2011 for all the three years, the assessment orders came to be passed by the Assessing Authority. We have to see the conduct of the assessee. Immediately after issue of notice on 13-12- 2011 and 16-12-2011 before the issuance of notice on 21- 12-2011, the assessee addressed a letter to the Assessing Authority undertaking to pay a sum of Rs. 130 crores. The said letter is dated 17th November 2011, which reads as under: KINGFISHER AIRLINES 7th November, 2011 The Asst. Commissioner of Income Tax(TDS) Circle -16(2), 59, HMT Bhavan, 4th Floor, Ganga Nagar, Bangalore – 560 032. Dear Madam, Sub: Liquidation of TDS dues. The assessee company is a premier airline company having a huge market share in India. The business of running airlines in India is a very tough task inview of the unfriendly and deteriorating macro economic situation. The existing Civil Aviation Policy and Tax Policy has been the cause for huge financial losses incurred by the assessee company. The losses have also caused tremendous financial strain on the company and attendant liquidity problems. Inview of the foregoing genuine circumstances beyond the control ....
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.... with Board Circular No.275/201-95-IT(B) has not been considered. For the last few years, due to global spurt in crude prices, aviation turbine fuel prices continued to shoot up and coupled with the exorbitant rates of taxes on aviation turbine fuel in India, put the civil aviation industry under severe pressure. The rising fuel costs during the period and increase in other operating costs further added to the problems of the company. Further the depreciation of the rupee against the dollar has also caused tremendous hardship on the operations of the company. The resultant increases in fares and fuel surcharges that the airlines had to implement, resulted in a slowdown in air travel, both in India and worldwide. The domestic carries in the country continued to add capacity, the growth in capacity was far in excess of the growth in traffic in the domestic market. This continued overcapacity situation led to stiff competition putting pressure on yields. All these factors combined to cause an operating loss for the six months period ending 30th September, 2011 at Rs. 1,083 Crores and the accumulated losses till 30th September, 2011 is Rs. 6,080 Crores. Ongoing recession in....
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....t being in default in respect of the tax arrears in appeal as per the provisions of section 220(6) of the I.T Act in the interest of justice. It may be noted that the company’s request is in line with the conditions stated in the circulars/instructions for grant of stay and requests that absolute stay be granted till the disposal of the appeals. It has been so held by Rajasthan High Court, Jaipur Bench in 223 ITR 192 and recently by Delhi High Court in Soul v DCIT – 14 DTR 267, Subhash Chandra Sehgal v DCIT in 6 DTR 53, and Valvoline Cummins Ltd v. DCIT – 8 DTR 145. Hence we pray for staying the collection of the entire demand until the disposal of the appeal in the interests of justice. The Company prays for a personal hearing before disposal of the stay petition. Thanking You, Yours truly, For Kingfisher Airlines Ltd., Sd/- Authorised Signatory. 22. In the entire letter they have not expressed their grievance that they have neither been heard nor violation of principles of natural justice. But they pleaded difficulties experienced by them for making the said payment and they also made it clear that they are preferring an appeal before the Commissione....
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....quity infusion and no sooner the long term bank finance/equity infusion is completed we will be in a position to give you a firm payment plan for liquidation of our TDS dues. However to show our commitment, we will arrange to make a payment of Rupees Twenty Crores in the coming week and follow it up with a payment plan. While I thank you for your co-operation and understanding, I would earnestly request you to please bear with us and do not resort to any coercive steps towards liquidation of our TDS dues. Your sincerely. Sd/- 24. One more letter came to be addressed by the Chairman & Managing Director on 2-3-2012 pointing out that as against the claim of Rs. 302 crores plus interest of Rs. 70.00 crores, on February 22nd, IATA remitted Rs. 15.15 crores to the IT Department, reducing the principal due to Rs. 286.85 crores and a proposal was given for making the balance amount. The said letter was addressed to the Chairman, CBDT, Government of India which reads as under: KINGFISHER AIRLINES Vijay Mallya Member of Parliament Chairman and Managing Director March 02, 2012 Mr.Laxman Das, Chairman – CBDT, Government of India, New Delhi. Dear Sir, Our c....
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....sal. Thanking you, Yours faithfully, Sd/- Vijay Mallya. cc: Mr.R.S.Gujral, Secretary – Revenue Government of India, New Delhi. 25. It was followed by one more letter dated 9-3-2012 making a proposal to pay Rs. 356.85 crores in eight equal monthly installments of Rs. 45.60 crores, which reads as under: KINGFISHER AIRLINES Vijay Mallya Member of Parliament Chairman and Managing Director March 09, 2012 Mr.Laxman Das, Chairman – CBDT, Government of India, New Delhi. MOST URGENT Dear Sir, This is further to my letter dated March 02, 2012 to you. Our Company is undergoing serious financial stress mainly on account of the high oil prices, punitive State Sales Taxes and various other factors. The Income tax authorities attached all our bank accounts and our main IATA collection account with the result that we are completely crippled and have been unable to make any payments to any party including salaries to 8000 + employees. The Government of India are reportedly taking several policy initiatives to help the stressed aviation sector. This will help the industry and also Kingfisher Airlines. We are in active discussion with serious ....
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....their possession. 27. Section 106 of the Evidence Act, 1872 which deals with the burden of proving the fact, especially within knowledge, provides that when any fact is established within the knowledge of any person the burden of proving that fact is upon to him. The amount collected as TDS is the amount deducted from the salary of the employees of the assessee. The assessee has failed to furnish particulars such as the number of employees employed by them, the amount of salary paid to them, the amount of TDS deducted out of their salary and if any payment has been made to the Central Government. These are all facts which are within the knowledge of the assessee and they cannot expect the Department to furnish all these particulars. The Department is acting on the basis of the information furnished by the assessee as set out above. The assessee in their correspondence has stated what is the amount due which is reflected in the annexures. The Department has gathered the figures from the materials available on record. If that is wrong, it was open to the assessee to produce their accounts and point out to the Appellate Authority that, that is not the amount due. But no such exerci....
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....ss of assessment, and an assessment is nothing but another name for adjustment of the tax liability to accord with the taxable event in the particulars tax payer’s case. 29. Therefore, if the grievance of the assessee is that Assessing Authority did not give sufficient opportunity to place their version and to produce receipts showing payments of money, they were not afforded with an opportunity to produce the documents to show that the assessee has not deducted the tax from the salary of its employees, it was open to the assessee to produce all those documents before the First Appellate Authority whose powers are co-extensive with that of the Assessing Authority. He was empowered in law to do what the Assessing Officer failed to do and request the Authority to grant the relief to which he was entitled to in law. The assessee was assisted by able Chartered Accountant. The assessee was in possession of audit report and the books of account were in his possession. No effort was made before the First Appellate Authority to produce those documents to substantiate the defence, if they have any. On the contrary, the conduct of the assessee shows, they are corresponding with the Asse....
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....te Authority in taxation laws as compared to other jurisdiction. The powers of the First Appellate Authority are co-extensive with that of the Assessing Officer. Therefore, the order of the Tribunal cannot be sustained and accordingly, it is set aside. JURISDICTION 31. The argument of the learned Senior Counsel appearing for the assessee is that, it is clear from Section 200 of the Act, the order under Section 201 is to be passed by the prescribed Income Tax Authority, which is prescribed under Rule 31, which is the Director General of Income Tax (Systems). Indeed, the said Authority has not passed the order. The entire proceedings initiated and the orders passed are without jurisdiction and requires to be set aside. Therefore, the question to be answered is that who is the Authority which is competent to pass the order under Section 201 of the Act declaring an assessee in default. It was pointed out, in order to find an answer to the said question, Sections 200, 200-A and 201 have to be read together. 32. Section 200 of the Act reads as under: "Duty of person deducting tax (1) Any person deducting any sum in accordance with the foregoing provisions of this Chapter s....
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....all be determined after adjustment of amount computed under clause (b) against any amount paid under section 200 and section 201, and any amount paid otherwise by way of tax or interest; (d) an intimation shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (c); and (e) the amount of refund due to the deductor in pursuance of the determination under clause (c) shall be granted to the deductor : Provided that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the statement is filed. (i) of an item, which is inconsistent with another entry of the same or some other item in such statement; (ii) in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act. (2) For the purposes of processing of statements under sub-section (1), the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said subsection." ....
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....such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. (1A) Without prejudice to the provisions of subsection (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,- (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200: Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the su....
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.... as in default, is not an order which is contemplated under Section 200-A, where the prescribed Authority who is processing the return is a Director General of Income Tax (Systems). The Authority which is competent to pass an order under Section 201(3) is the Assessing Officer, who has the jurisdiction on the assessee on TDS matters under the provisions of the Income Tax Act. Though the word "Assessing Authority" is not stipulated in Sub-section (3) or in sub-section (1) of Section 201, the proviso to Section 201 throws some light on who is the competent authority to pass such orders. The second proviso provides that no penalty shall be charged under Section 201 from such person meaning the assessee in default, unless the Assessing Officer is satisfied that such person without good and sufficient reasons has failed to deduct and pay such tax. Therefore, not only the Assessing Officer is competent to declare an assessee in default, by virtue of Section 221 which empowers an Assessing Officer to impose penalty payable when tax is in default, authorizes the Assessing Authority also to impose penalty for failure to comply with Section 200. Therefore, if we read the aforesaid three prov....