TaxTMI 
TaxTMI 
2014 (11) TMI 637
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....ees. The A.O. was of the view that the assessee was under an obligation to deduct tax at source under section 194H of the Act in respect of the discount so allowed to the franchisees. When assessee carried the grievance in appeal before the ld. CIT(A), the ld. CIT(A) also confirmed the demands so raised under section 201/201(1A) read with section 194H of the Income Tax Act, 1961. The assessee is not satisfied and is in appeal before us. 4. During the course of hearing before us, it was noticed that there is no finding by the A.O. to the effect that the recipient of the money i.e. franchisees have not paid the taxes on income embedded in the amounts in question. In this background, we are of the considered view that the matter deserves to be sent back to the file of A.O. for reconsideration in the light of following observations made by the Co-ordinate Bench in due deference to Hon'ble Allahabad High Court's judgement in the case of Jagran Prakashan Limited vs. DCIT (2012) 21 taxman.com 489 (All), in the case of ICICI Bank Limited vs. DCIT, 156 TTJ 569:- 6. It is, however, important to bear in mind the settled legal position that a short deduction of tax at source, by itself does ....
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.... . Once this finding about the nonpayment of taxes by the recipient is held to a condition precedent to invoking Section 201(1), the onus is on the Assessing Officer to demonstrate that the condition is satisfied. No doubt the assessee has to submit all such information about the recipient as he is obliged to maintain under the law, once this information is submitted is for the Assessing Officer to ascertain whether or not the taxes have been paid by the recipient of income. This approach, in our humble understanding, is in consonance with the law la id down by Hon'ble Allahabad High Court. 8. It is important to bear in mind that the lapse on account of non-deduction of tax at source is to be visited with three different consequences - penal provisions, interest provisions and recovery provisions. The penal provisions in respect of such a lapse are set out in Section 271 C. So far as penal provisions are concerned, the penalty is for lapse on the part of the assessee and it has nothing to do with whether or not the taxes were ultimately recovered through other means. The provisions regarding interest in delay in depositing the taxes are set out in Section 201(1A). These provisions....
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.... play at all. The computation of interest is to be redone in the light of this legal position. 10. The matter thus stands restored to the file of the Assessing Officer for fresh adjudication in accordance with the law and in the light of our observations above. While doing so, the Assessing Officer will give a due and fair opportunity of hearing to the assessee and dispose of the matter by way of a speaking order. We direct so." 5. Learned Departmental Representative did not have much to say beyond placing his reliance on the orders of the authorities below and contending that on merit of the case the assessee ought to have deducted tax at source. That plea of hers is not relevant in the above context in as much as TDS liability is only a vicarious liability. In the circumstances in which principal liability is discharged, vicarious liability does not survive. 6. In any event, the issue also seems to be covered, on merits, in favour of the assessee by decision of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Bharat Sanchar Nigam Limited (95 DTR 253) wherein Their Lordships have, inter alia, observed as followed: The assessee, a Government of India undertaking, has ....
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.... where taxes have been deducted at source but not paid over to the revenue 8. The stand taken by the authorities below is thus contrary to the stand taken by the Central Board of Direct Taxes. While authorities below have taken a stand that the prospective amendment in Section 194 H, by itself, demonstrates that the taxes were required to be deducted at source in respect of PCO commission for earlier years, the Central Board of Direct Taxes is of the view that except in cases where BSNL or MTNL has deducted the taxes, but not paid over the same to the treasury, demands are not to be enforced till the matter is sorted out by the Board. When such is the stand taken by the CBDT itself, it cannot be said that in view of the insertion of proviso to Section 194H with effect from 1st June, 22007. It is beyond doubt or controversy that so far as the period prior to this amendment is concerned, the tax deduction at source requirements under Section 194H applied on payments of commission to PCO franchisees. Learned Commissioner (Appeals) did not, therefore, have any good reasons to disregard the binding judicial precedent. It cannot be open to a subordinate or coordinate judicial forum to d....