TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 278
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.... exemption of income tax under section 10(10AA)(i) of the Act on the 2 payment of leave salary at the time of retirement/superannuation to its employees, considering them as employees of the Central Government. After considering the assessee's reply to the show cause notice issued as to why the assessee be not considered as an assessee in default under sections 201/201(1A) of the Act, in short deduction of tax due to allowing the exemption under section 10(10AA)(i) of the Act, beyond the maximum limit of Rs. 3 lacs, the AO treated the assessee as an assessee in default under sections 201/201(1A) of the Act. The ld. CIT(A) directed the ITO (TDS) to allow the assessee to adduce evidence that the deductees had themselves paid the tax due on th....
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....to allow opportunity to the assessee to lead evidence to establish the fact that the deductees have themselves paid due tax on their leave salary and to thereafter recompute the amounts in respect of the liability of the University concerning default under sections 201(1) and 201(1A) of the Act. 5. We have heard the parties and have perused the material on record. As per the Explanation to section 191 of the Act, if any person, who is responsible for paying any income by way of perquisite which is not provided for by way of monetary payment, being an employer, does not deduct or, having deducted, fails to pay, or does not pay tax and where the assessee has also failed to pay such tax 4 directly, then, such person shall be deemed to be an a....
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.... 191, it has been provided to ensure payment of due taxes, by the deductor, in case the same have not been paid by the deductee. 8. From the above, it becomes abundantly clear that before treating the deductor to be an assessee in default under section 201(1) of the Act, it is the bounden duty of the ITO (TDS) to ascertain and ensure that the assessee has also not paid due tax, for which, the assessee has to provide the requisite details to the ITO (TDS). 9. The above position of law has been taken judicial notice of by the Hon'ble Jurisdictional High Court in "M/s Jagran Prakashan Ltd. vs. DCIT", 345 ITR 288 (All). Therein, their Lordships have, inter alia, held as under: "...........it is clear that deductor cannot be treated an asses....
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....s not discharged that vicarious recovery liability can be invoked. Once all the details of the persons to whom payments have been made are on record, it is for the Assessing Officer, who has al l the powers to requisition the information from such payers and from the income tax authorities, to ascertain whether or not taxes have been paid by the persons in receipt of the amounts from which taxes have not been withheld. As a result of the judgment of Hon'ble Allahabad High Court in Jagran Prakashan's case (supra), there is a paradigm shift in the manner in which recovery provisions under section 201(1) can be invoked. As observed by Their Lordships, the provisions of Section 201(1) cannot be 7 invoked and the "tax deductor cannot be treated ....
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....ithin the purview of the ld. CIT(A) to fill in the lacuna of the ITO (TDS). In fact, it was for the ITO (TDS) to ascertain the position, as prescribed by the Explanation to section 191, that is, as to whether the assessee had failed to pay the due tax directly, and only thereafter to initiate proceedings to deem the assessee as an assessee in default under section 201(1) of the Act. As observed by the Lordships, this is a foundational and jurisdictional matter and therefore, the Appellate Authorities cannot place themselves in the position of the ITO (TDS) to ratify a jurisdiction wrongly assumed. 13. The only prerequisite was that the details of the persons to whom payments were made, be on record. And once that is so, i.e., the assessee ....