- (1.) THESE four appeals by the assessee are directed against the orders passed by the CIT(A) on 5th Oct., 2001 and 8th Oct., 2002, in relation to asst, yrs. 1996-97 to 1999-2000 under Sections 201 and 201(IA), respectively of the IT Act, 1961. We have clubbed these appeals for disposal as the issue raised in these appeals rotate around the common facts. ITA Nos. 528 to 531--Sections 201
(2.) Briefly stated, the facts of the case are that the assessee was Chief Agricultural Officer, who had made the payments to the contractors namely, M/s Unitech Engineers, Pathankot and M/s Competent Engineers, Pathankot, in respect of installation of tubewell pump sets, etc. While making these payments, the assessee had not deducted tax at source under Section 194C of the IT Act, 1961 and when the default was noted by the ITO, TDS Circle, Amritsar, he issued a letter, in response to which the assessee agreed that no deduction of tax at source was made by his office on the payments made to the contractors. The ITO, TDS Circle, Amritsar, raised a demand of Rs. 1,55,196 @ 2 per cent on gross payment of Rs. 77,59,827 in consolidated form of the above-referred years. In the first appeal, it was contended on behalf of the assessee that the default was made good and there were sufficient reasons as he was under the bona fide belief that since the payments were made in respect of agriculturists, therefore, the tax was not liable to be deducted at source. It was further urged that the tax due in the hands of the recipients of income had already been paid by them and as such the assessee could not be treated as in default. Reliance was placed on certain decisions including CIT v. Divisional Manager, New India Assurance Co. Ltd (1983) 140 ITR 818 (MP), 147 ITR 234 (sic), 51 ITR 623 (sic) and CIT v. M.P. Agro Morarji Fertilizer Co. Ltd. (1989) 176 ITR 282 (MP). It was stated that since both the contractors related to one assessee represented by Sh. Rajesh Verma, HUF, being proprietor of both the concerns who had paid year-wise self-assessment under Section 140A, therefore, the question of making any deduction at source could not arise. The learned CIT(A) referred the matter to the ITO, TDS Circle, in order to ascertain as to whether payment of taxes made by the contractors related only to the payments received from the assessee. As per the report of the ITO, TDS Circle, it was made clear that Sh. Rajesh Verma, HUF was the proprietor in both the concerns and he had paid taxes under Section 140A. In view of these facts, it was opined by the learned CIT(A) that the ITO, TDS Circle, was not justified in creating demand of Rs. 1,55,196 for the assessment years under consideration when the taxes to the extent of Rs. 1,03,000 (representing only total amount of income-tax paid by the contractor and not the interest paid under Sections 234A, 234B and 234C) had already been paid by the recipient contractor. Accordingly, assessment year-wise shortfall (TDS due minus only income-tax paid under Section 140A) was arrived at as under: JUDGEMENT_10045_TLIT0_20030.htm It was found that for the shortfall of Rs. 52,198 representing the amounts which should have been deducted from the payments made to the contractors but had not been deducted or paid by the recipient, the assessee was in default for non-deduction of tax to this extent. 2.1. The learned counsel for the assessee contended that no shortfall in deduction of tax at source could have been determined as payable by the first appellate authority in view of the fact that the tax due on the total income of the recipient contractor was already paid and assessed by the Revenue, The learned authorised representative relied on the decisions including the case of CIT v. Life Insurance Corporation of India (1986) 166 ITR 191 (MP) to contend that where regular assessment had been completed in the hands of the recipient and the amount of tax had been paid, the ITO (TDS) had no jurisdiction under Section 201 of the IT Act to demand further tax from the payer. 2.2. In the opposition, the learned Departmental Representative defended the impugned order. 2.3. After considering the rival submissions and perusing the relevant material on record, it is noted that the assessee was originally liable to deduct tax at source at Rs. 1,55,198 on the total contract payments made to M/s Competent Engineers and M/s Unitech Engineers. It is an admitted position that both the said concerns were represented by Sh. Rajesh Verma, HUF. The AO in his report to the first appellate authority had made it clear that the said payments were included by Sh. Rajesh Verma, HUF in its business receipts and the tax was paid under Section 140A and the returns so filed were duly processed as per assessment record. These facts point out that the tax due on the contract payments was rightly recovered from the contractor, which amounted to Rs. 1,03,000. 2.4 The provisions concerning deduction of tax at source were introduced by keeping into mind the fact that the income should not go tax free. There are various methods provided in the Act for the recovery of tax which, inter alia, includes payment of advance tax, self-assessment tax and deduction of tax at source. Chapter XVII of the Income-tax (Act) clearly states that the deduction of tax at source is one of the means to recover the tax. If the actual amount of tax has already been recovered by the Revenue, there is no question of treating the payer as the assessee in default in respect of the said amount. The Hon'ble Madhya Pradesh High Court in the case of CIT v. Life Insurance Corpn. of India (supra) has clearly held in so many words that where regular assessment of employee has been completed and the amount of tax fully paid by him, the ITO (TDS) has no jurisdiction under Section 201 of the Act, 1961, to demand further tax from the employer in respect of the tax short deducted relating to such employee. Adverting to the facts of the present case, we find that the tax due in the hands of the contractor on the contract payments under consideration came to Rs. 1,03,000 which was duly deposited by him under Section 140A and such returns were processed as per assessment record. Having recovered the tax on the contract payments, the learned CIT(A) ought not to have held the assessee as in default in respect of shortfall of Rs. 52,198 representing TDS due @ 2 per cent (Rs. 1,55,198 minus the income-tax paid under Section 140A Rs. 1,03,000). We are really surprised in the way from which the assessee has been held to be in default for a particular amount which is not due to the Revenue in any case. If the order of the first appellate authority is implemented, it would amount to recovering this shortfall from the assessee in question as against no tax due. The deduction of tax at source is different from tax on total income. Any amount of TDS is liable to be adjusted against the actual, demand. Since the assessments of the recipient (contractors) have been finalized and there remains no tax liability as per Revenue's own version, we are of the considered opinion that no recovery can be made from the assessee in this regard. These four appeals are, therefore, allowed. 2.5. In the result, all these four appeals are allowed. Ita Nos. 6 to 9/ASR/2003 These four appeals relate to charging of interest under Section 201(1 A) in respect of four assessment years under consideration. Pursuant to the order passed by the CIT(A) under Section 201, making the assessee liable for shortfall to the extent of Rs. 52,198, the AO held the assessee in default in respect of such shortfall and also initiated proceedings under Section 201(1A) for levying of interest @ 2 per cent on the short fall. As such interest was worked out at Rs. 69,435 on the shortfall amount as discussed above. In the first appeal, it was contended on behalf of the assessee that the contractor had paid interest under Sections 234A to 234-C and the further recovery of interest under Section 201(1A) from the assessee would amount to collection of double tax. This contention was repelled by holding that provisions of Section 201(IA) were different from Sections 234A to 234C. It was next urged that the ITO (TDS) had charged interest on the total amount of Rs. 55,198 whereas it should have been charged only on the shortfall amount of TDS. This contention was also not accepted. The appeal of the assesses was dismissed subject to the direction for ITO, TDS Circle, Pathankot to carry out the verification as to whether the interest was charged on the shortfall amount and not on the entire TDS. 3.1. Before us, the learned counsel for the assessee contended that the interest under Section 201(1A) could be charged only if the assessee was treated in default and if the view is taken in favour of the assessee on the first four appeals, then there would be no question of charging interest under this section. 3.2. In the opposition, the learned Departmental Representative supported the impugned order. The learned Departmental Representative relied on the case of CIT v. Dhanalakshmy Weaving Works (2000) 245 ITR 13 (Ker) to contend that the levy of interest under Section 201(1 A) was mandatory, 3.3. We have considered the rival submissions in the light of material placed before us and the precedents relied upon. Insofar as the contention of the assessee regarding non-charging of interest under Section 201(1A), we find that it is not acceptable. Though in the foregoing paras, we have held the assessee to be not in default but insofar as the charging of interest is concerned, the same is governed by Sub-section (1A) of the Section 201 which provides that "without prejudice to the provisions of Sub-section (1), if any such person......................... he or it shall be liable to pay simple interest at fifteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid." The rate of 15 per cent was substituted for 18 per cent w.e.f. 1st June, 2001. A bare perusal of this sub-section reveals that insofar as the charging of interest under Section 201(1A) is concerned, the provisions of Section 201(1) are not relevant. Even if the amount is subsequently paid by the deductor himself or is recovered from the deductee, the liability to pay interest would not cease for the period for which the Revenue remained deprived of the amount which was rightfully due to it. In the case of Grindlays Bank Ltd. v. CTT (1992) 193 ITR 457 (Cal.), it was laid down to this effect by specifically holding at p. 469 that "if the tax has been realized once, it could not be realized once again, but that does not mean that the assessee will not be liable for payment of interest or any legal consequence for their failure or to pay in accordance with law to the Revenue". The decision in the case of CIT v. Dhanalakshmy Weaving Works (supra) is the reiteration of the view convassed in the case of Grindlays Bank Ltd. In this case, it was held that the ultimate liability for tax being not there (since the firm which received the interest from the assessee had paid tax on such interest) did not dilute the requirements for non-compliance of which interest is levied under Section 201(1A). For the foregoing reasons, we hold the assessee liable to interest inspite of the fact that no liability remains under Section 201(1). 3.4. Now we proceed with the determination of the amount of interest chargeable under Section 201(1A). The answer to this question can be easily found in Sub-section (1A) itself which provides that interest at the specified rate shall be charged on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Since the necessary information is not coming up from the orders of the authorities below, we are of the considered opinion that it would be in the interest of justice, if the impugned order is set aside and the matter is restored to the file of the AO. We order accordingly and direct him to charge interest under Section 201(1A) as per law after allowing reasonable opportunity of being heard to the assessee.
(3.) IN the result, these four appeals are allowed for statistical purposes.;