ASHOK BHUSHAN,J. - (1.) THIS writ petition by a public Ltd. Company, publishing a Hindi daily newspaper "Dainik Jagaran" has invoked the jurisdiction of this Court under Article 226 of the Constitution of India challenging the initiation of proceedings under sections 201 and 201 (1A) of Income Tax Act, 1961 (hereinafter referred to as 'Act') vide notices dated 19.3.2012 and 21.3.2012 on the allegation that although the petitioner had allowed trade discount of 15% to advertising agencies in the assessment years in question but had failed to deduct the tax at source hence, the petitioner may show cause as to why it may not be declared as an asessee in default of such tax. The petitioner replied the notices. During the pendency of the writ petition assessment orders dated 28.3.2012 (Financial Year 2009 -10) and 29.3.2012 (Financial Year 2008 -09) were passed fastening liability of Rs.13,15,31,472 and Rs.3,26,82,953 respectively, which orders were also challenged in this writ petition by means of an amendment application, which was allowed on 18.4.2012.
(2.) THE brief facts giving rise to this writ petition are; the petitioner is engaged in the business of printing and publishing newspapers 'Dainik Jagaran' and 'I -next' from different centres across the country. The registered office of the petitioner's company is situate at Kanpur Nagar. The major source of revenue of the petitioner is generated from advertisements published in the said newspapers. The petitioner is also member of Indian Newspaper Society (hereinafter referred to as INS). The petitioner has been giving 15% trade discount to accredited advertising agency and trade discount of 10% to 15% to non -accredited advertising agency as per Rules and Regulations of INS for last several years. On 15.3.2012, the respondent conducted a survey under section 133A of the Act at the premises of the petitioner at Kanpur Nagar and recorded statement of General Manager Taxation and Legal. The notice dated 19.3.2012 for the financial year 2009 -2010 was issued to the petitioner stating that during the course of survey on 15.3.2012, it has been gathered that the petitioner has failed to deduct tax at source under section 194 H of the Act on the payment received from advertising agencies after allowing 15% trade discount, which is as well a deemed commission. Details of monthwise amount of payment of discount were required to be submitted. The petitioner was asked to show cause as to why order under section 201 (1) and 201(1) A of the Act be not passed declaring the petitioner as an assessee in default in respect of such taxes and interest thereon. The petitioner was asked to appear on 22.3.2012. Another notice dated 21.3.2012 for the financial year 2008 -09 was issued requiring details as mentioned therein including monthwise amount of payment of trade discount by the petitioner along with copy of the bills from January to March 2009. The petitioner filed a reply to the notices dated 19.3.2012 and 21.3.2012 on 22.3.2011. On 22.3.2012, the petitioner was required to submits monthwise bills of the advertisements received and trade discount given thereon by the next date i.e. on 23.3.2012. On 23.3.2012, another notice was issued by the respondent calling the petitioner to submit reply along with documents called for by 12:00 noon on 26.3.2012 positively. The petitioner was also informed by the same notice that Kerala High Court in 325 ITR 205 on the similar issue had decided that advertising agency has acted as an agent of the principal hence trade discount allowed can be considered as commission or brokerage defined under Explanation (i) of Section 194H of the Act. This writ petition was filed in this Court on 23.3.2012 praying for quashing the notice dated 29.3.2012 and 21.3.2012. The writ petition was heard on 19.3.2012 on which date following order was passed. "Supplementary affidavit filed today is taken on record. On a mention made by learned counsel for the petitioner, the matter is taken up in the presence of learned counsel appearing for the department. By means of this petition, the petitioner has prayed for quashing the notice dated 19.3.2012 and 21.3.2012 issued by the respondent ( Annexure No. 4 and 5 to the writ petition) by which the petitioner has been asked to furnish certain informations as required. Learned counsel for the petitioner challenging the notice contended that notices do not furnish any jurisdiction to the authority to proceed under section 201 of the Income Tax Act. as no TDS. was deductible on 15% trade discount. He submits that the trade discount can not be treated as commission so as to liable for any deduction. He has placed reliance on the decision of Delhi High Court passed in the case of I.T.A. No. 1264 of 2007,Commissioner of Income Tax Vs. Living Media India Limited filed as Annexure No. 1 to the writ petition at page 33. He has submitted that there is no material with the respondent to proceed under section 201 of the Income Tax Act. Shri Govind Krishna, learned counsel appearing for the respondent submits that by notice impugned only informations have been called from the petitioner and there is no lack of jurisdiction in the authority to proceed. He further submits that at this state, the writ petition be not entertained. Learned counsel for the petitioner further placed reliance on the decision of Supreme Court passed in the case of Siemens Ltd. Vs. State of Maharashtra and others reported in (2006)12 Supreme Court Cases 33. Be that as it may, in view of the fact that the assessment order is to be passed on or before 31.3.2012 as indicated in the notice, we are of the view that the petitioner may appear and submit necessary information as required and respondent may proceed to pass appropriate orders in accordance with law. It shall be open for the parties to bring on record the order passed by the respondent. Respondent is allowed three weeks' time to file counter affidavit. List thereafter." On 26.3.2012, the petitioner again submitted a letter to the Department stating therein that information sought for is not readily available and it needs a herculean manual exercise of compilation of more than 1,80,000 bills. On 28.3.2012, the petitioner again submitted a letter stating therein that relationship of the petitioner with the advertising agency is principal to principal and not as principal and agent. Reliance was also placed on the order of the Kerala High Court dated 9.12.2005, passed in writ petition No. 26871/2005, The Malayala Manorama Co. Ltd. Vs. The Income Tax Officer & others, wherein on identical facts, the proceedings of the department initiated under section 201/201 (1A) had been stayed. It was further stated that the judgment of the Kerala High Court reported in 325 ITR 205 was not applicable and points of distinction from the said judgment were specifically pointed out in the reply. It was stated that there is no liability of the petitioner to deduct tax at source. On 28.3.2012 an assessment order for the financial year 2009 -10 has been passed by the Deputy Commissioner of Income Tax holding the petitioner to be an assessee in default for non deduction of tax at source for an amount of Rs. 10,94,60,865 under section 201 (1) of the Act on which interest under section 201 (1A) amounting to Rs. 2,62,70,607/ - making the total amount to Rs. 13,57,31,472/ -. A demand notice was issued on 29.3.2012. Proposal for initiating penalty proceeding was also sent to Joint Commissioner Income Tax TDS Kanpur separately. Another order dated 29.3.2012 for the Financial Year 2008 -09 was passed holding the petitioner to be an assessee in default for non deduction of TDS for an amount of Rs. 2,40,31,583 and on which interest was also to be chargeable making the total amount of Rs. 3,26,82,953/ -. Penalty proceeding was to be separately initiated under Section 271C. The demand notice was also issued on 29.3.2012. The petitioner filed an application for amendment of the writ petition praying for adding paragraphs, grounds and reliefs in the writ petition for challenging the assessment orders dated 28.3.2012 and 29.3.2012. The amendment application was allowed by this Court on 18.4.2012 and the petitioner was permitted to challenge the assessment orders in this writ petition. Counter affidavit has also been filed by the Department to the writ petition and amended pleadings to which rejoinder affidavit has also been filed. Following are the reliefs which have been claimed in the writ petition including the reliefs prayed for by means of amendment application : "i) a suitable writ, order or direction in the nature of Certiorari calling for the records of the case and to quash the impugned notices dated 19.03.2012 and 21.03.2012 issued by the respondent (Annexures -4 and 5 to this writ petition). ii) a suitable writ, order or direction in the nature of Certiorari calling for the records of the case and to quash the impugned order dated 28.03.2012 along with the notice of demand dated 28.03.2012 (Annexure -6 to this writ petition) and the impugned order dated 29.3.2012 along with the notice of demand dated 29.03.2012 (Annexure -7 to this writ petition)." We have heard Sri V.K. Upadhyay learned senior Advocate, assisted by Sri Ritvik Upadhyay, for the petitioner, Sri Govind Krishna for the respondent Income Tax Department and have perused the record. Learned Counsel for the petitioner challenging the notices dated 19.3.2012 and 21.3.2012 contended that there were no foundational facts on the basis of which the respondent could have assumed jurisdiction under sections 201 and 201(1A) for initiating the proceedings. He submits that the petitioner allowed trade discount to advertising agencies on the advertisements received in accordance with the established trade practice and allowing of trade discount cannot be termed as commission paid by the petitioner to the advertising agency for any service. It is submitted that an advertising agency is not an agent of the petitioner and the transaction between the petitioner and advertising agency is on principal to principal basis. Advertising Agency infact acts as an agent of the advertisers. Section 194H is not attracted on trade discount allowed by the petitioner to advertising agency and the proceeding initiated under section 201/201 (1A) are without jurisdiction. The Income Tax Authorities have wrongly assumed jurisdictional facts although no such jurisdictional facts exist so as to enable the respondent Department to initiate proceedings under section 201/201 (1A) of the Act. The initiation of the proceedings by the Department is wholly without jurisdiction. The jurisdictional facts as required by Section 194H does not exist in the present case. Circular issued by Central Board of Direct Taxes dated 8.8.1995 clarifies that commission received from advertising agency by media would require deduction of tax at source under section 194J of the Act. The above circular was clarified by the CBDT vide subsequent letter dated 12.9.1995, clarifying that where the media raises only a bill for an advertising contract including therein inter - alia commission at the specified percentage to be retained by advertising agency, the media is not required to deduct tax at source since such a payment is subjected to TDS by the advertiser at the time of payment. Further where the media makes a direct payment to the advertising agency in respect of professional or technical services, it shall deduct tax at source @ 5% under section 194J.
(3.) LEARNED Counsel for the petitioner submits that the petitioner being a member of INS is required to pay trade discount of 15% according to the rules of INS. The advertising agency which are accredited by INS are also bound to follow the rules and under the terms of agreement entered with the advertising agency and INS under which it is obligatory for the news agency to give 15% trade discount and as per Rules of INS and terms of agreement entered between INS and advertising agency, the advertising agency acts as agent of the advertiser. The advertising agency carry on business of advertising and is not an agent appointed by the petitioner. No agreement with any advertising agency has been entered into by the petitioner nor there is any other relevant factor on the basis of which it can be said that the advertising agency is agent of the petitioner. It is submitted that the Rules of INS, as well as terms and conditions as mentioned above, clearly prove that advertising agency is not an agent of the petitioner and the jurisdictional facts as required under section 194H being not present, the entire proceedings are without jurisdiction. Learned Counsel for the petitioner further submits that the question as to whether 15% trade discount allowed to the news agency invites deduction of tax at source was raised by Income Tax Department with regard to news paper publication namely; M/s Living Media Ltd. Which publishes the magazines India Today, Business today etc. An order against M/s Living Media Ltd. under sections 201 and 201 (1A) was passed by the assessing authority on the ground that advertising agencies are agent of the news agencies and 15% trade discount is commission with regard to which tax at source is required to be deducted by the news agency. The matter was taken before the Income Tax Appellate Tribunal by the Department and Income Tax Appellate Tribunal held that there was no liability of the news agency to deduct tax at source with regard to 15% trade discount and advertising agency is not the agent of news agency. It was held that news agency was not liable to deduct tax. The Department took up the matter before the Delhi High Court and Delhi High Court vide its judgment and order dated 6.5.2008 has dismissed the writ petition of the Department holding that contract between the news agency and advertising agency was on principal to principal basis and trade discount allowed to advertising agency was as per Rule 32 of the INS Rules and there was no commission paid to advertising agency and the provisions of section 194H was not attracted. Although in the counter affidavit (paragraphs 21 and 41) filed by the Department, it was stated that judgment of the Delhi High Court has not accepted by CBDT and the same has been challenged by the Department by means of Special Leave Petition No. 3433 of 2009 but it was not mentioned that Special Leave Petition had been dismissed. Learned Counsel for the petitioner has produced the order of the apex Court dated 11.12.2009 by which the Special Leave Petition (Civil) 3433 Commissioner of Income Tax Vs. M/s Living Media India Ltd. has been dismissed. Learned Counsel for the petitioner submits that the issue having already been decided by the Delhi High Court in the aforesaid case, the initiation of the proceedings under section 201/201 (1A) on the same allegations are nothing but harassment of the petitioner and the proceedings so initiated are without jurisdiction. Learned Counsel for the petitioner submitted that the judgment of the Kerala High Court relied by the Department in [2010] 325 ITR 205 Commissioner of Income Tax Vs. Director Prasar Bharti, is not applicable in the present case and although distinguishing facts were submitted in writing by the petitioner but still the said judgment has been relied and the judgment of the Delhi High Court which was directly applicable has been brushed aside on the flimsy ground that judgment of the Kerala High Court is recent in point of time. Learned Counsel for the petitioner further submitted that the assessment orders dated 28.3.2012 and 29.3.2012 and the demand raised for tax which according to the respondents ought to have been deducted at source is wholly without jurisdiction. It is further submitted that under sections 201 and 201(1A), in a case where tax is not deducted at source, the only proceedings which can be initiated are proceedings for realisation of interest and penalty and the liability to pay tax cannot be fastened on deductor. As per Section 191 read with Section 4 of the Act, such tax has to be directly paid by the assessee i.e. advertising agency and the assessment orders dated 28.3.2012 and 29.3.2012 demanding payment of tax are wholly without jurisdiction. The petitioner could not have been treated to be an assessee in default with regard to tax which according to the respondents was required to be deducted unless a finding is returned that assessee has not paid the tax. In the entire assessment order, there is no finding that assessee has not paid the tax on the aforesaid trade discount (alleged commission) hence, the entire order is without jurisdiction.;