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Judgment
J.K. Ranka, J—The substantial question which emerges for consideration is: "whether in the facts and circumstances of the case, the ITAT was justified in law and has not acted perversely in holding that the payments made by the assessee to Channel Providers were liable for deduction of tax at source u/sec. 194C and not u/sec. 194J of the Income Tax Act, 1961 when the said issue was not before them and the assessee has only assailed the penalty?"
With the consent of the parties, we have heard the appeal on merits.
Instant Income Tax Appeal u/sec. 260A of the Income Tax Act, by the appellant-Revenue is directed against order dt. 30/01/2009 passed by the ITAT and relate to the assessment year 2005-06.
Brief facts, which are relevant for disposal of the present appeal, are that a survey operation was conducted on the business premises of the respondent-assessee (a partnership firm) on 16/02/2005. The assessee deals in the transmission of channels through cable network and during the course of survey, it was found that the assessee is making huge payments to pay channel providers against airing fee as per the agreed rates and as per the officers of the survey team, the assessee was required to deduct TDS u/sec. 194J. The assessee was avoiding and prior to that there were complaints that the assessee was though making huge payments but was not deducting tax at source at all and consequently, a survey came to be conducted. It was found that the assessee was liable to deduct tax at source. It was admitted by the assessee that they were not aware of the provisions relating to deduction of tax at source and after the survey, deposited the entire amount admitting tax liability on 25/03/2005 to 22/07/2005. Notice u/sec. 271Cwas issued as to why penalty may not be imposed. However, explanation was offered that the assessee was not aware of the provisions of TDS and default, if any, was bona fide and immediately when the officers brought to the notice of the assessee, the entire tax was deposited. Thus penalty ought not to have been levied but the AO imposed the penalty.
The assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals (for short, ''CIT(A)'') who deleted the penalty. The matter was carried by the Revenue before the ITAT who also upheld order of the CIT(A).
Ld. counsel for the appellant-Revenue contended that entirely different case was made out before the appellate authorities and the CIT(A) as well as ITAT have not really considered the issue at all and in so far as the ITAT is concerned, he contended that it wrongly relied upon the finding recorded by the CIT(A) and there is no reasoning by the ITAT of its own and thus when the ITAT, which is a final fact finding authority, ought to have gone into the issue in a detailed manner and thus, the order is perverse and requires consideration.
On the contrary, ld. counsel for the respondent-assessee contended that both the appellate authorities had elaborately discussed the issue and have gone into the facts as also the law and rightly come to the conclusion that the assessee was not aware of the provisions of the tax deduction at source and immediately on being made aware, the tax with interest was deposited and the omission, if any, was inadvertent and on account of the bona fide belief, the ITAT came to such conclusion and thus, the order does not require interference.
We have considered the arguments advanced by counsel for the parties and gone through the material available on record.
As noticed earlier, admittedly the assessee was not deducting tax at source prior to 16/02/2005 when survey operation on the premises of the assessee was carried and the assessee was making huge payments to various channels against airing fees. The demand of TDS and interest was created u/sec. 194J of the Act, which was deposited by the assessee much after the date of survey. The ITAT, in its order observed that. It was argued that the assessee is cooperating with the department by deducting and depositing TDS u/s. 194-J as instructed by the A.O. vide letter dated 24.7.2005 to deposit balance amount @ 5% though the assessee had already deposited correct TDS @ 2.09% u/s. 194C. It was stated that the TDS @ 2.091% u/s. 194C comes to Rs. 6,11,809/-, whereas assessee had deposited TDS amounting to Rs. 6,41,809/- (including interest) by 29.3.2005." Thus, from reading of the above observations, what we could gather is that according to the ITAT, the argument was raised that the assessee was at least deducting tax at source @ 2.091% u/sec. 194C and it appears the ITAT was swayed by the above argument by the assessee. On the above observations, counsel for the assessee submitted that even before the date of survey on 16/02/2005, tax was deducted and deposited in terms of Sec. 194C. It would be appropriate to quote the observations made by this Court in its order dated 16/09/2014 which reads ad-infra:-
"After the matter being heard, counsel for respondent-assessee Mr. Mahendra Gargieya submits that as per his instructions before the date of survey dated 16/02/2005, the TDS was deducted & deposited in terms of Sec. 194C. However after the survey was conducted, the assessee was called upon to say that in place of Sec. 194C the TDS was to be deposited u/s. 194J and the only dispute was in reference to difference of the amount of TDS and that was deposited immediately after it was brought to their notice without fail and under these circumstances, invoking penalty u/s. 271C as observed by the Tribunal does not cause any substantial question of law.
Let the respondent-assessee may place on record the relevant material & affidavit of the assessee as to whether for the assessment year in question, the amount of TDS was deposited in terms of Sec. 194C since it is not clear as claimed by the respondent-assessee from the record.
Let the matter may come up before the Court on 15/10/2014, as prayed."
Subsequent to that, an additional affidavit was filed by one Balbir Singh Sisodia, who happens to be partner of the respondent-assessee and the material portion of the same is being reproduced here as under:-
"That during the course of hearing on dated 16.09.2014, this Hon''ble High Court directed the assessee to file along with relevant material as to whether for the Assessment Year 05-06 ("A.Y." for short) the amount of TDS was deposited in terms of Sec. 194C of the Income Tax Act ("the Act" for short) before the date of survey dated i.e. 16.02.2005.
That I have checked the accounts and the relevant records and it is humbly submitted that no amount of TDS was deposited on or before 16.02.2005.
That whatever amount of TDS was deposited, was deposited after 16.02.2005 in terms of Sec. 194C of the Act and thereafter when informed by the Income Tax Department, the firm started deducting and depositing the amount of TDS u/s. 194J of the Act.
That the details of amount of TDS deposited is as under:-
That when my counsel asked earlier, out of my faint memory I instructed him that such amount of TDS was deposited u/s. 194C of the Act even prior to 16.02.2005."
Thus, the contention of the counsel at one point of time on the observations of the ITAT was that even prior to the date of survey, they were deducting tax at source u/sec. 194C, which was incorrectly observed and the affidavit reproduced herein above shows that whatever amount was deducted, was deducted after the date of survey.
In our view, on these facts and these are finding of fact, the order of the Tribunal on the aforesaid contradictions needs reconsideration and is to be restored back to the Tribunal for re-appreciating the facts once again as the Tribunal is the ultimate fact finding authority.
We find merit in the arguments of counsel for the appellant-revenue that the ITAT was not required to decide whether the amount paid was liable to be deducted u/sec. 194J or 194C but whether on non-deduction of TDS, penalty was leviable u/sec. 271C of the Act or not. It has not been disputed that fault of the assessee-respondent was detected only on account of survey carried out by the department. However, this issue needs to be gone into by the ITAT once again. Therefore, we quash & set aside the order of the ITAT impugned herein and remit the matter back to the ITAT for reconsideration afresh in accordance with law on merits after affording hearing to the parties without being influenced or inhibited by any of the observations made herein above.
Let the parties may appear before the ITAT on 21/09/2015 at 10.30 A.M. Copy of this order shall separately be sent to the ITAT for necessary compliance.