Ramakrishna Vedanta Math v. Income Tax Officer In the Income Tax Appellate Tribunal, Kolkata ‘C’ Bench, Kolkata Before Pramod Kumar (A.M.) and Mahavir Singh ( J. M. ) I.T.A. No.: 477,478 and 479/Kol/2012 Assessment year: 2005-06, 2006-07, 2008-09. Decided on July 31 , 2012 C ounsel for Assessee/Revenue : Miraj D Shah/ Amitava Ray

Facts:
The issue before the tribunal was whether a
demand under section 201(1) and section 201(1A) r.w.s. 194C can be
enforced even in a situation in which, the recipient of income embedded
in the payments has paid due taxes thereon, and, if not, who has the
onus to demonstrate that status about payment of such taxes.

During
the relevant period, the assessee had made several payments, in respect
of book binding charges, printing charges, advertisement and publicity
and bus hire charges etc, but had not deducted tax at source from the
payments made. According to the assessee the recipients have paid tax on
income embedded in those payments, and in the light of Supreme Court’s
decision in the case of Hindustan Coca Cola Beverages Pvt. Ltd. v CIT
(293 ITR 226), the taxes cannot once again be recovered from the
assessee. This contention was rejected by the Assessing Officer on the
ground that the assessee was not able to prove that taxes on income
embedded in those payments have been duly been paid by the recipients.
Aggrieved, assessee carried the matter in appeal but without any
success.

Held:
The tribunal referred to the
observations of the Allahabad High Court in the case of Jagran Prakashan
Ltd. v DCIT [ (2012) 21 taxmann.com 489 All], viz. that “tax deductor
cannot be treated an assessee in default till it is found that assessee
has also failed to pay such tax directly”. According to it, once this
finding about the non payment of taxes by the recipient was held to be a
condition precedent to invoking section 201(1), the onus was on the
Assessing Officer to demonstrate that the condition was satisfied. It
further noted that the Act provides for three different consequences for
lapse on account of non-deduction of tax at source viz., penal
provisions (section 271C), and interest provisions (section 201 (1A) and
recovery provisions section 201(1). As far as the matter under the
later two provisions were concerned, the former provides for levy of
interest in case of any delay in recovery of such taxes and the later
provisions seek to make good any loss to revenue on account of lapse by
the assessee tax deductor. The Tribunal further added that the question
of making good the loss of revenue arises only when there is indeed a
loss of revenue and the loss of revenue can be there only when recipient
of income has not paid tax. Therefore, it held that recovery provisions
under section 201(1) can be invoked only when loss to revenue is
established, and that can only be established when it is demonstrated
that the recipient of income has not paid due taxes thereon.

Accordingly,
the Assessing Officer was directed to verify the related facts about
payment of taxes on income of the recipient directly from the recipients
of income before invoking provisions of section 201(1).