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January 2018

29. Section 254 –Appellate Tribunal – Power and duties as final fact finding authority –A. Y. 2009-10 and 2010-11 – Must reappraise and reappreciate all factual materials – Failure by Tribunal to render complete decision in terms of powers conferred on it – Matter remanded to Tribunal

By K. B. Bhujle
Advocate
Reading Time 4 mins

Thyrocare Technologies Ltd. vs. ITO(TDS); 398 ITR 443 (Bom):

 

The assessee is a sample testing laboratory. The Assessing Officer was of the view that the sample collectors were not independent persons but were agents of the assessee which was the principal and that it was an arrangement with the sample collectors to avoid the obligation to deduct tax at source. The assessee submitted before the Commissioner (Appeals) that the samples were not collected directly by it from the patients, but by the sample collectors who visited the patients and thereafter, brought the samples to it for testing. It was also submitted that there was no privity of contract between it and the patients and that the sample collectors did not collect the samples exclusively for it, but were free to send the samples collected by them for testing to any other laboratories and therefore it was a principal to principal relationship. The order of the Assessing Officer was set aside by the Commissioner (Appeals). The Tribunal held that the payments made by the assessee to the sample collectors were in the nature of commission or brokerage which was evident from the affidavit-cum-undertaking executed by the sample collectors and their application forms for appointment as sample collectors and also from the statements recorded during the survey u/s. 133A of the Income-tax Act, 1961 (Hereinafter  for the sake of brevity  referred to as the “Act”). It also held that the assessee did not satisfactorily explain the queries raised. It further held that the Commissioner (Appeals) erred in not correctly appreciating the nature of the payments made to the sample collectors, that there was a principal and agent relationship between the assessee and the sample collectors and deleting the interest levied u/s. 201(1A).

 

In appeal before the High Court, the assessee raised the issue whether the findings of the Tribunal that the assessee had not “satisfactorily explained the queries”, “not produced any documents to substantiate the contention” and “not discharged the burden”, were perverse, contrary to the facts on record and that it never indicated during the hearing that it was not satisfied with the evidence. The Bombay High Court remanded the matter back to the Tribunal and held as under:

“i)   The order of the Tribunal was vitiated not only by non-application of mind but also by misdirection in law. The Tribunal as the last fact finding authority, failed to make any reference to the observations, findings and conclusions in the order of the Assessing Officer and that of the first appellate authority.

 

ii)   It termed certain facts as undisputed, whereas, they were very much disputed such as the non-admission by the assessee that the service providers were its agents or that they were allowed to collect the necessary charges from its clients for collecting the sample and delivering the reports. There was no reference to any communication or any document which indicated that the Tribunal’s queries had not been satisfactorily answered by the assessee.

 

iii)   The Tribunal should, independent of the statements recorded during the survey u/s. 133A, have referred to such of the materials on record which disclose that the assessee had entered into such arrangements so as to have avoided the obligation to deduct tax at source. If the arrangements were sham, bogus or dubious, then such a finding should have been rendered.

 

iv)  The Tribunal was obliged, in terms of the statutory powers conferred on it, to examine the matter, reappraise and reappreciate all the factual materials satisfactorily. It had not rendered a complete decision and its order was to be set aside.

 

v)   We direct the Tribunal to hear the appeals afresh on the merits and in accordance with law after giving complete opportunity to both sides to place their versions and arguments. The Tribunal shall frame proper points for its determination and consideration and render specific findings on each of them.”

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