Iapl/295/2016 Of The Commissioner Of Income Tax Tds Kanpur And Another v. Spice Mobility Ltd. Noida

Court No. - 35 1.Case :- INCOME TAX APPEAL No. - 295 of 2016Appellant :- The Commissioner Of Income Tax (Tds) Kanpur & AnotherAppellant :- The Commissioner Of Income Tax (Tds) Kanpur & Another Respondent :- Spice Mobility Ltd., NoidaCounsel for Appellant :- Gaurav MahajanCounsel for Respondent :- R.S. Agarwal, Praveen Kumar MishraCounsel for Appellant :- Gaurav MahajanCounsel for Respondent :- R.S. Agarwal, Praveen Kumar Mishra 2.Case :- INCOME TAX APPEAL No. - 19 of 2017Appellant :- The Commissioner Of Income Tax(Tds),Kanpur And AnotherAppellant :- The Commissioner Of Income Tax(Tds),Kanpur And Another Respondent :- Spice Mobility Ltd.Counsel for Appellant :- Gaurav MahajanCounsel for Appellant :- Gaurav Mahajan Counsel for Respondent :- R.S. Agarwal,Praveen Kumar MishraMishra Hon'ble Bharati Sapru,J.Hon'ble Dinesh Kumar Singh,J. 1.The Revenue has preferred these appeals underSection 260-A of the Income Tax Act, 1961(hereinafter referred to as “the Act”) against thecommon order dated 28[th] January, 2016 passed by theIncome Tax Appellate Tribunal, Delhi Bench “B”,New Delhi (hereinafter referred to as 'Tribunal') in ITANo. 5074 and 5075/Del/2014 respectively. 2.The Assessment Years are 2009-10 and 2010-11. 3.In the appeals, the following common questionsof law have been formulated by the appellant-Revenue.of law have been formulated by the appellant-Revenue. “1. Whether the Tribunal is justified inignoring the fact that the Hon'ble Tribunalhad itself upheld the disallowance u/s40a(ia) in assessment order 143(3) onexpenses incurred by the deductor– assesseewhile quashing the order u/s 201/201(1A)which was passed treating the default u/s194-H instead of Section 194-C of the Act? 2.Whether the Tribunal is justified inholding to the contrary when it is not indispute that while making payments theassessee has not deducted TDS as is evidentfrom the reply of the assessee and thediscussion in the order u/s 201(1)/201 (1A)of the Act itself. 3.Whether on the facts and in thecircumstances of the case the Tribunal isjustified in law in holding that unless theassessee is treated as assessee in default inrespect of specific amount of tax notdeducted in the correct Section (194-C inthis case) instead of u/s 194-H of the Acttherefore the order u/s 201(1)/201(1A) ofthe Act can not be sustained and thereforequashed? 4.Whether the finding recorded in theassessment order passed u/s 143(3) of theAct can be taken as a ground for decidingthe fate of the order passed u/s201(1)/201(1A) of the Act even whensubstantively the default of the assessee fornon deduction of TDS on certain paymentshas been decided in favour of theDepartment by the Tribunal itself? 3 4.The respondent-assessee is a public limitedcompany engaged in the business of trading of mobilephones, handset, manufacturing trading, servicing, andmaintenance of computer hardware etc. The respondent-assessee is a public limited 5.The Assessing Officer (hereinafter referred to as“A.O.”) conducted a spot enquiry on 23[rd] March,2012 and during the course of verification proceedingshe found that during the Financial Years 2008-09 and2009-10 (Assessment Years 2009-10 and 2010-11) therespondent-assessee had made payments to itsregional distributors towards advertisement and salespromotion of its products sold by them, but did notdeduct TDS as per provisions of Section 194-H of theAct. 6.In view of the above, the A.O. treated therespondent as assessee in default for non-deduction oftax at source and calculated the consequent shortdeductions and interest as per Section 201(1) readwith Section 201(1A) of the Act. The A.O. passed acomposite order for the Assessment Year (hereinafterreferred to “A.Y.”). 2009-10 and 2010-11 on 23[rd]March, 2013, thereby raised demand ofRs.91,41,176.00 and 64,97,046.00 respectively forthe two A.Ys. 4 6.In view of the above, the A.O. treated therespondent as assessee in default for non-deduction oftax at source and calculated the consequent shortdeductions and interest as per Section 201(1) readwith Section 201(1A) of the Act. The A.O. passed acomposite order for the Assessment Year (hereinafterreferred to “A.Y.”). 2009-10 and 2010-11 on 23[rd]March, 2013, thereby raised demand ofRs.91,41,176.00 and 64,97,046.00 respectively forthe two A.Ys. 4 7.Against the aforesaid order passed by theA.O., respondent-assessee preferred an appealbefore the Commissioner of Income Tax, IncomeTax Office, Ayakar Bhawan, A-2D, Sector-24,Noida (hereinafter referred to as “C.I.T.(Appeals)”). The C.I.T. (Appeals), afterexamining agreement between respondent-assessee and its regional distributors, held that therelationship between the respondent-assessee andits regional distributors was one of principle-agent and, therefore, the payment made to theregional distributors by the respondent-assesseefor marketing, advertising and brand promotionattracted the provisions of Section 194-H of theAct and the respondent-assessee was required todeduct tax at source against the payment made tothe regional distributors towards advertisementand sales promotion related services. The C.I.T.(Appeals) upheld the order passed by the A.O.treating the respondent-assessee as assessee indefault and passing the order under Section201(1)/201(1A) of the Act. 8.Aggrieved by the aforesaid order passed bythe C.I.T. (Appeals) the respondent-assessee filed an appeal before the Tribunal. The Tribunal hadheld that the assessment proceedings werecompleted considering the default of TDS quaSection 194-C of the Act, but in proceedingsunder Section 201 of the Act, default for the samepayment, had been considered under Section 194- H. The respondent-assessee had alreadychallenged the assessment proceedings in respectof default of TDS qua Section 194-C of the Actand he lost upto Tribunal and the Tribunal videorder dated 29[th] December, 2014 had upheld theorder passed by the A.O. treating the defaultunder Section 194-C of the Act. The Tribunal,therefore, set-aside the order passed by the C.I.T.(Appeals) upholding the order of A.O. u/s201/201(1A) of the Act. 9.Against the said order dated 29[th] December, 2014,the respondent-assessee had filed appeal before thisCourt being Income Tax Appeal No.99 of 2015. ThisCourt vide order dated 13[th] May, 2015 had dismissedthe appeal of the respondent-assessee. The learnedcounsel for the respondent-assessee during the courseof hearing of these appeals has informed the Court thatthe respondent-assessee had preferred SLP before the Supreme Court against the order dated 13[th] May, 2015passed by this Court in Income Tax Appeal No. 99 of2015 and the same is pending consideration before theSupreme Court. 10. We have heard Mr. Gaurav Mahajan, learnedcounsel appearing for the appellant-department, andMr. Praveen Kumar Mishra, learned counsel appearingfor the respondent-assessee. 11. It is clear that during the assessment proceedings the Department had treated the default of therespondent-assessee in not deducting the tax at sourceon the payment made to its regional distributors foradvertisement and brand promotion etc. as defaultunder Section 194-C of the Act and the assessmentproceedings were finalized. The assessment order hasbeen upheld by this Court. Now in the proceedingsunder Section 201 of the Act, the Department istreating the same as default under Section 194-H ofthe Act. Provisions of section 201(1)/201(1A) do notauthorize the Department to treat the same defaultunder two provisions. The proceedings under Section201(1)/201(1A) of the Act for treating the default ofthe respondent-assessee under Section 194-H amountsto reviewing the assessment order which had attained the Department had treated the default of therespondent-assessee in not deducting the tax at sourceon the payment made to its regional distributors foradvertisement and brand promotion etc. as defaultunder Section 194-C of the Act and the assessmentproceedings were finalized. The assessment order hasbeen upheld by this Court. Now in the proceedingsunder Section 201 of the Act, the Department istreating the same as default under Section 194-H ofthe Act. Provisions of section 201(1)/201(1A) do notauthorize the Department to treat the same defaultunder two provisions. The proceedings under Section201(1)/201(1A) of the Act for treating the default ofthe respondent-assessee under Section 194-H amountsto reviewing the assessment order which had attained finality. The inconsistent stand of the Department inassessment proceedings and the proceedings underSection 201 of the Act is wholly erroneous and bad inlaw. We, therefore, uphold the impugned order passedby the Tribunal and dismiss both the appeals. 12. The questions of law are answered against theRevenue and in favour of the respondent-assessee. Order Date :- 1.8.2018MVS Chauhan/-