M/S Ravi Shree Narayan Transport, Partnership Firm, Acc Maingate, Jamul Square, Jamul Bhilai (Cg) Pan- Ashfr7461F v. Asst. Commissioner Of Income Tax, Tds, Aaykar Bhawan, Civillines, Raipur (C.g

Digitally signedby SAIFANSAIFANKHANDate:KHAN2025.03.2512:19:07+0530 2025:CGHC:13270-DB AFR HIGH COURT OF CHHATTISGARH AT BILASPUR TAXC No. 178 of 2024 M/s Ravi Shree Narayan Transport, Partnership Firm, ACC MainGate, Jamul Square, Jamul Bhilai (CG) PAN- ---Appellant Versus Asst. Commissioner of Income Tax, TDS, Aaykar Bhawan, CivilLines, Raipur (C.G.) ---Respondent WITH TAXC No. 180 of 2024 M/s Ravi Shree Narayan Transport, Partnership Firm, ACC MainGate, Jamul Square, Jamul Bhilai (CG) PAN- ---Appellant Versus Asst. Commissioner of Income Tax, TDS, Aaykar Bhawan, CivilLines, Raipur (C.G.) ---Respondent WITH TAXC No. 181 of 2024 M/s Ravi Shree Narayan Transport, Partnership Firm, ACC Main Gate, Jamul Square, Jamul Bhilai (CG) PAN- ---Appellant Versus Asst. Commissioner of Income Tax, TDS, Aaykar Bhawan, CivilLines, Raipur (C.G.) ---Respondent [Cause-title taken from Case Information System (CIS)] --------------------------------------------------------------------------------------------For Appellant: Mr. S. Rajeswara Rao, AdvocateFor Respondent:Mr. Amit Choudhari & Mr. Ajay Kumrani, Advs. Mr. Amit Choudhari & Mr. Ajay Kumrani, Advs. [TAXC-178-2024, TAXC-180-2024 & TAXC-181-2024] ------------------------------------------------------------------------------------------- Division Bench Hon'ble Shri Justice Sanjay K. Agrawal andHon'ble Shri Justice Sanjay Kumar JaiswalOrder on Board(20.03.2025) Sanjay K. Agrawal, J 1. Regard being had to the similitude of the questions of fact and law involved and being arising out of a common impugned orderdated 26.12.2022, passed by the Income Tax Appellate Tribunal,Raipur (for short the “ITAT”), between the same parties, on the jointrequest of learned counsel for the parties, all these 03 tax appeals,filed under Section 260-A of the Income Tax Act, 1961 (for short the“Act of 1961”), are clubbed together, heard together and beingdecided by this common order on the following common substantialquestion of law framed separately in all these appeals by order ofthis Court dated 13.02.2025; “Whether the three authorities are concurrently justified in imposing the liability on the appellant topay amount towards TDS on impugned transaction,treating him as ‘assessee deemed to be in default’under Section 201 of the Income Tax Act, 1961 byrecording a finding which is perverse to the record ?”pay amount towards TDS on impugned transaction,treating him as ‘assessee deemed to be in default’under Section 201 of the Income Tax Act, 1961 byrecording a finding which is perverse to the record ?” 2.The aforesaid substantial question of law arises fordetermination on the following factual backdrop:determination on the following factual backdrop: ----2.1TAXC1782024relates to financial year 200607, TAXC180 [TAXC-178-2024, TAXC-180-2024 & TAXC-181-2024] ---2024relates to financial year 200708and TAXC1812024relates-to financial year 200809. The common appellant in all these taxappeals is a partnership firm engaged in transportation business.The respondent-revenue authority has conducted verification of TDS(Tax Deducted at Source) compliance vis-a-vis deduction of TDS onvarious expenses and found that the appellant had failed to deductTDS on aggregate payments made towards Labour Charges,Transportation Charges (under Section 194C) and Interest (underSection 194A) to the Non-Banking Financial Companies (for shortthe “NBFCs”), namely, (i) SREI International Finance Ltd., (ii)Magma Leasing Ltd. and (iii) Tata Motors Ltd., for the financial years2006-07, 2007-08 & 2008-09 respectively. [TAXC-178-2024, TAXC-180-2024 & TAXC-181-2024] ---2024relates to financial year 200708and TAXC1812024relates-to financial year 200809. The common appellant in all these taxappeals is a partnership firm engaged in transportation business.The respondent-revenue authority has conducted verification of TDS(Tax Deducted at Source) compliance vis-a-vis deduction of TDS onvarious expenses and found that the appellant had failed to deductTDS on aggregate payments made towards Labour Charges,Transportation Charges (under Section 194C) and Interest (underSection 194A) to the Non-Banking Financial Companies (for shortthe “NBFCs”), namely, (i) SREI International Finance Ltd., (ii)Magma Leasing Ltd. and (iii) Tata Motors Ltd., for the financial years2006-07, 2007-08 & 2008-09 respectively. 2.2Consequently, the Assessing Officer vide order passed underSection 201(1) of the Act of 1961, dated 19.03.2010, by holding theappellant as “assessee deemed to be in default”, has determined theamount of TDS [under Section 201(1)] alongwith interest [underSection 201(1A)] payable as under: 2.3Feeling aggrieved against the said order dated 19.03.2010,passed by the Assessing Officer, the appellant preferred 03 appealsbefore the Commissioner of Income Tax (Appeals) [for short the “CIT [TAXC-178-2024, TAXC-180-2024 & TAXC-181-2024] (Appeals)]. By order dated 11.02.2020, the CIT (Appeals) thoughheld that the appellant is not liable to deduct TDS on LabourCharges and Transportation Charges and set aside the order of theAssessing Officer dated 19.03.2010 to that extent, but heldappellant is liable to deduct TDS on interest payment qua financecharges paid to the NBFCs under Section 194A of the Act of 1961.Against which, the appellant preferred 03 separate appeals beforethe learned ITAT, Raipur questioning the said part of the orderpassed by the CIT (Appeals) dated 11.02.2020, whereby theappellant has been held liable to deduct TDS on interest/financecharges paid to the NBFCs under Section 194A of the Act of 1961. 2.4The learned ITAT, Raipur by its final order dated 26.12.2022,passed in all 03 appeals, affirmed the orders passed by theAssessing Officer and the CIT (Appeals) by holding that theappellant failed to satisfy the Assessing Officer that receipts ofpayments have duly been proved by them and they have failed todischarged their burden of proving their case that no TDS onfinance charges/interest paid to the NBFCs are due on thembecause the receipients have incoproated the receipts in their booksand paid tax on corresponding income and there also exits a goodand sufficient cause for failure to deduct said TDS charges. Feelingaggrieved, the appellant has filed instant 03 appeals before thisCourt calling in question the legality, validity and correctness of thesaid order dated 26.12.2022, which have already been admitted for hearing on the substantial question of law, summarized in Para-01of this order. hearing on the substantial question of law, summarized in Para-01of this order. 3.Mr. S. Rajeswara Rao, learned counsel appearing for theappellant submits that before the Assessing Officer held theappellant as “assessee deemed to be in default” under Section201(1) of the Act of 1961, he ought to have given reasonableopportunity to the appellant to satisfy that taxes have been paid bythe deductee/assessee, which has not been done in the present caseand, on the same footing, the learned CIT (Appeals) and the learnedITAT, Raipur have also erred in dismissing the appeals of theappellant. As such, the impugned orders passed by the authoritiesbelow are liable to be set aside and the matter deserves to beremitted to the Assessing Officer for fresh consideration afteraffording due opportunity of hearing to the appellant to establish itscase that taxes have been paid by the deductee/assessee as, inabsence of which, the appellant has suffered great prejudicebecause heavy tax liability has been imposed/enforced on theappellant, which is impermissible in law. Hence, all the appeals areliable to the allowed. 4.Per-contra, Mr. Amit Choudhary and Mr. Ajay Kumrani,learned counsel appearing for the respondent-revenue authoritysupported the impugned orders passed by the authorities below andfurther submit that it was the duty on the part of the appellant toestablish that TDS on interest/finance charges paid by them to the NBFCs have been deducted under Section 194A of the Act of 1961,which they failed to do and, therefore, all the appeals are liable to bedismissed. 5.I have heard learned counsel for the parties, considered theirrival submissions made herein above and went through the recordwith utmost circumspection. 6.In the case at hand, the appellant was required to deduct TDSon interest/finance charges paid to the NBFCs by virtue of Section194A of the Act of 1961, as such, it would be relevant to noticeSection 194A of the Act of 1961, which reads as under: “-194A. Interest other than "Interest on securities". (1) Any person, not being an individual or a Hinduundivided family, who is responsible for paying to aresident any income by way of interest other thanincome by way of interest on securities, shall, at thetime of credit of such income to the account of the payeeor at the time of payment thereof in cash or by issue ofa cheque or draft or by any other mode, whichever isearlier, deduct income-tax thereon at the rates in force:*** *** *** ***” 7.In this regard, the Central Board of Direct Taxes (for short the“CBDT”) has also issued a Instruction/Circular No.275/201/95-IT(B), dated 29.01.1997 under Section 201(1) of the Act of 1961 vis-a-vis Consequence of failure to deduct or pay tax, which reads asunder: “The Board is of the view that no demand visualizedunder Section 201(1) of the Income-Tax Act should beenforced after the tax deductor has satisfied the officer- [TAXC-178-2024, TAXC-180-2024 & TAXC-181-2024] in-charge of TDS that taxes have been paid by thedeductee-assessee” 8.The aforesaid circular dated 29.01.1997, issued by the CBDThas also been noticed by their Lordships of the Supreme Court in the matter of Hindustan Coca Cola Beverage (P) Ltd. v.Commissioner of Income-Tax1, wherein at Para-10 it has been held as under: “The Board is of the view that no demand visualizedunder Section 201(1) of the Income-Tax Act should beenforced after the tax deductor has satisfied the officer- [TAXC-178-2024, TAXC-180-2024 & TAXC-181-2024] in-charge of TDS that taxes have been paid by thedeductee-assessee” 8.The aforesaid circular dated 29.01.1997, issued by the CBDThas also been noticed by their Lordships of the Supreme Court in the matter of Hindustan Coca Cola Beverage (P) Ltd. v.Commissioner of Income-Tax1, wherein at Para-10 it has been held as under: “10. Be that as it may, the circular No. 275/201/95- IT(B)dated 29.1.1997 issued by the Central Board of DirectTaxes, in our considered opinion, should put an end tothe controversy. The circular declares "no demandvisualized under Section 201 (1) of the Income- tax Actshould be enforced after the tax deductor has satisfied theofficer-in-charge of TDS, that taxes due have been paid bythe deductee-assessee. However, this will not alter theliability to charge interest under Section 201 (1A) of the Acttill the date of payment of taxes by the deductee-assesseeor the liability for penalty under Section 271C of theIncome-tax Act."” 9.A careful reading of the judgment of the Supreme Court inHindustan Coca Cola Beverage (P) Ltd. (supra) would show that ithas categorically been made clear that demand visualized underSection 201(1) of the Act of 1961 should be enforced after the taxdeductor has satisfied the Officer-In-Charge of TDS that taxes dueon him have been paid by the deductee-assessee. In the presentcase, by virtue of Section 194A of the Act of 1961 the appellant wasrequired to deduct TDS on payment of interest/finance chargesmade to the NBFCs but, admittedly, the same has not been 1 (2007) 163 Taxman 355 (SC) [TAXC-178-2024, TAXC-180-2024 & TAXC-181-2024] deducted by the appellant herein and, consequently, the circularissued by the CBDT dated 29.01.1997 would come into play whereit has been clearly held that demand visualized under Section201(1) of the Act of 1961 should be enforced after the tax deductorhas satisfied the Officer-In-Charge of TDS (Assessing Officer) thattaxes due on him have been paid by the deductee/assessee.Admittedly, in the instant case, in accordance with Section 194A ofthe Act of 1961 TDS have not been deducted on the interest/financecharges paid by the appellant to the NBFCs and the respondent-revenue has held the appellant as “assessee deemed to be indefault” and, therefore, enforced demand under Section 201 of theAct of 1961. However, the Assessing Officer was required to affordopportunity to the appellant/tax-deductor to satisfy and establishthat taxes have been paid by the deductee/assessee, as, in absenceof which, the appellant/tax-deductor has failed to satisfy theAssessing Officer (Officer-In-Charge of TDS) by establishing thattaxes have been paid by the deductee/assessee more particularlywhen the appellant/tax-deductor and NBFCs/tax-deductee/assessee are two different entites/personalities. As such, theAssessing Officer ought to have given opportunity to the appellantbefore imposing liability under Section 201(1) of the Act of 1961which, in the present case, has not been done and straightawayliability sought to have been imposed upon the appellant by theAssessing Officer and same has also been affirmed by the learned s@if [TAXC-178-2024, TAXC-180-2024 & TAXC-181-2024] CIT (Appeals) and the learned ITAT, Raipur. s@if [TAXC-178-2024, TAXC-180-2024 & TAXC-181-2024] CIT (Appeals) and the learned ITAT, Raipur. 10.Accordingly, the orders dated 23.12.2009, 11.02.2020 &26.12.2022, passed by the Assessing Officer, the CIT (Appeals) andthe learned ITAT, Raipur respectively to the extent that theappellant failed to deduct TDS on interest/finance charges paid tothe NBFCs, under Section 194A of the Act of 1961, for the financialyears 2006-07, 2007-08 & 2008-09 respectively are hereby setaside. The matter is remitted to the Assessing Officer for freshconsideration on the point whether the assessee/tax-deductee haspaid tax on the amount received by them by incorporating thereceipts in their books of accounts for the financial years 2006-07,2007-08 & 2008-09 respectively, after providing due opportunity ofhearing to the appellant. Since the matter relates to the for thefinancial years 2006-07, 2007-08 & 2008-09, therefore, theAssessing Officer is directed to expedite the hearing and pass freshorder expeditiously in accordance with law. However, this will notalter the liablity to charge interest under Section 201(1A) of the Actof 1961 till the date of payment of taxes by thetax-deductee/assessee. 11.Consequently, all the appeals are party allowed to the extentindicated herein above. Sd/- Sd/- (Sanjay K. Agrawal) (Sanjay Kumar Jaiswal) Judge Judge