Block Development Officer, Jammu vs Department Of Income Tax

Income Tax Officer, vs. The Block Development Officer, TDS Circle, Jammu. Sunderbani, Distt. Rajouri. (Appellant) (Respondent)

Appellant by:Smt. Ratinder Kaur, DR Respondent by:None

Date of hearing:10/03/2015 Date of pronouncement:11/03/2015

ORDER

PER A.D. JAIN, JM:

This is Department's appeal for the assessment year 2010-11 against

the order dated 25.11.2013 passed by learned CIT(A), Jammu, taking the

following grounds:

"1. Whether the ld. CIT(A) was right in facts and circumstances and in law in passing the impugned order as the same is contrary to facts and circumstances of the case.

2. That the impugned order is erroneous in law as well as on merits.

2 ITA No.63(Asr)/2014 3. Whether the ld. CIT(A) was right in facts and circumstances and in law in holding that in the cases of contractors who were having PAN allotted before the date of inspection, the payment should not be brought into the ambit of default for lesser deduction of TDS, inspite of the fact that the AO had given opportunities to the PR to furnish proof of PAN cards with the contractors before determining their quantum of default.

4. Whether the ld. CIT(A) was right in holding that merely having PAN without furnishing the same before the AO is a sufficient ground for deleting their demand created by the AO by applying higher rate of TDS.

2. An inspection was conducted on the assessee, a Block Development

Officer by the ITO (TDS), Jammu. It was found that on total payments of

Rs.1,21,33,801/-, made to different contractors during the year, no tax had

been deducted u/s 194C of the Income Tax Act, 1961( 'the Act', for short).

The AO, thus, passed an order under sections 201(1)/201(1A) of the Act,

raising a demand of Rs.27,53,510/- @ 20%, as according to the AO, no

PANs of the Mates were found available in the record of the PR during the

course of inspection and the PR had also failed to furnish any copy of PAN

obtained by him during the proceedings before the AO.

3. By virtue of the impugned order, the ld. CIT(A) held that the

payments of Rs.30,68,500/-, made to 28 different contractors were having

permanent account numbers (PANs) at the time of making payments and 3 ITA No.63(Asr)/2014

that, therefore, tax on the amount of Rs.30,68,500/- was required to be

deducted @ 1% and not @ 20%, as charged by the AO.

4. Aggrieved, the department is in appeal before us.

5. The notice issued to the assessee on 19.01.2015 has not returned

unserved. However, none has appeared on behalf of the assessee. Finding

that the matter can be proceeded with in the absence of the assessee, we are

doing so.

6. Challenging the impugned order, the ld. DR contended that the ld.

CIT(A) has erred in holding that in cases of contractors who were having

PANs allotted before the date of inspection, the payment should not be

brought in the ambit of default for lesser deduction of tax; while doing so,

the ld. CIT(A) failed to appreciate that the AO had given due opportunity to

the PR to furnish proof of PAN cards, which was not done and that it was

therefore, that the AO had raised the demand; and that the ld. CIT(A) has

also erred in holding that merely having PAN without furnishing the same

before the AO is a sufficient ground for deleting the demand created by the

AO, by applying higher rate of TDS.

7. We have heard the ld. DR and have perused the relevant material on

record. The Ld. CIT(A), while passing the impugned order, has observed as

follows:

4 ITA No.63(Asr)/2014

"(v) Out of payments of Rs.54,56,500/- made to different contractors during the year it has been argued that tax was required to be deducted @ 1% as against 20% rate applied by the AO because these persons whose tax was required to be deducted are having permanent account numbers. The AO in his remand report has stated that in respect of payments of Rs.23,41,000.00 made to 19 different persons, the permanent account numbers have been obtained/allotted after the payments in respect of contract have made by the person responsible for deduction of tax. In fact there is an omission in the AO's report of two names at Sr. No. 9 (Sh.Tara Chand) for Rs.38,000 and Sr. No.46(Sh. Patel Kumar) for Rs.9000. This mistakes the total Rs.23,88,000/- instead of Rs.23,41,000/-. Therefore, in respect of balance payments of Rs.30,68,500/- made to 28 different contractors were having permanent account numbers at the time of making payments. Accordingly, tax on Rs.30,68,500/- was required to be deducted @ 1% as against charged in the order."

7.1. It is seen that as available from the impugned order, before the ld.

CIT(A), the assessee contended that PANs of the persons in whose names

payments amounting to Rs.54,56,500/- had been made by the assessee

during the year, were available on record, but could not be produced before

the AO during proceedings before him. The details of these persons along

with copies of their PAN were filed as Annexure 'B' with the written

submissions of the assessee before the CIT(A), contending that the

applicable rate of TDS on payments of Rs.54,56,500/- was, thus, 1% and not

20%, as applied by the AO (impugned order page 3, 2nd last para).

7.2. The Ld. CIT(A) called for a remand report from the AO in this regard.

In the remand report, dated 18.11.2013, the AO stated as follows: 5 ITA No.63(Asr)/2014

"(v) The PR has furnished PAN of the persons in whose name payments amounting to Rs.54,56,500/- were available but could not be furnished before the AO and their details are annexed now.

Information regarding the date of allotment of PAN of Contractors/Mates was sought from the Jurisdictional Asseessing Officer and also verified from AST. In the following cases as per Annexure 'B', PANs appearing at S.No.5 (Ram Lal), 9 (Taran Chand), 21 (Pardeep Chand), 24 (Om Parkash), 25 (Om Parkash), 26 (Patel Kumar), 36 (Subash Chander), 38 ( Deepak Sharma), 40 (Khem Raj), 41 (Kasturi Lal), 46 (Pomesh Chander), 47 (Subash Chander), 49 ( Romesh Chander), 52 ( Tara Chand), 57 (Mohd Anward), 59 (Subash Chander, 63 (Mohd Anwar), 65 (Romesh Chander) and 69 (Mohd Anwar) have been allotted after the date of payments. Thus these PAN's were not even allotted to the Mates/Contractors after the payments made by the PR.

7.3. From the above remand report it is, therefore, available that the

information regarding date of allotment of PAN of Contractors/Mates was

sought from the jurisdictional AOs and also got verified from AST by the

AO.

7.4. The assessee filed a rejoinder to the above remand report, stating that :

"With regards to para v wherein the AO has verified the allotment of PAN No. of contractors/maters and below mention PAN No. were issued after the date of payment. We request that date of allotment of the same may be conveyed to assessee as assessee does not has any means to verify the same and further prayed that since assessee has procured/got allotted the PAN numbers of Mates after making the payments, default may be calculated at 1% instead of 20%. This default is due to various reasonable causes viz Backwardness of the area, illiteracy, ignorance of sections which were newly incorporated in the Act.

1 Sr. No.5 Ram Lal 2. Sr.No.9 Tara Chand 6 ITA No.63(Asr)/2014

3. S.No.21 Pradeep Chand

4. Sr.No.24 Om Parkash

5. S.No.25 Om Parkash

6. S.No.26 Patel Kumar

7. S.No.36 Subash Chander

8. S.No.38 Deepak Sharma

9. S.No.40 Khem Raj

10. S.No.41 Kasturi Lal

11. S.No.46 Romesh Chander

12. S.No.47 Subash Chander

13. S.No.49 Romesh Chander

14. S.No.52 Tara Chand

15. S.No.57 Mohd. Anwar

16. S.No.59 Subash Chander

17. S.No.63 Mohd. Anwar

18. S.No.65 Romesh Chander

19. S.No.68 Mohd. Anwar"

7.5. In response to the rejoinder of the AO, the AO gave the following

reply:

"The PR furnished PAN of the persons in whose name payments amounting to Rs.54,56,500/- were available but could not be furnished before the AO. As already submitted vide remand report dated 18.07.2013, information regarding the date of allotment of PAN of contractors/mates was sought from the jurisdictional AO and also verified from AST. In the following cases as per Annexure 'B", PANs appearing at S.No.5 (Ram Lal), 9 (Taran Chand), 21 (Pardeep Chand), 24 (Om Parkash), 25 (Om Parkash), 26 (Patel Kumar), 36 (Subash Chander), 38 ( Deepak Sharma), 40 (Khem Raj), 41 (Kasturi Lal), 46 (Pomesh Chander), 47 (Subash Chander), 49 ( Romesh Chander), 52 ( Tara Chand), 57 (Mohd Anward), 59 (Subash Chander, 63 (Mohd Anwar), 65 (Romesh Chander) and 69 (Mohd Anwar) have been allotted after the date of payments. Thus these PAN's were not even allotted to the Mates/Contractors after the payments made by the PR.

It is submitted that as per section 206AA of the I.T. Act, 1961 the deductor has to obtain PAN of the deductee at the time of payment, failing which tax had to be deducted by the deductor @ 20% . Thus, 7 ITA No.63(Asr)/2014

in the instant case, the PR was required to deduct tax at the rate of 20% which has been done."

7.6. While passing the impugned order, the ld. CIT(A) duly took into

account the remand report of the AO and the other communication by the

assessee and the AO to the ld. CIT(A). On perusing the same, the ld. CIT(A)

held that out of the payments of Rs.54,56,500/-, the AO, as per his remand

report, stated that in respect of payments of Rs.23,41,000/- made to 19

different persons, the PAN had been obtained after the payments had been

made. The ld. CIT(A) observed that the AO had omitted to mention two

names, i.e., S.No.9 (Taran Chand) for Rs.38,000/- and S.No.46 (Patel

Kumar) for Rs.9000/-. Thus, the total came to Rs.23,88,000/- and not to

Rs.23,41,000/-. The ld. CIT(A) observed that as such, in respect of the

balance payments of Rs.30,68,500/- made to 28 different contractors , the

PANs were there with the contractors at the time of making the payments. It

was on this basis that the ld. CIT(A) held that tax on payments of

Rs.30,68,500/- was required to be deducted @ 1%, as against @ 20%, as

done by the AO. We do not find any error in the order of the ld. CIT(A). In

the remand report itself, the AO did not challenge the facum of 28

contractors, concerning payments of Rs. 30,68,500/- having PANs at the

time the payments were made. The names of the contractors having been

allotted PANs were mentioned in the remand report itself. There was an 8 ITA No.63(Asr)/2014

omission regarding two contractors, which was taken into consideration by

the ld. CIT(A). The names mentioned in the remand report were reiterated

by the AO in his reply to assessee's rejoinder, as reproduced hereinabove.

7.7. Therefore, it does not lie in the mouth of the Department now to

contend that during the proceedings before the AO, the AO had given

opportunity to the PR to furnish the proof of PANs which was not done and

that therefore, the AO was correct in raising the demand in question, i.e., @

20% and not @ 1%, as held by the ld. CIT(A). The Department is also not

correct in contending that the ld. CIT(A) erred in holding that merely

having PANs without furnishing therein, before the AO was a sufficient

ground for reducing the demand created by the AO. To reiterate, once the

facts, as discussed above, have been accepted by the AO by way of the

remand report, as per which, due verification was got done by seeking

information regarding allotment of the date of allotment of PANs to the

contractors, from the jurisdictional AOs, and the same was got verified from

the AST, nothing else remains to be done. The factum of the assessee not

having produced PAN cards before the AO during proceedings before him

thus cannot go to the detriment of the AO. In view of the above, finding no

merit therein, the grievance sought to be raised by the Department by way 9 ITA No.63(Asr)/2014

of the grounds of appeal raised is rejected. Thus, the appeal of the

Department is dismissed.

8. In the result, the appeal filed by the Department is dismissed.

Order pronounced in the open court on 11th March, 2015.

Sd/- Sd/- (B.P. JAIN) (A.D.JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 11th March, 2015 /SKR/ Copy of the order forwarded to:

1. The Assessee:The Block Development Officer, Rajouri

2. The ITO (TDS) Circle, Jammu

3. The CIT(A), Jammu

4. The CIT, Jammu

5. The SR DR, ITAT, Amritsar.

True copy By order

(Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.