IT : The revenue can, only after ascertaining that the taxes have not been recovered from the person having primarily liability to pay tax, invoke vicarious recovery provisions
FACTS
• The assessee had made several payments towards charges for book binding, printing, advertisement and publicity, bus hire etc., without deducting tax at source.
• Assessing Officer opined that the assessee be treated as assessee in default for such non-deduction of tax at source and the same be recovered under section 201(1), along with interest under section 201(1A).
• Assessee contended that since the recipients had paid tax on income embedded in such payments, the taxes could not once again be recovered from the assessee.
• Rejecting assessee's plea, Assessing Officer held that the assessee was not able to prove that taxes on income embedded in such payments had been duly paid by the recipients. Further, assessee's request to the Assessing Officer to 'use his statutory powers to corroborate from the payers whether they have paid tax on their account' was also rejected.
• Aggrieved by the order of AO, assessee went in for appeal but could not succeed.
HELD
• The revenue has to demonstrate that the taxes have not been recovered from the person having primarily liability to pay tax; and it is only when the primary liability is not discharged that vicarious recovery provision can be initiated.
• In view of the judgment of Allahabad High Court in Jagran Prakashan Ltd v DCIT [(2012) 21 taxmann.com 489 All] there is a paradigm shift in the manner in which recovery provisions under section 201(1) can be invoked. In this case it was observed that the provisions of Section 201(1) cannot be invoked and the "tax deductor cannot be treated an assessee in default till it is found that payee has also failed to pay such tax directly".
• Once the finding about the non-payment of taxes by the recipient is held to be a condition precedent to invoking section 201(1), the onus is on the Assessing Officer to demonstrate that the condition is satisfied.
• Recovery provisions as set out in section 201(1) seek to make good any loss to revenue on account of lapse by the assessee tax deductor. Therefore, said recovery provisions 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.
• In the absence of the statutory powers, assessee may not always be able to obtain requisite information from the recipient of income. On the other hand, once assessee furnishes lawfully maintained information about the recipient, the Assessing Officer can very well ascertain the related facts about payment of taxes on income of the recipients directly from the said recipients. Such an exercise may put an additional burden on the Assessing Officer before he can invoke section 201(1) but that's how High Court has visualized the scheme of the Act. - [2012] 24 taxmann.com 29 (Kolkata - Trib.)
FACTS
• The assessee had made several payments towards charges for book binding, printing, advertisement and publicity, bus hire etc., without deducting tax at source.
• Assessing Officer opined that the assessee be treated as assessee in default for such non-deduction of tax at source and the same be recovered under section 201(1), along with interest under section 201(1A).
• Assessee contended that since the recipients had paid tax on income embedded in such payments, the taxes could not once again be recovered from the assessee.
• Rejecting assessee's plea, Assessing Officer held that the assessee was not able to prove that taxes on income embedded in such payments had been duly paid by the recipients. Further, assessee's request to the Assessing Officer to 'use his statutory powers to corroborate from the payers whether they have paid tax on their account' was also rejected.
• Aggrieved by the order of AO, assessee went in for appeal but could not succeed.
HELD
• The revenue has to demonstrate that the taxes have not been recovered from the person having primarily liability to pay tax; and it is only when the primary liability is not discharged that vicarious recovery provision can be initiated.
• In view of the judgment of Allahabad High Court in Jagran Prakashan Ltd v DCIT [(2012) 21 taxmann.com 489 All] there is a paradigm shift in the manner in which recovery provisions under section 201(1) can be invoked. In this case it was observed that the provisions of Section 201(1) cannot be invoked and the "tax deductor cannot be treated an assessee in default till it is found that payee has also failed to pay such tax directly".
• Once the finding about the non-payment of taxes by the recipient is held to be a condition precedent to invoking section 201(1), the onus is on the Assessing Officer to demonstrate that the condition is satisfied.
• Recovery provisions as set out in section 201(1) seek to make good any loss to revenue on account of lapse by the assessee tax deductor. Therefore, said recovery provisions 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.
• In the absence of the statutory powers, assessee may not always be able to obtain requisite information from the recipient of income. On the other hand, once assessee furnishes lawfully maintained information about the recipient, the Assessing Officer can very well ascertain the related facts about payment of taxes on income of the recipients directly from the said recipients. Such an exercise may put an additional burden on the Assessing Officer before he can invoke section 201(1) but that's how High Court has visualized the scheme of the Act. - [2012] 24 taxmann.com 29 (Kolkata - Trib.)
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