M/s Ghaziabad Development Authority, Vikas Path,Hapur Road, Ghaziabad. Vs. Income Tax Officer (TDS), Ghaziabad.
October, 27th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
`C' : NEW DELHI
DELHI BENCH `C
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
GARG, JUDICIAL MEMBER
SHRI CHANDRA MOHAN GARG,
Assessment Year : 2003-
M/s Ghaziabad Development Vs. Income Tax Officer (TDS),
TAN : MRTGO0108D.
Appellant by : Shri O.P. Sapra, Advocate.
Respondent by : Shri Vivek Wadekar, CIT-DR.
PER G.D. AGRAWAL, VP :
This appeal by the assessee is directed against the order of
learned CIT (TDS), Kanpur dated 9th March, 2011 for the AY 2003-04.
2. The assessee has raised the following grounds of appeal:-
"1. That the ld.CIT(TDS) has erred in law as well as on
the facts of the case by invoking provisions of sec. 263
of the I.T. Act, 1961, and the order u/s 263 as passed is
arbitrary, unjust & illegal on various legal & factual
grounds including the following :-
(i) The ld.A.O. has properly applied mind before
passing order u/s 154 of the Income Tax Act, 1961 and
has acted in accordance with the CBDT instructions as
were binding upon him.
(ii) That the order u/s 154 dated 17.09.2008 as passed
by the ld.A.O. was not erroneous at all so as to justify
the application of section 263.
(iii) Various observations made by the ld.CIT in his
order passed under section are either factually incorrect
or are untenable in law.
(iv) Cancellation of order dated 17.09.2008 by invoking
the provision of section 263 is totally illegal having been
passed against the directions contained in Board
instructions F.No.275/109/92-IT(B) dt. 21.09.1994 which
were of binding nature.
(v) The observation of the ld.CIT(TDS) that the
payment was made by the appellant to the land owners
directly and that it was the person responsible for
deducting TDS is against the facts on record and the
impugned payments were made by the appellant either
to the court awarding compensation or additional
compensation or to the SLAO, the authority empowered
under the Land Acquisition Act, 1894 to acquire land for
public purpose, who is the person responsible for
deducting TDS in view of above cited instructions.
2. That the impugned order of the ld.CIT u/s 263
deserves to be cancelled/annulled.
3. That the appellant craves leave to add, modify
and/or delete any ground of appeal."
3. The facts of the case are that the ITO, TDS & Survey, Ghaziabad
has passed order under Section 201(1)/201(1A) of the Income-tax Act,
1961 on 9.2.2004 for FY 2002-03 raising demand of `18,53,396/-. The
Assessing Officer has held that the Secretary, Ghaziabad Development
Authority (GDA) has made payment of interest of `1,43,81,119/- on
enhanced compensation against land acquisition in Govindpuram
Scheme Ghaziabad through court to various persons during FY 2002-03
and TDS under Section 194A of the Act which had not been made by
the GDA who is person responsible to deduct and pay tax to the
Central Government account. The similar order was passed by the ITO,
TDS for FY 2002-03 raising the demand of `7,30,655/-. On appeal for
FY 2003-04, the ITAT by their order dated 31st March, 2008 in ITA
No.2902/Del/2006 has decided the issue against the assessee.
However, the Assessing Officer, vide order under Section 154 dated
9.2.2004, following the decision of ITAT for FY 2003-04, rectified the
original order dated 9.2.2004 passed under Section 201(1)/201(1A)
and reduced the demand to nil. The CIT in the order under Section 263
dated 9.3.2011 (which is the order in appeal before us) held the order
under Section 154 to be erroneous and prejudicial to the interests of
the Revenue and held as under:-
"11. In view of foregoing discussion, I consider that the
order dated 17.09.2008 u/s 154 read with 201(1)( &
201(1A) of the Income Tax Act, 1961 passed by the
I.T.O. (TDS & Survey), Ghaziabad is erroneous in so far
as it is prejudicial to the interests of the revenue and
therefore, the aforesaid order is hereby cancelled and
the original order dated 09.02.2004 u/s 201(1)/201(1A)
passed by the I.T.O. (TDS & Survey), Ghaziabad is
revived. The I.T.O. (TDS & Survey), Ghaziabad is being
directed to pass order giving effect of this order."
4. At the time of hearing before us, the learned counsel for the
assessee referred to the Circular of CBDT vide F.No.275/109/92-I.T.(B)
dated 21st September, 1994 wherein CBDT held as under:-
"2. It has now been decided in consultation with the
Ministry of Law & Justice that the responsibility for
making deduction of tax at source under section 194A
of the Income-tax Act, 1961, should be that of the
Collector (Land Acquisition) or any other authority
empowered under the Land Acquisition Act, 1894, to
acquire land for the public purpose as laid down by that
Act. When the concerned parties, whose land has been
acquired, go to the Court of Law, seeking higher
compensation (with interest) and the Court allows their
claims the concerned authority which had acquired
their land, shall, while paying the compensation, deduct
tax at source from the amount of interest forming part
of the compensation, and deposit the remaining amount
with the Court of Law, for disbursement to the
successful litigants. The same authority shall also issue
the TDS certificates to the concerned parties in the
prescribed Form 16A."
5. The learned counsel, therefore, submitted that the Ministry of
Finance in consultation with the Ministry of Law & Justice held that the
responsibility of deducting the tax at source under Section 194 should
be only Collector (Land Acquisition) or any other authority empowered
under the Land Acquisition Act to acquire land for public purposes. He,
therefore, submitted that when the assessee is not responsible for
deducting the tax, how can the assessee be held in default for not
deducting the tax. He submitted that the assessee made the entire
payment to the Collector (Land Acquisition) and thereafter, the
Collector (Land Acquisition) made the payment to the person whose
land was acquired. He reiterated that the assessee did not make any
payment to the persons whose land was acquired. He also pointed out
that this Circular was not referred to by either of the parties at the time
of hearing before the ITAT for FY 2003-04 and, therefore, the ITAT had
no occasion to consider this Circular. He, therefore, submitted that in
view of the above Circular, the order of the CIT passed under Section
263 may be quashed.
6. Learned DR, on the other hand, stated that the limited issue
before the ITAT is whether the order of the Assessing Officer passed
under Section 154 was erroneous and prejudicial to the interest of the
Revenue or not. That the ITAT had decided the issue against the
assessee for FY 2003-04 (AY 2004-05) and the Assessing Officer,
following the said order of the ITAT, rectified his own order passed
under Section 201(1)/201(1A) for the current financial year. Thus, the
order of the Assessing Officer passed under Section 154 was clearly
erroneous and CIT was fully justified in invoking his jurisdiction under
Section 263. He, therefore, submitted that the order of the CIT passed
under Section 263 should be sustained. He alternatively submitted
that if at all the above submission of the department is not accepted
and the Bench is of the view that the Board's Circular needs to be
considered, then, the entire matter should be set aside to the file of
the Assessing Officer because the applicability of the Circular was
never considered by the Assessing Officer. Moreover, the facts stated
by the learned counsel i.e., the assessee, did not make any payment to
the persons whose land was acquired and payment made by the
assessee was only to the Collector (Land Acquisition), would also
require verification at the end of the Assessing Officer.
7. In the rejoinder, learned counsel for the assessee stated that the
assessee is a statutory body and similar disputes were arising in
respect of land acquired by various statutory bodies and therefore,
considering all these aspects, the Circular was issued by the CBDT.
The Circular of the CBDT is binding on the Assessing Officer whether it
was referred to or not by the assessee at the time of passing of order
under Section 201(1)/201(1A). He stated that he had no objection for
sending the matter to the file of the Assessing Officer for verification of
the facts in the light of the Circular of the CBDT.
8. We have carefully considered the submissions of both the sides
and perused relevant material placed before us. On perusal of the
order passed under Section 154, we find that the Assessing Officer has
passed the order following the Board's Circular and not the decision of
the ITAT as canvassed by the learned DR and as mentioned by the CIT
in the order passed under Section 263. For ready reference, it would
be essential to reproduce the entire order passed under Section 154:-
"Order under section 154 read with section 201(1) &
201(1A) of Income Tax Act, 1961
In this case a rectification application u/s 154 of
the Income Tax Act, 1961 was filed on 15.05.2008 by
the authorized representative & counsel for the
assessee Sh. Manoj Kumar Jain, CA. In the application
the AR mentioned with various law of land acquisition,
Board's Instructions, advise note of Ministry of Law &
Justice & CA (department of Legal Affairs) and judicial
pronouncement that "At the time of passing the original
order u/s 201(1) & 201(1A) on 30.01.2005 the then AO
has not appreciated the correct provisions of law, and in
submission cited relevant provisions of Land
Acquisition, Act, 1894, CBDT Instruction and various
case laws applicable on the facts of the assessee case.
On the perusal of the Board Instruction
No.275/109/92-I.T.(B) dated 21.09.1994 it is clear that
for acquisition the land for public purpose and to
disburse the compensation, Award enhanced
compensation the Collector is the authority empowered
under the Act Development Authority are directed to
pay the amount to ADM(LA) or Special Land Acquisition
Officer, After getting amount from Authority ADM(LA) or
SLAO paid the money to the concerned person whose
land is being acquired after applying the relevant
provision of Land Acquisition, Act, 1894.
As per above Board instruction, judgement of
Supreme Court and High Court on the same issue and
provision of Land Acquisition Act, 1894 the assessee,
i.e. GDA was not responsible for paying any income to
the recipient in pursuance of Court decree within
meaning of Section 204 of the Income Tax Act, 1961.
Only ADM(LA) was person responsible for paying and
was also liable to deduct TDS.
In pursuance of order of Hon'ble ITAT, Delhi `H'
Bench in ITA No.2902/Del/06 for assessment year 2004-
05 dated 31.03.2008 order u/s 201(1)/201(1A) is
reduced to nil.
Considering the facts of the case, legal position as
laid down by the Board, submission of the assessee is
correct. Consequently, the order u/s 201(1)/201(1A) of
the Income Tax Act, 1961 dated 09.02.2004 is
accordingly, rectified and demand is nil."
9. From the above, it is evident that the Assessing Officer has
referred the Board's Instruction dated 21st September, 1994 and found
that as per Board's Circular, it is evident that the assessee i.e., GDA
was not responsible for paying the amount to the recipient in
pursuance to the Court decree. Only the ADM (LA) was responsible for
paying and was also liable to deduct TDS. After arriving at the above
finding, he referred to the order of the ITAT for FY 2003-04 i.e. AY
2004-05. Thereafter, in the concluding paragraph, he mentioned
"Considering the facts of the case, legal position as laid down by the
Board, submission of the assessee is correct. Consequently, the order
u/s 201(1)/201(1A) of the Income Tax Act, 1961 dated 09.02.2004 is
accordingly, rectified and demand is nil". Thus, he initially discussed
the Board's Circular and arrived at the conclusion that the assessee is
not responsible for deducting the TDS. It is the ADM(LA) who is
responsible for paying money to the persons concerned whose land is
being acquired and therefore, he is responsible for deducting TDS.
Thereafter, incidentally, he mentioned the order of the ITAT for AY
2004-05 but in a final conclusion, he relied upon the Board's Circular
only. The Revenue could not point out whether the above Board's
Circular of 1994 has been withdrawn or modified till date. Therefore,
we hold that the same was applicable and the Assessing Officer was
bound by it. Once the Assessing Officer was bound by it, we do not
find any infirmity in the order passed under Section 154 which was
passed in pursuance to the Board's Circular and not in pursuance to
the order passed by the ITAT as canvassed by the learned DR as well
as by the CIT, Kanpur. The order passed under Section 154 in
pursuance to the Circular of CBDT, cannot be said to be erroneous or
prejudicial to the interest of the Revenue so as to empower the CIT to
invoke jurisdiction under Section 263. In view of the above, we quash
the order passed under Section 263 and restore the order passed
under Section 154 of the Act.
10. In the result, the appeal of the assessee is allowed.
Decision pronounced in the open Court on 20th October, 2014.
(CHANDRA MOHAN GARG) AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 20.10.2014
Copy forwarded to: -
1. Appellant : M/s Ghaziabad Development Authority,
Vikas Path, Hapur Road, Ghaziabad.
2. Respondent : Income Tax Officer (TDS), Ghaziabad.
5. DR, ITAT