Assessee treated as ‘Assessee in default’ u/s 201(1) of Income Tax Act on ground of Non deposition of TDS in Books of Account : ITAT Directs Re-adjudication [Read Order]

The New Delhi bench of the Income Tax Appellate Tribunal ( ITAT) directed the assessing officer to re-adjudicate the assessment order made on the ground of non deposition of Tax Deducted at Source (TDS) in the books of account. 

KMP Expressways Ltd, the appellant assessee was awarded a project for the development, design, financing, production, engineering and construction, operation, and maintenance of 135.65 kilometer-long Kundli- Manesar- Palwal (KMP) Expressway in the State of Haryana on Build, Operate and Transfer basis. 

The assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the assessment order passed by the assessing officer. 

G.S. Grewal and Harsimran Grewal, the counsels for the assessee contended that the copy of form no.26A containing the Chartered Accountant’s certificate confirming the fact that the payee, i.e., SREI Infrastructure Finance Ltd had duly accounted the receipts from the assessee as its income and paid due taxes thereon and thus in view of the second proviso to section 201(1) of the Income Tax Act,1961 the assessee cannot be treated as an ‘assessee in default’. 

Anuj Garg, the counsel for the revenue contended that during the assessment proceedings the assessing officer found that in the TDS returns filed for the various quarters, the assessee had deducted tax at source while making payment to SREI Infrastructure Finance Ltd, but had not deposited the same to the account of the Central Government. Thus the assessee was treated as an ‘assessee in default’ under section 201(1) of the Income Tax Act and, consequentially, interest under section 201(1A) of the Income Tax Act was charged on the assessee. 

The bench observed that because of the second proviso to section 201(1) of the Income Tax Act, the assessee cannot be treated as an ‘assessee in default’. 

The two-member panel comprising C.M. Garg (Judicial ) and M. Balaganesh (Accountant) directed the assessing officer to re-adjudicate the matter by applying the second proviso to section 201(1) of the Income Tax Act which had been held to be retrospective in operation while allowing the appeal filed by the assessee. 

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