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2012 Supreme(All) 1379
[2012(9) ADJ 213 (DB)]
ALLAHABAD HIGH COURT
BEFORE : ASHOK BHUSHAN AND PRAKASH KRISHNA, JJ.
JAGRAN PRAKASHAN LIMITED ....Petitioner
Versus
DEPUTY COMMISSIONER OF INCOME TAX (TDS) ....Respondent
(Civil Misc. Writ Tax No. 388 of 2012, decided on 23rd May, 2012)
Counsel :
Ritvik Upadhya and V.K. Upadhya for the Petitioner; Bharat Ji Agrawal, B. Agarwal and Govind Krishna for the Respondent.
Headnote:Income Tax Act, 1961—Sections 201, 201-A,194-E and 191—Constitution of India, 1950—Article 226—Income Tax—Deduction of tax at source (TDS)—Failure as such—Initiation of proceedings under Sections 201 and 201-A—Scope of—Although petitioner had allowed trade discount of 15% to advertising agencies in the Assessment years in question but had failed to deduct the tax at house—Declaration as an assessee in default of such tax—Proceedings against challenged on ground that there was no jurisdictional facts on the basis of which the income tax authorities could have assessed jurisdiction—And also there was no jurisdiction to direct for recovery of tax which according to respondent was short deducted by the deductor—No foundational fact exists that advertising agencies are agent of petitioners and further advertising agencies render any service to the newspaper—Since aforesaid facts being non-existent, the proceedings under Sections 201/201 (1-A) of Act were not permissible—There is no agreement between petitioner and advertising agency and advertising agency has never been appointed as agent of petitioner—To declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that assessee has also failed to pay tax directly—When tax has not been deducted at source, the short deducted tax cannot be realised from the deductor, and the liability to pay such tax shall continue to be with the assessee direct—A person who fails to deduct the tax at source, is liable for interest and penalty only—Assessing Authority has not considered the relevant materials while passing the assessment order which clearly vitiates the assessment order—Not a fit case in which the petitioner be relegated to remedy of appeal—Writ jurisdiction has rightly been invoked—Adequate opportunity to which petitioner was entitled was not provided—Impugned proceedings set aside. [Paras 15 to 84]
Result; Petition Allowed.
Hon’ble Ashok Bhushan, J.—This writ petition by a public Ltd. Company, publishing a Hindi daily newspaper “Dainik Jagaran” has invoked the jurisdiction of this Court under Article 226 of the Constitution of India challenging the initiation of proceedings under Sections 201 and 201 (1A) of Income Tax Act, 1961 (hereinafter referred to as ‘Act’) vide notices dated 19.3.2012 and 21.3.2012 on the allegation that although the petitioner had allowed trade discount of 15% to advertising agencies in the assessment years in question but had failed to deduct the tax at source hence, the petitioner may show-cause as to why it may not be declared as an asessee in default of such tax. The petitioner replied the notices. During the pendency of the writ petition assessment orders dated 28.3.2012 (Financial Year 2009-10) and 29.3.2012 (Financial Year 2008-09) were passed fastening liability of Rs. 13,15,31,472 and Rs. 3,26,82,953 respectively, which orders were also challenged in this writ petition by means of an amendment application, which was allowed on 18.4.2012.
2. The brief facts giving rise to this writ petition are; the petitioner is engaged in the business of printing and publishing newspapers ‘Dainik Jagaran’ and ‘I-next’ from different centres across the country. The registered office of the petitioner’s company is situate at Kanpur Nagar. The major source of revenue of the petitioner is generated from advertisements published in the said newspapers. The petitioner is also member of Indian Newspaper Society (hereinafter referred to as INS). The petitioner has been giving 15% trade discount to accredited advertising agency and trade discount of 10% to 15% to non-accredited advertising agency as per Rules and Regulations of INS for last several years. On 15.3.2012, the respondent conducted a survey under Section 133A of the Act at the premises of the petitioner at Kanpur Nagar and recorded statement of General Manager Taxation and Legal. The notice dated 19.3.2012 for the financial year 2009-2010 was issued to the petitioner stating that during the course of survey on 15.3.2012, it has been gathered that the petitioner has failed to deduct tax at source under Section 194 H of the Act on the payment received from advertising agencies after allowing 15% trade discount, which is as well a deemed commission. Details of monthwise amount of payment of discount were required to be submitted. The petitioner was asked to show-cause as to why order under Sections 201 (1) and 201(1) A of the Act be not passed declaring the petitioner as an assessee in default in respect of such taxes and interest thereon. The petitioner was asked to appear on 22.3.2012. Another notice dated 21.3.2012 for the financial year 2008-09 was issued requiring details as mentioned therein including monthwise amount of payment of trade discount by the petitioner alongwith copy of the bills from January to March 2009. The petitioner filed a reply to the notices dated 19.3.2012 and 21.3.2012 on 22.3.2011. On 22.3.2012, the petitioner was required to submits monthwise bills of the advertisements received and trade discount given thereon by the next date i.e. on 23.3.2012. On 23.3.2012, another notice was issued by the respondent calling the petitioner to submit reply alongwith documents called for by 12:00 noon on 26.3.2012 positively. The petitioner was also informed by the same notice that Kerala High Court in 325 ITR 205 on the similar issue had decided that advertising agency has acted as an agent of the principal hence trade discount allowed can be considered as commission or brokerage defined under Explanation (i) of Section 194H of the Act. This writ petition was filed in this Court on 23.3.2012 praying for quashing the notice dated 29.3.2012 and 21.3.2012. The writ petition was heard on 19.3.2012 on which date following order was passed.
“Supplementary affidavit filed today is taken on record.
On a mention made by learned counsel for the petitioner, the matt
