INCOME TAX ACT, 1961

Section 201/(1A)

Tax deduction at source - Assessee-in-default - Passing of order under section 201(1)/(1A) without considering assessee's submissions in that regard - Breach of principles of natural justice

Assessee was an advertising agency, which enabled its clients to place/display their advertisement on various media, viz., print, TV, etc. It recovered amount from its clients and made payment to media owners for the advertisement of its clients, on its media. At the time of making payment, assessee's clients deducted tax under section 194C and assessee again deducted tax under section 194C while making payment to media owners on 24-5-2019 show-cause notices for assessment years 2017-18, 2018-19 and 2019-20 were issued by AO calling upon assessee to show-cause as to why it should not be treated as one in-default under section 201(1) and 201(1A): for failure to deduct tax from payments made to media owners for the services media owners owners provided to it under section 194J. On 9-9-2019, assessee filed detailed representation in respect of proceedings under sections 201(1) and 201(1A) contending that payments made by it to TV print, electronic and other medias for displaying of advertisement of assessee's clients were not in the nature of fees for technical services, therefore, same could not be subjected to tax deduction under section 194J. No query and/or clarification was sought for by revenue but immediately on receipt of representation, AO passed three orders, all dated 9-9-2019, holding that assessee was one in default under section 201(1) and 201(1A) for assessment years 2017-18, 2018-19 and 2019-20 for having failed to deduct tax from payments made to M/s. Goofle India (P) Ltd. and other like suppliers under section 194J. Assessee challenged order passed by AO by way of writ petition.Held: It was evident that impugned orders were non-speaking orders in as much as admittedly it had not considered assessee's submissions which went to the root of matter. When assessee filed representation on 9-9-2019 in respect of proceedings under section 201 and 201(1A), AO in undue haste passed an order determining huge sums payable by assessee for assessment years 2017-18, 2018-19 and 2019-20 for failure to appropriately deduct tax. The entire exercise was done in undue haste and was, therefore, vitiated for breach of natural justice. Impugned orders were set aside to AO for fresh disposal after following principles of natural justice, i.e., due consideration of assessee's submission by a speaking order.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2017-18 to 2019-20

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