Before imposing s. 201 TDS Liability, AO to show that recipient has not paid tax
The AO passed an order u/s 201 in which he held the assessee to be in default for failure to deduct TDS u/s 194C on payments made to contractors. The assessee’s argument that in view of Hindustan Coca Cola Beverages 293 ITR 226 (SC), the tax could not be recovered from it as it must have been recovered from the recipient was rejected on the ground that the onus was on the assessee to prove that the recipient had paid the taxes. On appeal by the assessee to the Tribunal, HELD allowing the appeal:
In view of the judgment of the Allahabad High Court in Jagran Prakashan, there is a paradigm shift in the manner in which recovery provisions u/s 201(1) can be invoked. S. 201 is intended to make good the loss of revenue suffered by the revenue as a result of non-deduction of tax. However, the question of making good the loss arises only when the recipient of income has not paid tax and, therefore, the department has to establish that the recipient of income has not paid due taxes thereon. The non payment of taxes by the recipient is a condition precedent to invoking s. 201(1) & the onus is on the AO to demonstrate that the condition is satisfied. The assessee has to submit all such information about the recipient as he is obliged to maintain under the law. Once this information is submitted, it is for the AO to ascertain whether or not the taxes have been paid by the recipient of income.