judgment
1. This appeal under Section 260A of the Income Tax Act, 1961 (Act) challenges the order dated 6 September 2013 passed by the Income Tax Appellate Tribunal (Tribunal). The impugned order relates to assessment for Assessment Year 2006-07.
2. The Revenue has urged the following question of law for our consideration :—
(a)
Whether on the facts and in the circumstances of the case and in law, the ITAT was correct in upholding the order of the CIT(A) and holding that the assessee was not liable to deduct tax at source under section 194 from the alleged share application money which was held as deemed dividend under section 2(22)(e) of the Act by the Assessing Officer?
3. The Respondent assessee is in construction business. During the Assessment Year 2006-07, the Respondent assessee had paid share application money to one M/s. Siddhivinayak Realities Pvt. Ltd. The Assessing Officer added the amount of Rs.10.35 crores as deemed dividend on a substantive basis in the hands of Siddhivinayak Realities Pvt. Ltd. and on a protective basis in the hands of its director Mr. Vikas Oberoi in their assessment orders.
4. Being aggrieved, both M/s. Siddhivinayak Realities Pvt. Ltd. and Mr. Vikas Oberoi challenged their orders of assessment holding that they are in receipt of deemed dividend. Their appeals were allowed by the Commissioner of Income Tax (Appeals) (CIT(A)) holding that they could not be charged to tax on the amount of Rs.10.35 crores as recipients of deemed dividend under Section 2(22)(e) of the Act. Being aggrieved by the order of CIT (Appeals), the Revenue filed an appeal to the Tribunal which was dismissed. Thereafter, the Revenue filed an appeal to this court, being Income Tax Appeal No.1174/2013 in the case of M/s. Siddhivinayak Realities Pvt. Ltd. and in the case of CIT v. Vikas Oberoi [2017] 394 ITR 505 (Bom.). This Court by orders dated, respectively, dismissed both the Revenue's appeals from the orders of the Tribunal holding that M/s. Siddhivinayak Realities Pvt. Ltd. and Vikas Oberoi cannot be charged to tax as recipients of deemed dividend.
5. In the meantime, pending the aforesaid proceedings, the Assistant Commissioner of Income Tax (TDS) (ACIT (TDS)) passed an order dated 11 February 2011 under Section 201(1) and 201(1A) of the Act holding the Respondent assessee to be an assessee in default for not having deducted tax on the deemed dividend of Rs.10.35 crores paid to M/s. Siddhivinayak Realities Pvt. Ltd.. The Respondent assessee, being aggrieved, filed an appeal to the CIT (Appeals). By an order dated 27 December 2011, the appeal of the Respondent assessee was allowed by the CIT (Appeals) holding that as in the appellate proceedings in respect of M/s. Siddhivinayak Realities Pvt. Ltd. and Mr. Vikas Oberoi, the addition of income to the extent of Rs.10.35 crores under section 2(22)(e) of the Act on substantive and protective basis had been deleted, there was no taxable income which had to suffer tax deduction at source. Consequently, no failure to deduct tax could arise.
6. Being aggrieved, the Revenue-appellant carried the issue in further appeal to the Tribunal. By order dated 6 September 2013, the Tribunal upheld the order of the CIT (Appeals) holding that once the addition made on account of deemed dividend is deleted in the hands of the recipient of the amount of Rs.10.35 crores, there could be no failure to deduct tax at source thereon. Thus the consequent demand under Section 201(1) and 201(1A) of the Act upon the Respondent-assessee was not justified. Being aggrieved, the Revenue is in appeal before us.
7. The grievance of the Revenue before us is that no fault could be found with the order dated 11 February 2011 of the ACIT(TDS) at the date when he passed the order holding the Respondent-assessee to be an assessee in default liable to tax and interest under Section 201(1) and 201(1A) of the Act. As on that date, the recipient of amount of Rs.10.35 crores i.e. M/s. Siddhivinayak Realities Pvt. Ltd. on substantive basis and Mr. Vikas Oberoi on protective basis, were held liable to tax. In the above view, no fault could be found with the order of ACIT (TDS) holding the Respondent assessee as an assessee in default under Section 201(1) and 201(1A) of the Act.
8. We find that both the CIT (Appeals) as well as the Tribunal in these (TDS) proceedings have held that as the very basis for holding the Respondent assessee liable for failure to deduct tax did not subsist, the TDS proceedings must also fail. This was in view of the orders passed in the case of recipients i.e. M/s. Siddhivinayak Realities Pvt. Ltd. and Mr. Vikas Oberoi in appeal by the authorities under the Act including this Court that they were not liable to any tax as they had not received any deemed dividend under Section 2(22)(e) of the Act. Once the foundation is removed, the superstructure falls (sublato fundamento Cedit opus). The grievance of the Revenue is that in TDS proceedings, one must ignore the orders passed in the hands of the recipients i.e. M/s. Siddhivinayak Realities Pvt. Ltd. and Mr. Vikas Oberoi. The officers of the Revenue administering the TDS provisions are not outside the scope of the Act and orders passed under the Act in respect of the character of the payment made under the Act are binding upon them. The fact that at the time the order of the ACIT (TDS) was passed, there was basis to do so does not mean that orders passed on income in the hands of the recipients will have no bearing in deciding its validity. One must not ignore the fact that this order of the TDS officer is tentative in nature and its existence would depend upon the nature of receipt in the hands of the recipient and subject to the orders passed in respect thereof by appropriate court.
9. In the above view, the question, as proposed by the Revenue, does not give rise to any substantial question of law. Thus, not entertained.
10. The appeal is dismissed. No order as to costs.