CHIEF TREASURY OFFICER Vs. UNION OF INDIA

JUDGEMENT

(1.) The Chief Treasury Officer, Agra, the petitioner, by means of the present petition filed under Article 226 of the Constitution of India has questioned the legality and validity of the order passed by the Income Tax Officer (TDS), Agra passed under section 221(1)/221(1A) of the Income Tax Act whereby the Chief Treasury Officer has been held as assessee in default having failed to deduct and pay the tax under section 194-H of the Income Tax Act, 1961 from commission. A tax liability along with interest amounting to Rs.2,77,648/- has been created by the order dated 31st of March, 2002.

(2.) The background facts may be noticed in brief.

(3.) On 29th October, 2003 the Income Tax Department conducted a survey in the office of the petitioner under section 133A of the Income Tax Act and thereafter proceeding was initiated under section 221(1)/221(1A) of the Act on the allegations that the petitioner sells general stamp papers, court fee stamps, copy stamps and other stamps either to the public directly or through licensed stamp vendors at a price less than 1% of the value of such stamps which amounts to 'commission' within the meaning of section 194-H of the Act. The petitioner having failed to deduct the tax at source on the said 'commission amount' to which it was obliged under section 194-H of the Act, is assessee in default. The case of the petitioner in brief is that the petitioner is not giving any commission to the stamp vendors. But the sales are made at discount of one per cent on cash purchases of stamp papers etc. by licensed vendors as per provisions of Rule 157 read with Rule 161 of U.P. Stamp Rules, 1942. It has been stated in paragraph-4 of the writ petition that the petitioner, on the instructions of the ITO (TDS)/respondent no.3 collected the tax from the licensed vendors pertaining to the financial years 2001-2002, 2002-2003 and 2003-2004 and deposited the same with the respondent department. The petitioner further states that similar issue was up for consideration before the Commissioner, Income Tax (Appeals) - II, Kanpur with respect to the Chief Treasury Officer, Kanpur and it was held that the Chief Treasury Officer is not required to deduct the tax at source on the sale of stamp papers etc. to licensed vendors as per the U.P. Stamp Rules, 1942. Therefore, the impugned order is illegal and void.