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IN THE HIGH COURT OF KARNATAKA, BANGALORE
Dated this the 15th day of July, 2014
PRESENT:
THE HON'BLE Mr. JUSTICE N.KUMAR
AND
THE HON'BLE Mr. JUSTICE B. MANOHAR
ITA No.165/2012
C/W
ITA Nos.164/2012, 166/2012, 239/2012,
240/2012 & 241/2012
In ITA NO.165 OF 2012:

BETWEEN
1. THE COMMISSIONER OF INCOME-TAX

TDS, NO.59, HMT BHAVAN
BELLARY ROAD, GANGANAGAR
BANGALORE-32
2. THE ASSISTANT COMMISSIONER

OF INCOME-TAX
TDS, CIRCLE - 16 (2)
NO.59, HMT BHAVAN
BANGALORE-32 ... APPELLANTS
(By Sri K V ARAVIND, ADV.,)

2
AND
M/s. KINGFISHER AIRLINES LTD.,

# 35/2, CUNNINGHAM ROAD
BANGALORE-560 052 ... RESPONDENT
(By Smt. S R ANURADHA, ADV.,)
THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,

1961, ARISING OUT OF ORDER DATED 25/05/2012
PASSED IN ITA NO.370/BANG/2012, FOR THE
ASSESSMENT YEARS 2011-2012, PRAYING TO
FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED THEREIN AND ALLOW THE APPEAL AND SET
ASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE
IN ITA NO.370/BANG/2012 DATED 25/05/2012 AND
CONFIRM THE ORDER OF THE APPELLATE
COMMISSIONER CONFIRMING THE ORDER PASSED BY
THE ASSISTANT COMMISSIONER OF INCOME TAX (TDS),
CIRCLE-16(2), BANGALORE, IN THE INTEREST OF
JUSTICE AND EQUITY.

BETWEEN

BANGALORE-32
2. THE ASSISTANT COMMISSIONER OF INCOME-TAX

NO.59, HMT BHAVAN

3
AND


JUSTICE AND EQUITY.

BETWEEN

BANGALORE-32

NO.59, HMT BHAVAN

4
AND


JUSTICE AND EQUITY.

BETWEEN

BANGALORE-560 052
REPRESENTED BY ITS
AUTHORIZED SIGNATORY
Sri AJAY VIJAY ... APPELLANT
AND
1. THE COMMISSIONER OF INCOME-TAX (TDS)

NO.59, HMT BHAVAN
5

BANGALORE-32

(TDS), CIRCLE - 16 (2)
NO.59, HMT BHAVAN
BANGALORE-32 ... RESPONDENTS

ASIDE THE ORDER DATED 25/05/2012 PASSED BY THE
ITAT, BANGALORE IN ITA NO.369/BANG/2012, IN SO FAR
AS IT RELATES TO THE ISSUE OF JURISDICTION HELD IN
FAVOUR OF REVENUE AND AGAINST THE ASSESSEE, IN
THE INTEREST OF JUSTICE AND EQUITY.

BETWEEN

BANGALORE-560 052
REPRESENTED BY ITS

6
AND

NO.59, HMT BHAVAN
BANGALORE-32

NO.59, HMT BHAVAN


BETWEEN

BANGALORE-560 052
REPRESENTED BY ITS
7
AND

NO.59, HMT BHAVAN
BANGALORE-32

NO.59, HMT BHAVAN

THESE ITAs COMING ON FOR FINAL HEARING, THIS

DAY, N.KUMAR, J., DELIVERED THE FOLLOWING:
8
JUDGMENT
As all these appeals relate to the same assessee but for
the different assessment years and a common order is
passed by the Tribunal, all these appeals are taken up for
consideration together and disposed of by this common
order.
2. The Assessee Company-M/s. Kingfisher Airlines
Limited is engaged in the business and operating as a
schedule passenger airline in India. A survey under Section
133A was conducted in the assessee’s premises on
18.3.2011, in order to verify TDS compliance. The survey
revealed that the assessee was not remitting the taxes
deducted by it at source to Government account within the
due dates as prescribed in the Income Tax Act, 1961 (for
short, hereinafter referred to as the ‘Act’).
3. During the course of verification of the TDS
compliances it was noticed that for the financial year 2009-

9
2010, a sum of Rs.74,94,21,701/-; for the financial year
2010-2011, a sum of Rs.139,43,81,410/- and for the
financial year 2011-2012 up to September 2011, a sum of
Rs.89,79,76,212/- was deducted from the salaries paid to
the employees and payments under other heads for the
above mentioned assessment years but the same was not
remitted to the Government Account. Therefore, show-cause
notices were issued dated 13.12.2011 for the assessment
year 2010-2011; notice dated 16.12.2011 for the assessment
year 2011-2012 and notice dated 21.12.2011 for the
assessment year 2009-2010 under Section 201(1) of the Act.
The notices were duly served on the assessee. The assessee
was called upon to explain as to why they should not be
treated as an assessee-in-default and was asked to furnish
its submissions, if any. In two cases there was no response.
In one case, time was sought for filing response. The
assessing authority passed an order on 30.12.2011 directing
the assessee to pay the amount deducted with interest and

10
issued a demand notice. The order was passed to initiate
penalty proceedings under Section 221(1) separately.
4. Aggrieved by the said order, the assessee
preferred an appeal before the Commissioner of Income Tax
(Appeals)-V, Bengaluru. The First Appellate Authority after
considering the arguments canvassed by both the parties
held that the assessee has never denied the fact that taxes
have been deducted from the salaries paid to its employees.
Therefore, the argument of the assessee that the taxes
should be collected from the deductees is not acceptable.
The amount withheld by the assessee in reality belongs to
the Government of India as per law. Therefore, the assessee
cannot plead financial crunch as the reason for not remitting
the TDS to the Government Account. The assessee had no
right to withhold the tax deducted from payments without
paying it to the Government Account. Because of this action
of the assessee, the deductees are not in a position to claim
the credit for tax deducted in their cases. Therefore, he

11
confirmed the order passed by the assessing authority.
Aggrieved by the said order, the assessee preferred appeals
before the Income Tax Appellate Tribunal, Bangalore.
5. The Tribunal after considering the rival
contentions was of the view that the main grievance of the
assessee was that proper opportunity of being heard was not
given to the assessee. In order to answer the said question,
it looked into the notice issued; the date on which it is
served coupled with the fact that the assessee did not file the
response as the time given was too short and an order
holding that the assessee-in-default would have serious
consequences, it was of the view that sufficient opportunity
should have been given to the assessee. The same having not
been given, it set aside the orders passed by both the
authorities and remanded the matter to the assessing
authority for fresh adjudication in accordance with law after
providing due and reasonable opportunity of being heard to
the assessee. Aggrieved by the said order, the revenue has

12
preferred three appeals. Similarly, the assessee has also
preferred three appeals.
6. In the light of the aforesaid facts, the substantial
questions of law that arise for our consideration in ITA
Nos.165/2012; 164/2012 & 166/2012 are as under:-
“1. Whether the Tribunal was correct in

setting aside the order u/s. 201(1) r.w.s. 201(1A)
of the Act to give the assessee an opportunity of
hearing when the entire liability with interest is
admitted and worked out and given by the
assessee themselves and the question of fresh
adjudication on remand will not arise as there is
no dispute as to the liability?
2. Whether the Tribunal was correct in

holding that section 201(1) r.w.s. 201(1A) of the
Act was penal proceedings when the scheme to
deduct tax at source vests the deductor with an
obligation under statute in a fiduciary capacity
and to pass on the deducted tax to the Central
Government failing which interest is levied
which is compensatory in nature?
13

holding that the notice had not been served, the
assessee was not heard, no sufficient
opportunity was granted and the officer has to
be satisfied that there was good and sufficient
reason for not making TDS when the material on
record showed to the contrary and consequently
recorded a perverse finding?

holding when granting interim order that the
assessee was in dire financial difficulties having
admitted the liability and an opportunity should
be granted to repay the amount in installments
proceeded to completely ignore this finding and
set aside the impugned order on imaginary
grounds and recorded a perverse finding?
7. The substantial questions of law that arise for
our consideration in ITA Nos.239/2012; 240/2012 &
241/2012 are as under:-

remanding the matter back to the file of the
Assessing Officer when the order under Section
14
201 read with Section 201(1A) of the Act suffers

from inherent lack of jurisdiction and therefore
the said order is void, inoperative and nullity in
the eyes of law?
2. Whether the Tribunal committed a

grave error of law in not appreciating that
legislative scheme of the Act which is bound up
with the Rules make it abundantly clear that
DGIT (Systems) is the competent authority for
making an order Section 201 of the Act and
therefore the Assessing Officer lacked
jurisdiction to make an order under Section 201
of the Act?

not appreciating that the power exercisable
under Section 201 has to be read in conjunction
with Section 200(3) and Section 200A of the Act
as the liability under Section 201 is intrinsically
linked with the processing of statement under
Section 200A of the Act?
8. Sri D.L.N.Rao, learned Senior Counsel
appearing for the assessee, contended that, the assessing

15
authority is not the prescribed officer under the Act, who is
competent to pass the impugned order and therefore the
entire proceeding is vitiated. Secondly, he contended though
notices were issued, either the notices were served after
passing of the order or sufficient opportunity was not given
before passing the order and therefore there is violation of
principles of natural justice and the Tribunal has rightly set
aside the order and remanded the matter back for fresh
consideration which cannot be found fault with. He
submitted that as is clear from the survey report that the
amount outstanding from the assessee is not found therein.
Unless the Department ascertain and state what is the exact
amount due by the assessee, the Assessing Authority will
have no jurisdiction to proceed with the matter, because it is
a jurisdictional fact. In the instant case, till now, what is the
amount actually due has not been stated. If and when they
would put forth the claim, the assessee would have shown
payment of the said amount. Therefore, he submits that the
entire proceeding was conducted without jurisdictional fact

16
being ascertained. The impugned order passed by the
assessing authority is one without jurisdiction and the
Tribunal was justified in setting aside the orders passed by
the authorities and remanding the matter back to the
Assessing Authority for deciding the case afresh. He also
submitted that the documents produced before this Court at
the time of hearing of these appeals shows asseessees have
filed return though belatedly and made payments. The
prescribed authority under the Act has passed orders calling
upon the assessee to pay certain sum of money, which
according to him was the deficient. Unless these amounts
are taken into consideration, the liability, if any of the
assessee cannot be fixed and those orders are not passed by
the assessing authority but by the prescribed authority
under the Act. Even otherwise as the Tribunal has not
decided the case on merits, in the event the Court were to set
aside the order of remand, the matter has to be remitted to
the Tribunal to consider the case on merits and pass
appropriate orders.
17
9. Per contra, learned Counsel appearing for the
Revenue Sri K. V. Aravind submitted that, the prescribed
authority’s duty is to receive the statement on file, look into
the contents and if there is any deficiency they have to
communicate to the assessee for compliance. In these cases,
the amount collected as TDS is not paid, no Returns are filed
and therefore it is for the assessing authority who is the
competent authority to pass an order under Section 201.
Therefore the order passed is valid and legal. Before issuance
of notice under Section 201 of the Act, after survey, there
was a correspondence between the parties wherein the
assessee was called upon to produce the statements and
accounts which he did and the amount reflected in the
notice is taken from those correspondences and therefore it
is too late in the day for them to contend that the
jurisdictional facts were not ascertained before proceeding
with the matter. Secondly, he contended the claim was not
in dispute. Notice was issued. Sufficient opportunity was
granted. When no explanation is offered, payment is not

18
made, the orders are passed. After passing of the order,
accepting the order, the Managing Director of the Assessing
Company in several letters has pleaded for time to make
payment in installments. Parallelly, he has filed an appeal,
which came to be dismissed. Before, the First Appellate
Authority, the assessee did not make any efforts either to
offer an explanation to the notice issued or to produce
documents to show that he has paid money. Therefore, it
was not open to him to contend before the Tribunal that the
principles of natural justice is violated. The Tribunal without
appreciating the difference between Section 201 and Section
221, set aside the impugned order on the ground that the
requirements of Section 221 is not complied with, which has
no application to the facts of this case. Therefore, the order
of remand is illegal and liable to be set aside. He also
submitted that even on merits, the liability is admitted and
therefore the question of remitting the matter to the Tribunal
would not arise. However, it is open to the assessee to
produce the particulars of the amount deposited and if it is

19
proved that he has remitted the money, certainly he would
be entitled for deduction of the amount paid by him. For
that purpose, no remand is required.
10. In the light of the aforesaid facts and rival
contentions, the points that arise for our consideration in
these appeals are:
(i) Whether the entire proceedings initiated
by the Assessing Authority when the
jurisdictional fact being ascertained, is
one without jurisdiction?
(ii) Whether the impugned orders passed by
the Assessing Authority and the First
Appellate Authority offends principles of
natural justice as held by the Tribunal
and therefore no case for interference, if
such an order is made out?

20
(iii) Whether in a proceeding under Section
201 of the Income Tax Act, who is a
competent authority who is vested with
the power to declare the assessee as
assessee in default and order passed by
the Assessing Authority can be said to be
one without jurisdiction?
JURISDICTIONAL FACT
11. The learned Senior Counsel relying upon a
judgment of Allahabad High Court in the case of JAGRAN
PRAKASHAN LIMITED v/s DEPUTY COMMISSIONER OF
INCOME TAX reported in (2012) 345 ITR 288 contended
that existence of jurisdictional fact is sine qua non or
condition precedent for exercising the power by the court of
limited jurisdiction. The jurisdictional fact is a fact which
must exist before a Court, a Tribunal or an authority
assumes jurisdiction over a particular matter. A
jurisdictional fact is one on existence or non-existence of

21
which depends on the jurisdiction of a Court, a Tribunal or
an Authority. It is the fact upon which an administrative
agency’s power to act depends. If the jurisdictional fact does
not exist, then the Court, authority or officer cannot act. If a
Court or authority wrongly assumes existence of such fact,
the order can be questioned by a writ of certiorari. The
underlying principle is that by erroneously assuming the
existence of such jurisdictional fact, no authority can confer
upon itself jurisdiction which it otherwise does not possess.
There cannot be any quarrel with the aforesaid legal
position.
12. In the instant case, the assessee was served with
three notices dated 13-12-2011, 16-12-2011 and 21-12-
2011 claiming amounts mentioned therein and calling upon
the assessee to show cause why the assessee should not be
treated as an assessee in default under Section 201(1) of the
Act in respect of the sum mentioned in the notice. Further,
the assessee was also requested to furnish the above details

22
month wise in the format mentioned in the said notice to
enable the office to verify the TDS compliance and
calculations of interest under Section 201(1A). In case, the
month wise details is not furnished, the interest under
Section 201(1A) will be calculated from 01-04-2010. The
format was also mentioned in the said notice. Now the
argument is, the amount mentioned as having been
deducted by the assessee and has not been remitted to the
Government Account in accordance with the provisions of
Section 200 is devoid of particulars and not supported by
any supporting documents. Neither before the First
Appellate Authority nor before the Tribunal nor before this
Court, the particulars are forthcoming nor furnished.
Therefore in the absence of those particulars, the
jurisdictional fact does not exist and the entire proceedings
is vitiated.
13. The materials on record disclose that on 18-03-
2011, a survey was conducted in the assessee’s premises in

23
order to verify the TDS compliance. The said survey revealed
that the assessee was not remitting taxes deducted by it at
source to Government account within the due dates as
prescribed in the Income Tax Act. Therefore, several letters
were sent to the assessee vide letter dated 22-3-2011, 21-6-
2011, 24-08-2011 and 09-09-2011 asking the assessee to
furnish the details regarding the heads of expenditure from
which, the TDS was deducted, the rate of deduction and
dates on which payments became due, for each financial
year separately. However, there was no response. Since the
assessee failed to furnish the information called for,
verification was conducted at the business premises of the
assessee. Consequently and after severe pursuance,
Rs.21,04,64,384/- was collected by the office. The assessee
was further asked to give the payment plan and accordingly
the assessee vide letter dated 17-11-2011 filed a
commitment letter and had undertaken to pay the
outstanding TDS liabilities for the financial year 2010-11
and clear the entire outstanding liabilities by the end of the

24
current financial year i.e. 31-03-2012. After repeated
telephonic conversation with Shri Venkatadri, AVP, Taxation
of M/s. Kingfisher Airlines Limited furnished the details
regarding outstanding TDS liabilities for the financial year
2010-11 which was received by Fax. After taking into
consideration the payments made by the assessee-company
as ascertained from Ms.Rekha, Assistant Manager Accounts,
the details of the outstanding TDS liabilities for the financial
year 2010-11 was set out as under:
F.Y Nature of Section Amount

Payment
2010-11 Contractors 194C Rs. 8,98,98,548
Interest 194A Rs. 14,68,18,191
Rent 194I Rs. 4,99,35,917
Commission 194H Rs. 18,78,27,914
Professional 194J Rs. 5,90,96,159
Salaries – Local 192 Rs. 88,08,15,311
Total Rs.141,43,92,040
14. Further a letter dated 15-12-2011 was sent
calling upon the assessee to furnish the outstanding TDS
liabilities for the financial year 2011-12, the details was

25
received vide fax on 16-12-2011. The outstanding TDS
liabilities for the financial year 2011-12 upto September
2011 as furnished by the assessee is as under:
Section Rs. in Crores

192B 47.00
194C 5.00
194A 6.00
194I 7.00
194H 11.00
194J 14.00
TOTAL 90.00
15. A letter was also sent to the assessee to furnish
the details month-wise so as to enable the office for
calculations of interest under Section 201(1A) of the Act for
the Financial years 2010-11 and 2011-12 and was also
informed that if the details are not furnished, interest under
Section 201(1A) will be calculated from 11-4-2010/01-04-
2011 without considering the payments already made by the
assessee. The letters were also sent to the assessee on the
complaints received from some of the former employees
regarding non issue of TDS Certificates for the financial year

26
2009-10. On 21-12-2011, a fax was received wherein the
outstanding TDS liability for the financial year 2009-10 was
sent by the assessee-company. The details of which are as
under:
192B Rs.74,94,21,701
16. The materials on record also disclose that the
audit report under Section 44AB of the Act along with
audited Profit and Loss Account for the year ended on 31st
March 2010, the audited balance sheet as at 31st March
2010 and the documents declared by the relevant Act to be
part of or annexed to the Profit and Loss Account and
Balance Sheet were also furnished which are dated 01st
October 2010.
17. In column No.27, as against the query whether
the assessee had complied with the provisions of Chapter
XVII-B regarding deduction of tax at source and regarding
payment thereof to the credit of the Central Government, the

27
auditors have remarked that they had verified the
compliance with the provisions of Chapter XVII-B regarding
deduction of tax at source and regarding the payment
thereof to the credit of the Central Government in
accordance with the Auditing Standards generally accepted
in India which include test checks and the concept of
materiality. The non-compliance revealed during such audit
procedures are as mentioned in clause(b). Then they had set
out non-compliance. Insofar as tax deducted but not paid
to the credit of the Central Government is concerned, they
have enclosed Annexure-IX. Annexure-IX shows the tax
deducted for the months under various provisions of the
Income Tax Act as well as the due dates and wherever the
payment has been made, the date of payment is given.
Wherever no such payment is made, the column is left
blank. The said annexure also shows the amount of tax
which is deducted and not paid. Based on this information
and correspondence, the notice was issued under Section
201 of the Act. The demand was made as required under

28
Section 201 of the Act. Therefore, the contention that the
amount claimed in the notice has no basis and how the said
amount is arrived at is not made known and therefore, the
assessee did not have an opportunity to meet the case of
Department is without any substance. Therefore, we do not
see any merit in the said contention.
18. Insofar as the contention that there is violation
of principles of natural justice is concerned, as is seen from
the aforesaid facts, after survey, before issuing notice under
Section 201 of the Act, the authorities had made enquiries
calling upon the assessee to furnish the particulars. The
assessee reluctantly has furnished the particulars.
Therefore, in this background when there was total non-
cooperation on the part of the assessee, the Department was
left with no alternative than to issue those notices calling
upon them to appear and show cause why the assessee
should not be declared as ‘assessee in default’ in respect of
the tax mentioned in the said notice.

29
19. The argument is there was no sufficient
opportunity for the assessee to appear and contest the
matter. In support of their contention, it was contended
that notice dated 21-12-2011 which called upon the
assessee to appear on 26-12-2011 was served on the
assessee on 29-12-2011 whereas the order of assessment
was passed on 30-12-2011. The assessee has made
available to us all the three notices received by them. In the
notice dated 21-12-2011, 29-12-2011 it is mentioned as the
date on which it was served, however, the assessee was
called upon to appear on 26-12-2011. Hence, it was argued
that the said notice is vitiated and at any rate a reasonable
opportunity was not given. The notice dated 29-12-2011 is
put by the assessee’s official with their seal. In fact, in the
notice dated 13-12-2011 which is said to have been received
by the assessee on 16-12-2011, we do not see any such date
being put. But in that particular case, they engaged the
services of a leading Chartered Accountant, who made a

30
request for time by three weeks, which was not granted and
therefore, the order came to be passed on 30-12-2011. Even
in pursuance of the notice dated 16-12-2011, no objections
are filed. Therefore, in all the three cases, in spite of notice
under law has been issued, duly served, but no steps were
taken to file any objections or furnish the particulars and
contest the matter. The question is whether the principles of
natural justice is violated in the aforesaid circumstances.
20. Now, it is not in dispute that on 30-12-2011 for
all the three years, the assessment orders came to be passed
by the Assessing Authority. We have to see the conduct of
the assessee. Immediately after issue of notice on 13-12-
2011 and 16-12-2011 before the issuance of notice on 21-
12-2011, the assessee addressed a letter to the Assessing
Authority undertaking to pay a sum of Rs.130 crores. The
said letter is dated 17th November 2011, which reads as
under:
31
AIRLINES
17th November, 2011

The Asst. Commissioner of Income Tax(TDS)
Circle -16(2),
59, HMT Bhavan,
4th Floor, Ganga Nagar,
Bangalore – 560 032.
Dear Madam,
Sub: Liquidation of TDS dues.
The assessee company is a premier airline

company having a huge market share in India. The
business of running airlines in India is a very tough
task inview of the unfriendly and deteriorating macro
economic situation. The existing Civil Aviation Policy
and Tax Policy has been the cause for huge financial
losses incurred by the assessee company. The losses
have also caused tremendous financial strain on the
company and attendant liquidity problems. Inview of
the foregoing genuine circumstances beyond the
control of the assessee the assessee is having
difficulty in timely payment of Tax deducted at
source. However, the assessee has in the last few
years have made every effort possible to remit large
amount of sum towards TDS. For the current year the
32
assessee is making effort to expeditiously remit the

TDS. However it is often constrained by the
insufficient working capital limit sanctioned by the
assessee’s bankers. Having regard to the present
financial situation and after reviewing the likely
enhancement of working capital limits, the assessee
plans to pay as under:
1) For the Month of December Rs.30 Crores

2) For the Month of January Rs.30 Crores
3) For the Month of February Rs.30 Crores
4) For the Month of March Rs.40 Crores
] --------------------
Total Rs.130 Crores
--------------------
In view of the genuine difficulty faced by the

assessee it is requested that the assessee may not be
declared as in default and request that in this
connection no other proceeding be initiated against
the assessee in the interest of justice and oblige.
Thanking you,
33
Yours Faithfully.
For Kingfisher Airlines Limited
Sd/-
Authorised Signatory
21. After the order came to be passed and on coming
to know of the same, the assessee addressed a letter to the
Assessing Authority dated 5-1-2012 seeking stay of
collection of demand of Rs.372,09,45,786/- for the
assessment years 2010-11, 2011-12 and 2012-13. The said
letter reads as under:
AIRLINES
Date: 05.01.2011
The Asst. Commissioner
Of Income Tax (TDS)
Circle -16(2),
Bangalore.
Madam,
34
Sub: Stay of Collection of Demand of

Rs.372,09,45,786/- For AY:
2010-11, 2011-12 & 2012-13.
Vide orders passed u/s.201(1)201(1A) of the Act

dated 30.12.2011 for the above mentioned
assessment years the following demands have been
raised.
Ass. Year Demand Interest Total Demand

u/s.201(1) u/s.201(1A)
2010-2011 74,94,21,701 28,70,53,151 103,64,74,852

2011-2012 139,43,80,410 30,63,48,835 170,07,29,245
2012-2013 89,79,76,212 8,57,64,477 98,37,40,689
TOTAL 304,17,78,323 67,91,66,463 372,09,44,786
Further even the time limit for making the above

payment has been reduced from 30 days to 7 days
without giving any valid and sustainable reasons.
While passing the orders, the payments made directly
by the recipients u/s.191 of the Act read with Board
Circular No.275/201-95-IT(B) has not been
considered.
35
For the last few years, due to global spurt in crude

prices, aviation turbine fuel prices continued to shoot
up and coupled with the exorbitant rates of taxes on
aviation turbine fuel in India, put the civil aviation
industry under severe pressure. The rising fuel costs
during the period and increase in other operating costs
further added to the problems of the company. Further
the depreciation of the rupee against the dollar has
also caused tremendous hardship on the operations of
the company. The resultant increases in fares and fuel
surcharges that the airlines had to implement,
resulted in a slowdown in air travel, both in India and
worldwide.
The domestic carries in the country continued to

add capacity, the growth in capacity was far in excess
of the growth in traffic in the domestic market. This
continued overcapacity situation led to stiff
competition putting pressure on yields.
All these factors combined to cause an operating

loss for the six months period ending 30th September,
2011 at Rs.1,083 Crores and the accumulated losses
till 30th September, 2011 is Rs.6,080 Crores.
Ongoing recession in economics worldwide and the

economic meltdown culminating in the collapse of
36
financial markets and the slump in the aviation

industry worldwide (with quite a few airlines filing for
bankruptcy), has further aggravated the situation,
with avenues for funding temporarily blocked. The
banks and financial institutions in the country being
new to this business and considering the current state
of aviation sector, are having constraints in financing
aviation industry, which poses further constraints in
raising additional funds.
The company’s case is under the active

consideration by consortium of Banks led by State
Bank of India for restructuring the operations and to
provide adequate working capital. Further the
company is also in the process of finalizing plans for
raising additional equity funds. It is expected that the
liquidity of the company would substantially improve
when these plans materialize. The company has
already let the Financial Institutions know the
quantum of statutory liability and in the revamp plan
the liability is already considered. The company
submits it will make all efforts to discharge its liability
at the earliest occasion and no sooner the long term
funds as stated materialize, till then the acute
shortage of liquidity renders the company helpless in
meeting the liability. The delay in remittances is
37
unintentional and due to circumstances beyond the

capacity of the company.
The financial stringency experienced by the

assessee is also known to the department as it is in
the public domain and is in the news regularly. It has
been held in many cases that financial stringency
amounts to good and sufficient reason for granting
stay.
The company is preferring appeal before the CIT(A)

against the arbitrary orders passed u/s.201(1) and
levy of interest u/s.201(1A) of the Act. Further, the
company does not have such huge liquid and readily
disposable funds to pay such huge demand raised
consequent to the arbitrary orders. The liquid funds
available with company is not even sufficient to meet
its day to day operations, hence the question of
payment of the same will put further strain and effect
the operations of the company.
In view of the foregoing, the company prefers this

petition for complete stay of collection of the demand
until the disposal of the appeals. The company further
requests your honour to treat the company as not
being in default in respect of the tax arrears in appeal
38
as per the provisions of section 220(6) of the I.T Act in

the interest of justice.
It may be noted that the company’s request is in

line with the conditions stated in the
circulars/instructions for grant of stay and requests
that absolute stay be granted till the disposal of the
appeals. It has been so held by Rajasthan High Court,
Jaipur Bench in 223 ITR 192 and recently by Delhi
High Court in Soul v DCIT – 14 DTR 267, Subhash
Chandra Sehgal v DCIT in 6 DTR 53, and Valvoline
Cummins Ltd v. DCIT – 8 DTR 145. Hence we pray for
staying the collection of the entire demand until the
disposal of the appeal in the interests of justice.
The Company prays for a personal hearing before

disposal of the stay petition.
Thanking You,
Yours truly,
For Kingfisher Airlines Ltd.,
Sd/-
Authorised Signatory.
39
22. In the entire letter they have not expressed their
grievance that they have neither been heard nor violation of
principles of natural justice. But they pleaded difficulties
experienced by them for making the said payment and they
also made it clear that they are preferring an appeal before
the Commissioner of Income Tax (Appeals). Thereafter, on
27-01-2012, the Chairman & Managing Director of the
assessee-Company who is also a Member of Parliament
addressed a letter to the Assessing Authority undertaking to
liquidate the statutory liability towards TDS. The said letter
reads as under:
AIRLINES
Vijay Mallya
Member of Parliament
Chairman and Managing Director
January 27, 2012

The Assistant Commissioner of Income Tax (TDS)
Circle -16(2),
59, HMT Bhavan, 4th Floor,
Ganganagar,
Bangalore 560 032.
40
Dear Madam,
Sub: Liquidation of TDS Dues.
I am aware that the company has given an

undertaking dated 17.11.2011, committing to
liquidate the TDS dues in installments. I would like
to reiterate that we will make every possible effort
to honour the commitment at the earliest. SBI Caps
is in the process of completing a viability report of
the Airline and we are closely working with our
consortium of bankers and other prospective
investors to infuse long term finance into the
company based on the viability report. All statutory
dues have been factored in the cash flow
projections submitted to SBI Caps. No sooner the
long term bank finance is arranged equity infusion
is made, we will be liquidating our statutory
liability towards TDS.
I thank you for your co-operation and
understanding.
Yours Sincerely,
Sd/-
Vijay Mallya
Kingfisher Airlines Limited.
41
23. It was followed by another letter dated 14-2-
2012 by the Chairman & Managing Director requesting for
some time and he assured to show his commitment he would
arrange to make payment of Rs.20.00 crores in the coming
week. The said letter reads as under:
AIRLINES
Vijay Mallya
February 14, 2012

The Assistant Commissioner of Income Tax
(TDS), Circle -16(2),
59, HMT Bhavan, 4th Floor,
Ganganagar,
Bangalore 560 032.
Dear Madam,
Sub: Liquidation of TDS Dues.
Further to my letter of January 27, 2012 I would

like to inform you that a meeting of our consortium of
42
bankers is scheduled to be held in Mumbai on

Friday, 17th February 2012. This meeting is expected
to throw some clarity on the long term bank finance
requested for by the company to its consortium of
bankers.
As already mentioned in my earlier letter, we are

making progress in our efforts for equity infusion
and no sooner the long term bank finance/equity
infusion is completed we will be in a position to give
you a firm payment plan for liquidation of our TDS
dues.
However to show our commitment, we will arrange

to make a payment of Rupees Twenty Crores in the
coming week and follow it up with a payment plan.
While I thank you for your co-operation and

understanding, I would earnestly request you to
please bear with us and do not resort to any coercive
steps towards liquidation of our TDS dues.
Your sincerely.
Sd/-
43
24. One more letter came to be addressed by the
Chairman & Managing Director on 2-3-2012 pointing out
that as against the claim of Rs.302 crores plus interest of
Rs.70.00 crores, on February 22nd, IATA remitted Rs.15.15
crores to the IT Department, reducing the principal due to
Rs.286.85 crores and a proposal was given for making the
balance amount. The said letter was addressed to the
Chairman, CBDT, Government of India which reads as
under:
AIRLINES
Vijay Mallya
March 02, 2012

Mr.Laxman Das,
Chairman – CBDT,
Government of India,
New Delhi.
Dear Sir,
44
Our company is undergoing serious financial stress

mainly on account of the high oil prices, punitive
State Sales Taxes and various other factors.
The Income Tax authorities attached all our bank
accounts and our main IATA collection account with
the result that we are completely crippled and have
been unable to make any payments to any party
including salaries to 8000 + employees.
The Government of India are reportedly taking

several policy initiatives to help the stressed aviation
sector. This will help the industry and also
Kingfisher Airlines. We are in active discussion with
serious investors and are confident that we can
introduce fresh equity and recapitalize Kingfisher
Airlines in the near future.
We have also applied to our Consortium of Bankers

for additional working capital.
We are submitting below a payment plan over 8

months for your kind consideration. If we raise fresh
equity and/ or secure additional working capital we
will voluntarily increase our payments and liquidate
our net dues towards TDS, some of which are under
appeal.
45
The IT Department, Bangalore, claims that an

amount of Rs.302 crs is due plus interest of Rs.70
crs.
On February 22nd, IATA remitted Rs.15.15 crs to the

IT Department, reducing the principal due to
Rs.286.85 crs.
Our proposal would be to pay as follows based on
seasonal cash flow affordability and minimal
operating requirements:
“ To pay Rs.14.85 crs to Income Tax department
from the currently attached IATA account. This will
make a total of Rs.30 crs paid in the past 15 days.
“ For the balance Rs.272 crs of past dues, we
propose to pay as follows over 8 months:
March - Rs.14.85 crores (from IATA account –
Total Rs.30 crores)
1. April - Rs.16.00 crores
2. May - Rs.16.00 crores
3. June - Rs.20.00 crores
4. July - Rs.35.00 crores
5. August - Rs.50.00 crores
6. September - Rs.60.00 crores
7. October - Rs.75.00 crores
Total - Rs.272 crores.
46
- We will pay the interest dues in 4 equal monthly

installments thereafter.
In view of the above payment proposal, we request

the attachment of our IATA and bank accounts be
lifted with immediate effect as we cannot continue
operations in this crippled state.
We would be most grateful for your kind acceptance
of our proposal.
Thanking you,
Yours faithfully,
Sd/-
Vijay Mallya.
cc: Mr.R.S.Gujral, Secretary – Revenue
New Delhi.
25. It was followed by one more letter dated 9-3-
2012 making a proposal to pay Rs.356.85 crores in eight
equal monthly installments of Rs.45.60 crores, which reads
as under:
47
AIRLINES
Vijay Mallya
March 09, 2012

Mr.Laxman Das,
Chairman – CBDT,
New Delhi.
MOST URGENT
Dear Sir,
This is further to my letter dated March 02, 2012 to

you.
Our Company is undergoing serious financial stress

mainly on account of the high oil prices, punitive
State Sales Taxes and various other factors.
The Income tax authorities attached all our bank

accounts and our main IATA collection account with
the result that we are completely crippled and have
been unable to make any payments to any party
including salaries to 8000 + employees.
48
The Government of India are reportedly taking

several policy initiatives to help the stressed aviation
sector. This will help the industry and also
Kingfisher Airlines. We are in active discussion with
serious investors and are confident that we can
introduce fresh equity and recapitalize Kingfisher
Airlines in the near future.
We have also applied to our Consortium of Bankers

for additional working capital.
We are submitting below a payment plan over 8

months for your kind consideration. If we raise fresh
equity and or secured additional working capital we
will voluntarily increase our payments and liquidate
our net dues towards TDS. Some of which are under
appeal.
The IT Department, Bangalore, claims that an

amount of Rs.302 crs is due plus interest of Rs.70
crs.
On February 22nd, IATA remitted Rs.15.15 crs to the

IT Department, reducing the amount due to
Rs.356.85 crs.
Our proposal would be to pay Rs.356.85 crs in eight

monthly installments of Rs.44.60 crs.
49
In view of the above payment proposal, we request

the attachment of our IATA and bank accounts be
lifted with immediate effect as we cannot continue
operations in this seriously crippled state.
We would be most grateful for your kind and urgent

acceptance of our proposal.
Thanking you,
Yours faithfully,
Sd/-
Vijay Mallya.
cc: Mr.R.S.Gujral Secretary – Revenue,
New Delhi.
26. From the aforesaid letters, it is clear that the
assessee never complained of violation of principles of
natural justice, on the contrary the liability was admitted
and their difficulties in making the payment was expressed.
They wanted to make payments in installments and a part of
the amount was also paid. However, in the appeal filed, all
the facts set up by them were made a ground. For the first
50
time they contended that the order is in violation of
principles of natural justice. The argument was that they
have made payments and there was no opportunity for them
to show the said payments and also that the amounts
claimed are without any basis. If there is any substance in
the said contention, it was open to the assessee to produce
before the First Appellate Authority along with the appeal
memorandum the particulars such as, number of employees
employed by them, salary paid to them, the TDS deductions
made from the salary, what is the total amount of TDS
deduction which came to their hands and what is the
amount they have to pay and requested the First Appellate
Authority to set aside the order of the Assessing Authority on
the basis of such factual position which was in their
possession.
27. Section 106 of the Evidence Act, 1872 which
deals with the burden of proving the fact, especially within
knowledge, provides that when any fact is established within

51
the knowledge of any person the burden of proving that fact
is upon to him. The amount collected as TDS is the amount
deducted from the salary of the employees of the assessee.
The assessee has failed to furnish particulars such as the
number of employees employed by them, the amount of
salary paid to them, the amount of TDS deducted out of their
salary and if any payment has been made to the Central
Government. These are all facts which are within the
knowledge of the assessee and they cannot expect the
Department to furnish all these particulars. The
Department is acting on the basis of the information
furnished by the assessee as set out above. The assessee in
their correspondence has stated what is the amount due
which is reflected in the annexures. The Department has
gathered the figures from the materials available on record.
If that is wrong, it was open to the assessee to produce their
accounts and point out to the Appellate Authority that, that
is not the amount due. But no such exercise has been done.
52
28. In this regard, it is useful to refer to the scope of
enquiry under the Income Tax Act before the First Appellate
Authority. This Court after reviewing the entire case law on
the point in the case of CIT v/s M.N.DASTUR AND
COMPANY in ITA No.2335/2005 decided on 14th July
2010, has held as under:
There can be no analogy or parallel

between a tax appeal and an appeal, sat, in civil
cases. A civil appeal, like a law suit in the court
of first instance out of which it arises is really
and truly an adversary proceeding, that is to say,
a controversy or tussle over mutual rights and
obligations between contesting litigants ranged
against each other as opponents. A tax appeal is
quite different. Even as the assessing authority
is not the tax-payer’s “opponent”, in the strictly
procedural sense of the term, so too the appellate
authority sitting in appeal over the assessing
authority’s order of assessment is not strictly an
arbitral tribunal deciding a contested issue
between two litigants ranged on opposite sides.
In a tax appeal, the Appellate Authority is very
much committed to the assessment process. The
53
Appellate Authority can itself enter the arena of

assessment, either by pursuing further
investigation or causing further investigation to be
done. It can do so on its own initiative, without
being prodded by any of the parties. It can
enhance the assessment, taking advantage of the
opportunity afforded by the tax-payer’s appeal,
even though the appeal itself has been mooted
only with a view to a reduction in the
assessment. These are special and exceptional
attributes of the jurisdiction of a tax appellate
authority. The appellate authorities are in the
nature of revising authorities not in the narrow
sense of revising those matters about which the
assessee has a grievance, but a revising
authority in the sense that, once the appeal is
before him he can revise not only the ultimate
computation arrived at by the (assessing officer),
but he can revise every process which led to the
ultimate computation or assessment. An
appellate authority under the taxing enactments
sits in appeal, only in a manner of speaking.
What it does, functionally, is only to adjust the
assessment of the appellant in accordance with
the facts on the record and in accordance with the
54
law laid down by the legislature. An appeal is a

continuation of the process of assessment, and
an assessment is nothing but another name for
adjustment of the tax liability to accord with the
taxable event in the particulars tax payer’s case.
29. Therefore, if the grievance of the assessee is that
Assessing Authority did not give sufficient opportunity to
place their version and to produce receipts showing
payments of money, they were not afforded with an
opportunity to produce the documents to show that the
assessee has not deducted the tax from the salary of its
employees, it was open to the assessee to produce all those
documents before the First Appellate Authority whose
powers are co-extensive with that of the Assessing Authority.
He was empowered in law to do what the Assessing Officer
failed to do and request the Authority to grant the relief to
which he was entitled to in law. The assessee was assisted
by able Chartered Accountant. The assessee was in
possession of audit report and the books of account were in

55
his possession. No effort was made before the First
Appellate Authority to produce those documents to
substantiate the defence, if they have any. On the contrary,
the conduct of the assessee shows, they are corresponding
with the Assessing Authority admitting the total liability of
the tax payable requesting him to grant some time or liberty
to pay in instalment. They have also made partial payment.
Therefore, at no point of time, the liability was in dispute.
The grievance was because of cash crunch, difficult times
the assessee was undergoing, he is not able to raise requisite
funds, he wanted accommodation. It is in this background,
the First Appellate Authority in one of the case has clearly
set out the ground urged before him, where difficulties are
pleaded. The First Appellate Authority was of the view that
the amount payable by the assessee to the Department is
not tax due by him. He has deducted the tax payable by his
employees or to whom he has made payment, collected tax
due to the Government on behalf of Government, instead of
remitting the same he has appropriated the same for his

56
benefit. Therefore, it was held, none of those causes put
forth for not remitting the said amount would constitute
sufficient cause. Therefore, the assessee was not entitled to
relief.
30. In appeal, the Tribunal has completely
misdirected itself and proceeded on the assumption that the
assessee has not been given a reasonable opportunity of
putting forth his case and therefore, it set aside the order.
Before coming to that conclusion, the Tribunal has not
looked into the material on record. It has also not taken into
consideration the scope of enquiry before the First Appellate
Authority. It has also not taken into consideration that the
assessee did not make any efforts to produce documents and
statements in support of their contention, though a ground
was raised in the appeal memo. When we look at the order
passed by the First Appellate Authority, the said ground
appears to have not been urged. Even otherwise, if assessee
wanted an opportunity to produce statement, nothing

57
prevented the assessee from producing them along with the
appeal or file an application to the First Appellate Authority
requesting them to take note of the same and then frame an
order of assessment. The Tribunal has proceeded on the
assumption that the assessee has been denied a reasonable
opportunity by the Assessing Officer and therefore, the order
requires to be set aside. The approach of the Tribunal is not
in accordance with law and it has not borne in mind the
distinction between the jurisdiction of the First Appellate
Authority in taxation laws as compared to other jurisdiction.
The powers of the First Appellate Authority are co-extensive
with that of the Assessing Officer. Therefore, the order of the
Tribunal cannot be sustained and accordingly, it is set aside.
JURISDICTION
31. The argument of the learned Senior Counsel
appearing for the assessee is that, it is clear from Section
200 of the Act, the order under Section 201 is to be passed
by the prescribed Income Tax Authority, which is prescribed

58
under Rule 31, which is the Director General of Income Tax
(Systems). Indeed, the said Authority has not passed the
order. The entire proceedings initiated and the orders
passed are without jurisdiction and requires to be set aside.
Therefore, the question to be answered is that who is the
Authority which is competent to pass the order under
Section 201 of the Act declaring an assessee in default. It
was pointed out, in order to find an answer to the said
question, Sections 200, 200-A and 201 have to be read
together.
32. Section 200 of the Act reads as
under:
“Duty of person deducting tax
(1) Any person deducting any sum in accordance

with the foregoing provisions of this Chapter shall
pay within the prescribed time, the sum so
deducted to the credit of the Central Government
or as the Board directs.
59
(2) Any person being an employer, referred to in

sub-section (1A) of section 192 shall pay, within
the prescribed time, the tax to the credit of the
Central Government or as the Board directs.
(3) Any person deducting any sum on or after the

1st day of April, 2005 in accordance with the
foregoing provisions of this Chapter or, as the
case may be, any person being an employer
referred to in sub-section (1A) of section 192 shall,
after paying the tax deducted to the credit of the
Central Government within the prescribed time,
prepare such statements for such period as may
be prescribed and deliver or cause to be delivered
to the prescribed income-tax authority or the
person authorised by such authority such
statement in such form and verified in such
manner and setting forth such particulars and
within such time as may be prescribed.”
33. The aforesaid provision mandates that any
person deducting any sum under Chapter 17 which deals
with deduction at source and advance payment shall be paid
within the prescribed time, the sum so deducted to the credit

60
of the Central Government. After paying the said amount,
prepare such statements for such period as may be
prescribed and deliver or cause to be delivered to the
prescribed Income Tax Authority, such statement in such
form and verify in such manner and setting forth such
particulars and within such time as may be prescribed after
such payment is made and statement is delivered.
34. Section 200-A provided for processing of
statement of tax deducted at source which reads as under:
“Processing of statements of tax deducted at

source
(1) Where a statement of tax deduction at source

has been made by a person deducting any sum
(hereafter referred to in this section as deductor)
under section 200, such statement shall be
processed in the following manner, namely:—
61
(a) the sums deductible under this Chapter shall

be computed after making the following
adjustments, namely:—
(i) any arithmetical error in the statement; or
(ii) an incorrect claim, apparent from any

information in the statement;
(b) the interest, if any, shall be computed on the

basis of the sums deductible as computed in the
statement;
(c) the sum payable by, or the amount of refund

due to, the deductor shall be determined after
adjustment of amount computed under clause (b)
against any amount paid under section 200 and
section 201, and any amount paid otherwise by
way of tax or interest;
(d) an intimation shall be prepared or generated

and sent to the deductor specifying the sum
determined to be payable by, or the amount of
refund due to, him under clause (c); and
62
(e) the amount of refund due to the deductor in

pursuance of the determination under clause (c)
shall be granted to the deductor :
Provided that no intimation under this sub-section

shall be sent after the expiry of one year from the
end of the financial year in which the statement
is filed.
(i) of an item, which is inconsistent with another

entry of the same or some other item in such
statement;
(ii) in respect of rate of deduction of tax at source,

where such rate is not in accordance with the
provisions of this Act.
(2) For the purposes of processing of statements

under sub-section (1), the Board may make a
scheme for centralised processing of statements
of tax deducted at source to expeditiously
determine the tax payable by, or the refund due
to, the deductor as required under the said sub-
section.”
63
35. Section 200A provides for a procedure for
processing such statement. Sub-section (2) of 200A provided
for the purposes of processing of statements under sub-
section (1), the Board may make a scheme for centralized
processing of statements of tax deducted at source to
expeditiously determine the tax payable by, or the refund
due to the deductor as required under the said sub-section.
Therefore, what follows is, after tax is paid, statement is
delivered on the basis of particulars furnished in the
statement and an intimation is given to the deductor,
satisfying the sum determined, payable or the amount of
refund due to him under Clause (c) and also correct the
incorrect line apparent from information in the statement
and call upon the deductor to correct the same. Once the
assessee complies with such request and pays any tax which
is a short fall and also pay interest, if not paid, the liability of
the assessee under the Act ceases to exists.

64
36. Section 201 deals with consequence of failure to
deduct or pay. It reads as under:
“Consequences of failure to deduct or pay.
(1) Where any person, including the principal

officer of a company,—
(a) who is required to deduct any sum in

accordance with the provisions of this Act; or
(b) referred to in sub-section (1A) of section 192,

being an employer,
does not deduct, or does not pay, or after so

deducting fails to pay, the whole or any part of
the tax, as required by or under this Act, then,
such person, shall, without prejudice to any other
consequences which he may incur, be deemed to
be an assessee in default in respect of such tax:
Provided that any person, including the principal

officer of a company, who fails to deduct the
whole or any part of the tax in accordance with
the provisions of this Chapter on the sum paid to
a resident or on the sum credited to the account of
65
a resident shall not be deemed to be an assessee

in default in respect of such tax if such resident—
(i) has furnished his return of income under

section 139;
(ii) has taken into account such sum for

computing income in such return of income; and
(iii) has paid the tax due on the income declared

by him in such return of income,
and the person furnishes a certificate to this

effect from an accountant in such form as may be
prescribed:
Provided further that no penalty shall be charged

under section 221 from such person, unless the
Assessing Officer is satisfied that such person,
without good and sufficient reasons, has failed to
deduct and pay such tax.
(1A) Without prejudice to the provisions of sub-

section (1), if any such person, principal officer or
company as is referred to in that sub-section does
not deduct the whole or any part of the tax or
after deducting fails to pay the tax as required by
66
or under this Act, he or it shall be liable to pay

simple interest,—
(i) at one per cent for every month or part of a

month on the amount of such tax from the date on
which such tax was deductible to the date on
which such tax is deducted; and
(ii) at one and one-half per cent for every month or

part of a month on the amount of such tax from
the date on which such tax was deducted to the
date on which such tax is actually paid,
and such interest shall be paid before furnishing

the statement in accordance with the provisions
of sub-section (3) of section 200:
Provided that in case any person, including the

principal officer of a company fails to deduct the
whole or any part of the tax in accordance with
the provisions of this Chapter on the sum paid to
a resident or on the sum credited to the account of
a resident but is not deemed to be an assessee in
default under the first proviso to sub-section (1),
the interest under clause (i) shall be payable from
the date on which such tax was deductible to the
67
date of furnishing of return of income by such

resident.
(2) Where the tax has not been paid as aforesaid

after it is deducted, the amount of the tax together
with the amount of simple interest thereon
referred to in sub-section (1A) shall be a charge
upon all the assets of the person, or the company,
as the case may be, referred to in sub-section (1).
(3) No order shall be made under sub-section (1)

deeming a person to be an assessee in default for
failure to deduct the whole or any part of the tax
from a person resident in India, at any time after
the expiry of—
(i) two years from the end of the financial year in

which the statement is filed in a case where the
statement referred to in section 200 has been
filed;
(ii) six years from the end of the financial year in

which payment is made or credit is given, in any
other case :
Provided that such order for a financial year

commencing on or before the 1st day of April,
68
2007 may be passed at any time on or before the

31st day of March, 2011.
(4) The provisions of sub-clause (ii) of sub-section

(3) of section 153 and of Explanation 1 to section
153 shall, so far as may, apply to the time limit
prescribed in sub-section (3).”
37. If an assessee who is required to deduct any
sum in accordance with the provisions of the Act does not
deduct or does not pay or after so deducting fails to pay the
whole or any part of the tax as required by or under the Act,
then such person shall be deemed to be an assessee in
default in respect of such tax.
38. Sub-section (3) of Section 201 declares no order
shall be made under Sub-section (1) deeming a person to be
an assessee in default in failing to deduct the whole or any
part of the taxes from a person resident in India at any time,
after the expiry prescribed therein. As this order declaring

69
an assessee to be in default would have serious consequence
and the statute does not exclude issue of notice before
passing such an order, principles of natural justice requires
before passing an order, the assessee should be heard.
Therefore, notice is issued to the assessee before passing
such order. This order declaring an assessee as in default,
is not an order which is contemplated under Section 200-A,
where the prescribed Authority who is processing the return
is a Director General of Income Tax (Systems). The Authority
which is competent to pass an order under Section 201(3) is
the Assessing Officer, who has the jurisdiction on the
assessee on TDS matters under the provisions of the Income
Tax Act. Though the word “Assessing Authority” is not
stipulated in Sub-section (3) or in sub-section (1) of Section
201, the proviso to Section 201 throws some light on who is
the competent authority to pass such orders. The second
proviso provides that no penalty shall be charged under
Section 201 from such person meaning the assessee in
default, unless the Assessing Officer is satisfied that such

70
person without good and sufficient reasons has failed to
deduct and pay such tax. Therefore, not only the Assessing
Officer is competent to declare an assessee in default, by
virtue of Section 221 which empowers an Assessing Officer
to impose penalty payable when tax is in default, authorizes
the Assessing Authority also to impose penalty for failure to
comply with Section 200. Therefore, if we read the aforesaid
three provisions together in a harmonious way, after
deducting and payment of tax, if the statement is filed under
Section 200-A, it is the Director General of Income Tax
(Systems) who is a competent authority to look into the said
statements and find out whether the liability under Section
200 has been complied or not. If no such deduction is made,
no such payment is made, no such statement is filed, then
under Section 201, it is the Assessing Authority who is
competent to declare him as the “assessee in default” and
levy tax, interest and penalty and take appropriate steps to
recover the said amount. Therefore in the light of the
aforesaid discussion, we are of the view that order passed

71
under Section 201 of the Act by the Assessing Authority is a
valid order and Assessing Authority is the competent person
to pass such orders. Therefore, the said question of law is
answered in favour of the revenue and against the assessee.
39. The learned Senior Counsel produced in the
course of arguments, the statements showing the intimation
under Section 200-A of the Act received by the assessee for
various periods. The orders are passed by the Deputy
Commissioner of Income Tax, Centralized Tax Deducted at
Source. They are dated 20.11.2013, 16.11.2013, 13.12.2013,
20.11.2013, 17.12.2013, 31.12.2013, 16.11.2013,
24.1.2014, 13.11.2013, 6.10.2013, 6.12.2013, 26.10.2013
and 4.2.2014. The said orders also disclose that the
statements were filed on 28.7.2012, 27.12.2012, 4.4.2013
and 19.12.2013. Some of the orders are passed under
Section 200-A of the Income Tax Act, whereas, the majority
were intimation under Section 154 of the Income Tax Act,
1961. These documents are undisputed and produced before

72
us, clearly demonstrate that those statements had not been
filed as and when required to be filed under law. If these
statements are filed after the orders are passed, it only
means the assessee has admitted the liability. In order to
avoid future consequence of nonpayment of interest and
penalty, these payments are made. Therefore, the liability is
not in dispute. Deduction of the amount is not in dispute.
Non-crediting the said amount to the Central Government
account is not in dispute. Non-filing of statement is not in
dispute. However, today, when they filed the statement, they
have complied with the requirement of law. All the payments
made as aforesaid are to be deducted out of the total amount
due to the assessee if not deducted and only for the balance
amount, the Authorities have to proceed, if any amount is
due. That exercise shall be done by the Assessing Authority
by giving effect to the orders which we have passed. In that
view of the matter, we pass the following

73
ORDER
1. All the appeals filed by the Revenue are
allowed.
2. All the appeals filed by the assessee are
dismissed.
3. However, the assessee shall produce
before the Assessing Authority all the
payments which they have made
subsequent to the order of the Assessing
Authority. They are also at liberty to
produce receipts showing payments prior to
the order passed by the Assessing
Authority, if such payment are not taken
into consideration. It is also open to the
assessee to file a statement as directed by
the Assessing Authority in the notice issued
at the first instance in the form showing the
serial number, nature of payment, amount
credited, amount of tax deducted at source

74
if any, due date for remittance, TDS
amount deducted, number of months delay,
interest amount and if amounts are made
subsequent to the assessment orders, the
particulars of the same.
4. The Assessing Authority shall take note of
all these payments and if he is convinced
about the said payments, give credit to the
said payments.
5. If such payment do not discharge the entire
amount due by the assessee, then recover
the balance in accordance with law.
6. If the assessee has not deducted the
amount and the employees have made the
payment, then that also should be taken
into consideration.
7. The assessee is to be given an opportunity
to produce all such documents showing

75
such payments within the period of four
months from today.
All the interim orders passed in these
proceedings shall stand discharged.
Sd/-
JUDGE
Sd/-
JUDGE
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IN THE HIGH COURT OF KARNATAKA, BANGALORE

Dated this the 15th day of July, 2014

THE HON'BLE Mr. JUSTICE N.KUMAR

THE HON'BLE Mr. JUSTICE B. MANOHAR

In ITA NO.165 OF 2012:

1. THE COMMISSIONER OF INCOME-TAX

2. THE ASSISTANT COMMISSIONER

(By Sri K V ARAVIND, ADV.,)

M/s. KINGFISHER AIRLINES LTD.,

(By Smt. S R ANURADHA, ADV.,)

THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,

In ITA NO.164 OF 2012:

1. THE COMMISSIONER OF INCOME-TAX

2. THE ASSISTANT COMMISSIONER OF INCOME-TAX

(By Sri K V ARAVIND, ADV.,)

M/s. KINGFISHER AIRLINES LTD.,

(By Smt. S R ANURADHA, ADV.,)

THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,

In ITA NO.166 OF 2012:

1. THE COMMISSIONER OF INCOME-TAX

2. THE ASSISTANT COMMISSIONER OF INCOME-TAX

(By Sri K V ARAVIND, ADV.,)

M/s. KINGFISHER AIRLINES LTD.,

(By Smt. S R ANURADHA, ADV.,)

THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,

In ITA NO.239 OF 2012:

M/s. KINGFISHER AIRLINES LTD.,

1. THE COMMISSIONER OF INCOME-TAX (TDS)

BELLARY ROAD, GANGANAGAR

2. THE ASSISTANT COMMISSIONER OF INCOME-TAX

(By Sri K V ARAVIND, ADV.,)

THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,

In ITA NO.240 OF 2012:

M/s. KINGFISHER AIRLINES LTD.,

(By Smt. S R ANURADHA, ADV.,)

1. THE COMMISSIONER OF INCOME-TAX (TDS)

2. THE ASSISTANT COMMISSIONER OF INCOME-TAX

(By Sri K V ARAVIND, ADV.,)

THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,

In ITA NO.241 OF 2012:

M/s. KINGFISHER AIRLINES LTD.,

(By Smt. S R ANURADHA, ADV.,)

1. THE COMMISSIONER OF INCOME-TAX (TDS)

2. THE ASSISTANT COMMISSIONER OF INCOME-TAX

(By Sri K V ARAVIND, ADV.,)

THIS ITA FILED UNDER SEC.260-A OF I.T. ACT,

THESE ITAs COMING ON FOR FINAL HEARING, THIS

As all these appeals relate to the same assessee but for

the different assessment years and a common order is

passed by the Tribunal, all these appeals are taken up for

consideration together and disposed of by this common

2. The Assessee Company-M/s. Kingfisher Airlines

Limited is engaged in the business and operating as a

schedule passenger airline in India. A survey under Section

133A was conducted in the assessee’s premises on

18.3.2011, in order to verify TDS compliance. The survey

revealed that the assessee was not remitting the taxes

deducted by it at source to Government account within the

due dates as prescribed in the Income Tax Act, 1961 (for