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Income Tax Appellate Tribunal, ‘C’ BENCH, KOLKATA
Before: Shri Rajpal Yadav, Vice- & Shri Rajesh Kumar
Per Shri Rajpal Yadav, Vice-President (KZ):- The present three appeals are directed at the instance of assessee against the separate orders of ld. Commissioner of Income Tax (Appeals), National Faceless 1 , 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited Appeal Centre (NFAC), Delhi passed on 24th November, 22 in A.Ys. 2016-17, 2017-18 & 2018-19.
The assessee has raised common grounds of appeals in all these years. The only variation between the grounds of appeals raised by the assesese is the difference in the quantum pleaded in the grounds. It has raised five grounds of appeal in each year and in brief its grievance is that the assessee ought to have not been treated as an assessee in default under section 201 of the Income Tax Act.
The facts on all vital points are common therefore, for the facility of reference, we are taking up the facts from A.Y. 2016-17.
Brief facts of the case are that the assessee is a Cooperative Society engaged in the Banking business. A survey under section 133A(2A) of the Income Tax Act was carried out in the Office premises of the assessee on 12.10.2017 for verification of TDS that was required to be deducted as per the provisions of Chapter XVIIB of the Income Tax Act. According to the ld. Assessing Officer, the assessee was required to deduct TDS on the payment of interest by the assessee to its customers. The ld. Assessing Officer further observed that the deductor had paid an amount of interest in excess of Rs.10,000/- to 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited the tune of Rs.16,13,44,802/- on deposits made by the customers on which TDS was applicable but the deductor-assessee has failed to deduct the TDS. Accordingly, he issued a show-cause notice and assessee gave its explanation.
In A.Y. 2017-18, the ld. Assessing Officer has observed that assessee-Bank has paid the interest of Rs.16,70,81,472/- on which it was required to deduct TDS while making payment of interest to the customers.
In A.Y. 2018-19, the assessee has made the payment of interest to the tune of Rs.12,32,38,118/- on deposits made by the customers on which TDS was applicable, but the assessee has failed to make the TDS.
The common stand of the assessee qua the show- cause notice of the A.O. was that out of the total amount pointed out by the ld. Assessing Officer, a major portion was of that sum ,on which TDS provision was not applicable. The cases where TDS provisions were applicable the assessee has obtained Forms No. 15G & 15H from the customers and thereafter did not deduct the TDS. The assessee has submitted all these details to the ld. Assessing Officer but the ld. Assessing Officer has rejected this contention of the assessee for two reasons:- , 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited (a) The assessee failed to upload these Forms to the Web Portal of the Income Tax Department as provided under Rule 29C and 31ACB.
(b) It was supposed to submit the complete details of such Forms to the Portal of the Income Tax Authorities, which assessee failed to submit.
Accordingly, ld. Assessing Officer has held the assessee in default and worked out a tax liability upon the assessee in A.Y. 2016-17 at Rs.1,61,34,480/-. The ld. Assessing Officer thereafter levied interest under section 201(1A) of the Income Tax Act and worked out the total amount payable by the assessee at Rs.1,47,08,586/-. Similar exercise has been made in other years whereby demand of Rs.1,34,57,256/- was raised in A.Y. 2017-18 and Rs.65,04,919/- in A.Y. 2018-19.
Dissatisfied with the orders passed under section 201(1)/201(1A) of the Income Tax Act, the assessee carried the matter in appeal before the ld. 1st Appellate Authority. The ld. CIT(Appeals) has decided all these appeals simultaneously though by separate order but by recording verbatim the same finding. The finding recorded by the ld. CIT(Appeals) in A.Y.16-17 reads as under:-
, 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited “Decision : Ground no.1:- The first ground of the appellant is related to treat the assessee in default for failure to deduct tax or pay. The appellant claimed that it could not have been treated assessee in default u/s 201 of the I.T Act because it had received form no. 15G in respect of the payment of interest to the tune of Rs.4,62,15,627/- and on balance payment under interest subject to TDS under the provision of the I.T Act where declared the income in their return by the deductees which could have been verified by the AO from the assessment records of the deductees. 5.1. It can be seen from the records that the survey operation u/s 133(A)(2A) was conducted in the business premise and found that the appellant had paid interest to different entities on which TDS was not done. The assessing officer considered and accept the reply of the appellant to determine the actual amount of interest paid to the depositors on which TDS was not made. The total amount of interest came to the tune of Rs. 16,13,44,802/-. Therefore, it is not disputed fact that the appellant has not deducted tax on source on interest payment to the tune of Rs. 16,13,44,802/-. 5.2. Now, there are two grounds on which the appellant seek relief from treating assessee in default u/s 201 of the I.T Act. The first one is related to obtain Form no. 15G from the deductees. Thus, the question arises that mere obtaining 15G form from the dedutees can absolve the deductor to be treated as “assessee in default”. 5.3. The Income Tax Act provides no deduction to be made in certain cases u/s 197A which is as under: (1) Notwithstanding anything contained in section 194 or section 194EE, no deduction of tax shall be made under any of the said sections in the case of an individual, who is resident in India, if such individual furnishes to the person responsible for paying any income of the nature referred to in section 194 or, as the case may be, section 194EE, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil. , 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited (IA) Notwithstanding anything contained in section 192A or section 193 or section 194Aor section 194D or section 194DA or section 194-1 or section 194K, no deduction of tax shall be made under any of the said sections in the case of a person (not being a company or a firm), if such person furnishes to the person responsible for paying any income of the nature referred to in section 192A or section 193 or section 194A or section 194D or section 194DA or section 194-1 or section 194K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil. (IB) The provisions of this section shall not apply where the amount of any income of the nature referred to in sub-section (1) or sub-section (1A), as the case may be, or the aggregate of the amounts of such incomes credited or paid or likely to be credited or paid during the previous year in which such income is to be included exceeds the maximum amount which is not chargeable to income-tax. (IC) Notwithstanding anything contained in section 192A or section 193 or section 194 or section 194A or section 194D or section 194DA or section 194EE or section 194-1 or section 194K or sub-section (1B) of this section, no deduction of tax shall be made in the case of an individual resident in India, who is of the age of sixty years or more at any time during the previous year, if such individual furnishes to the person responsible for paying any income of the nature referred to in section 192A or section 193 or section 194 or section 194A or section 194D or section 194DA or section 194EE or section 194-1 or section 194K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil. (ID) Notwithstanding anything contained in this section, no deduction of tax shall be made by the Offshore Banking Unit from the interest paid— , 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited (a) on deposit made on or after the 1st day of April, 2005, by a non-resident or a person not ordinarily resident in India; or (b) on borrowing, on or after the 1st day of April, 2005, from a non-resident or a person not ordinarily resident in India. Explanation.—For the purposes of this sub-section "Offshore Banking Unit" shall have the same meaning as assigned to it in clause (u) of section 2 of the Special Economic Zones Act, 2005. (1E) Notwithstanding anything contained in this Chapter, no deduction of tax shall be made from any payment to any person for, or on behalf of, the New Pension System Trust referred to in clause (44) of section 10. (1F) Notwithstanding anything contained in this Chapter, no deduction of tax shall be made, or deduction of tax shall be made at such lower rate, from such payment to such person or class of persons, including institution, association or body or class of institutions, associations or bodies, as may be notified by the Central Government in the Official Gazette, in this behalf.] (2) The person responsible for paying any income of the nature referred to in sub-section (1) or sub- section (1A) or sub-section (1C) shall deliver or cause to be delivered to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner one copy of the declaration referred to in sub-section (1) or sub- section (1A) or sub-section (1C) on or before the seventh day of the month next following the month in which the declaration is furnished to him. 5.4. It is evident from the above that no deduction of tax shall be made in case of an individual, if such individual furnishes to the person responsible for paying any income of the nature of interest u/s 194A in the case a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing in his total income will be nil and , 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited the prescribed form and prescribed manner is provided in rule 29C of I.T Rule 1962. The Rule 29C is as under: (1) A declaration under sub-section (1) or under sub-section (1A) of section 197A shall be in Form No.15G and declaration under sub-section (1C) of section 197A shall be in Form No. 15H. (2) The declaration referred to in sub-rule (1) may be furnished in any of the following manners, namely:— (a) in paper form; (b) electronically after duly verifying through an electronic process in accordance with the procedures, formats and standards specified under sub-rule (7). (3) The person responsible for paying any income of the nature referred to in sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A, shall allot a unique identification number to each declaration received by him in Form No. 15G and Form No.15H respectively during every quarter of the financial year in accordance with the procedures, formats and standards specified by the Principal Director-General of Income-tax (Systems) under sub-rule (7). (4) The person referred to in sub-rule (3) shall furnish the particulars of declaration received by him during any quarter of the financial year along with the unique identification number allotted by him under sub-rule (3) in the statement of deduction of tax of the said quarter in accordance with the provisions of clause (vii) of sub-rule (4) of rule 31A "
5.5. It is clear from Rule 29C(3) that the person responsible for paying any income i.e the appellant in this case had to mandatorily allot a unique identification number to each declaration received during every quarter of the financial year. Further, the appellant had to furnished particulars of the declaration in quarterly statements to the Director General of Income Tax (systems) or the person authorized by the Director General of Income Tax (systems) under Rule 31 A. The application of provision must be applied wholly and in totality. The appellant is not entitled to get relief if he partly fulfilled the requirements under the provision by only collecting form no.15G. 8 , 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited
5.6. The second is related to verification of return of the deductee by the AO as it was claimed by the appellant that all deductee had declared the interest income in their return and paid taxes. The claim of the assessee is based on a proviso mentioned u/s 201(1) of the I. T Act. The same proviso is reproduced as under: (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 payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee— (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.... ”
5.7. It is imperative to mention that the contention of the appellant can be accepted if the appellant would have fulfilled the essential condition of furnishing a certificate to this effect in Form no. 26A under rule 31ACB of the I. T Rule 1962. It is to consider that liability to deduct TDS always come first on deductor whereas declaring income in return by the deductee is subsequently done. Thus, it seems that to streamline 9 , 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited effective and smooth functioning on TDS front the legislature intended to specify provision for furnishing certificate by the deductor. The appellant has relied on case laws in support of its grounds. These are distinguishable and related to earlier years from the impugned Financial Year involved in this case. The proviso of section 201(1) came with effect from 01.07.2012. 5.8. In the view of the above facts, the AO has correctly treated him as “assessee in default” u/s 201 of the Income Tax Act. The ground no. 1 is dismissed. The second ground is dismissed in view of the dismissal of the ground no.1. 5.9. Ground no.3:- The ground no.3 is related to raise demand and interest u/s 201(1 A) of the Income Tax Act. As the assessee is treated “assessee in default” u/s 201 of the I.T. Act the demand and the interest u/s 201(1 A) is consequential and mandatory. The ground no. 3 is also dismissed. 5.10. Ground no.4:- The ground no. 4 is relates calculating the interest for default period and credit of TDS already paid. Interest levy u/s 201(1 A) is mandatory and to be calculated in following manner:-
(1) Interest for failure to deduct tax at source/delay in payment of TDS As per section 201, if any person who is liable to deduct tax at source does not deduct it or after so deducting fails to pay, the whole or any part of the tax to the credit of the Government, then, such person, shall be liable to pay simple interest as given below: Interest shall be levied at 1% 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 was deducted. Interest shall be levied at 1.5% 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 was actually remitted to the credit of the Government.
Further, subject to the fulfillment of conditions mentioned in proviso of section 201(1) of the I. T Act, interest shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such payee.
, 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited Interest in such a case will be levied at 1% for every month or part of the month. 5.11. In the view of the above provision, the AO is directed to verify and calculate default period for levy of interest u/s 201(1 A) of the I. T. Act, 1961. In the assessment order, it is noted that the appellant has deposited a sum of Rs.69,11,617/-. Thus, the AO is directed to verify the claim of TDS already paid by the deductor assessee and allow the credit of the same, if not given in the 201(1) and 201(1 A) order. The ground no. 4 is allowed. 5.12. Others two grounds nos. 5 and 6 are in general in nature and therefore no adjudication required. The appeal of the assessee is partly allowed”.
9. Before us, ld. Counsel for the assessee contended that factum of availability of Form 15G and 15H with the assessee are not denied by the ld. Assessing Officer. It has submitted those Forms before the ld. Assessing Officer, but instead of getting them verified completely, the ld. Assessing Officer has observed that the assessee ought to have uploaded these forms, only then their cognizance would be taken up. He relied upon the order of this Tribunal passed in & 460/KOL/2022, wherein the Tribunal has considered an identical aspect.
10. On the other hand, ld. D.R. submitted that the ld. Assessing Officer has specifically pointed out that assessee has not submitted complete documentary evidence showing party-wise interest payment and the corresponding 15G/15H Forms for verification. Thus a 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited specific finding of fact has been recorded by the ld. Assessing Officer, which the assessee unable to rebut.
We have duly considered the rival contentions and gone through the record carefully. A similar issue fallen for our consideration in & 460/KOL/2022, wherein Tribunal has recorded the following finding:- “7. We have heard rival contentions and perused the material placed on record before us. Common issue in dispute before us raised by the assessee is that the ld. CIT(A) erred in confirming the action of the ld. AO in treating the assessee in default for non-deduction of tax at source on interest paid on deposit to persons other than co- operative societies and also levying interest thereon. The assessee is a co-operative bank and received deposits from various persons in the form of fixed deposits and other deposits on which interest is paid. The dispute before us pertains to assessment year 2016-17 and 2017-18 for which the demand for non-deduction of tax and interest has been levied. The crux of the arguments of the ld. Counsel for the assessee is that the assessee bank regularly deducts tax at source on the deposits which are above the permissible limits u/s 194A of the Act. But in those cases for which Form 15G & 15H are received form the depositors tax at source is not deducted. The assessee bank regularly receives Form 15G & 15H and submits the same to the jurisdictional officer in charge of TDS. For the year under appeal there was a change in systems and the assessee was required to upload all the Forms 15G & 15H on the Income Tax portal, copy of which are placed at page 64 of the paper book. But thereafter, due to technical problem, the attachments uploaded, could not be opened. The assesse bank was unable to upload it again even though it had physical copies of Form 15G & 15H, which contains details of the investors, the amount of sum given on deposit, the date of investment and period of such investments and most important in the declaration given by the depositors of not having taxable income. Copies of these Forms 15G & 15H were placed before the ld. CIT(A) also but he ignored the physical copies and pressed upon online filing of the same.
ITA Nos. 702, 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited 8. It is an admitted fact that the assessee has procured the Form 15G & 15H, from all those depositors who have stated on the Form that tax should not be deducted on the interest paid/credited to them as their income is below taxable limit. Such forms are filed as per provisions of Income Tax Act and Income Tax Rules. Once such declaration is received by the bank, then, it is not required to deduct tax at source and in case any inconsistency is found in the declaration given by such depositors, then the remedy is available under the Act with the concerned officer to take action against such declarants.
So far as the assessee is concerned, he has acted within the four corners of law and did not deduct tax on such interest for which the depositors have filed Form 15G & 15H. Though the assessee is required to uphold the same in a proper format, but it failed to do so due to some technical defect but since the physical copies are available, revenue authorities should not have treated the assessee in default. Under similar set of facts, the Co-ordinate Bench of ITAT Delhi in the case of Allahabad Bank vs ITO in & 6096/Del/2016; order dt. 30/03/2021, decided in favour of the assessee as follows:-
“8. We have heard both the parties and perused the material available on record. The assessee bank has not deducted TDS in respect of customers who have provided Form No. 15G and 15H of the Act under the statute as provided by the Income Tax Act. The customers who have provided Form No. 15G/15H has specifically requests through these forms that TDS should not be deducted on their FDs/respective withdrawals. The prime responsibility relating to TDS deduction u/s 201 is of the recipient assessee to pay the tax directly once they filed From No. 15G/15H and any tax liability will be held as pending in recipient assessee's cases and hence Section 201 of the Act cannot be invoked as it is a recovery provision as submitted by the Ld. AR. The decisions given by the Ld. AR also reiterates similar facts. Besides this, in Assessment Years 2002-03 to 2004-05, in the case of the assessee itself in the same branch, the Delhi ITAT in to 5994/Del/2012 dated 4th March 2016, after following the judgment of the Jurisdictional 13 ITA Nos. 702, 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited Allahabad High Court in the case of the assessee itself, has quashed the proceedings u/s 201 of the Act on the similar lines. Further, for Assessment Year 2014-15 and 2015-16 also the issue is identical and no distinguishing feature was pointed out by Ld. DR at the time of hearing. Since, both the assessment years i.e. A.Y. 2014- 15 and 2015-16 are identical, therefore, we are allowing both the appeals.
Similar view was also taken by the Co-ordinate Bench of ITAT Bangalore in the case of The Karur Vysya Bank Ltd. Vs. ACIT in order dt. 09/08/2017. Therefore, respectfully following the decisions referred hereinabove and considering the fact that the assessee has not deducted tax at source u/s 194A of the Act after receiving the physical copies of Form 15G & 15H, it should not be considered as an assessee in default. Therefore, we delete the demand raised by the ld. AO for nondeduction of tax at source u/s 194A of the Act as well as interest levied thereon for AY 2016-17 and 2017-18 for non-submission of Form 15G & 15H, and allow the grounds raised
by the assessee.
11. In the result, both the appeals of the assessee are allowed”.
On due consideration of the impugned orders of ld. CIT(Appeals) would reveal that it failed to record specific finding on the explanation of the assessee. The stand of the assessee from the very beginning was that out of the total interest payment worked out by the ld. Assessing Officer to the tune of Rs.16,13,44,802/-, interest amounting to Rs.4,07,56,170/-, it has obtained Forms 15G and 15H. To that extent, after verification, this amount ought to be reduced from the total amount computed by the Revenue. This factum has not been factually verified either by the ld. Assessing Officer or by the ld. CIT(Appeals). The finding of both the authorities 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited is general in nature qua this aspect. The ld. Assessing Officer has observed that the assessee has not submitted complete documentary evidence showing party-wise interest payment and the corresponding 15G/15H for verification. It is pertinent to note that the assessee must be maintaining accounts of its customers to whom interest was paid. Even if somebody has made Fixed Deposits, then also, it must be having complete details of the person, who has made the Fixed Deposits. The identity of those individuals could be matched with Form Nos. 15G & 15H along with payment details. Therefore by making a sweeping observation in a negative manner would not be sufficed to hold that information was not submitted by the assessee. The ld. Assessing Officer was required to specifically make reference to those details.
It is pertinent to observe that the assessee has filed paper books in each year running into 47, 48 and 26 pages in A.Ys. 2016-17, 2017-18 and 2018-19 whereby it has tabulated the name of the person, to whom interest was paid, PAN, status and other details. Therefore, it is also pertinent to note that it is a District Central Cooperative Bank, who has maintained the details properly. Therefore, we are of the view that the impugned orders are not sustainable because the authorities below have failed to record specific finding of fact based on the documents submitted by the assessee in the Form 15G 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited and 15H. It is also observed that both the authorities have failed to comprehend that if the Forms 15G and 15H are partly submitted, then also the assessee will not be entitled for exclusion of that amount from the gross interest payment for which it can be held as the assessee in default. If this logic of the Revenue is accepted, then if one Form is not submitted then the assessee could be considered as an assessee in default for the whole interest payment, which was paid after collecting these forms properly. In other words, if the assessee is able to submit the details with respect to part of the amount paid without deducting the tax, then those details are to be considered by the Revenue before treating the assesese in default. For example in A.Y. 2016-17, the stand of the assessee is that it has submitted forms to the extent of Rs.4,07,56,170/- out of the total payment. This aspect ought to have been specifically dealt and a finding should have been recorded as to why this amount should also be considered for levying the TDS @ 10% alongwith interest. The persons who have received the interest payment from the assessee might not be a taxable assessee. In view of the above, we allow all these appeals and set aside the impugned orders. We restore this issue to the file of ld. Assessing Officer for fresh adjudication after providing due opportunity of hearing to the assessee. , 703 & 704/KOL/2022 Assessment Years : 2016-2017 to 2018-2019 M/s. Hooghly District Central Cooperative Bank Limited 14. In the result, all the appeals of the assessee are allowed for statistical purposes. Order pronounced in the open Court on July 05, 2023.