INCOME TAX OFFICER, MUMBAI vs. SYNDICATE BANK (MERGED WITH CARANA BANK), MUMBAI

आदेश / ORDER

PER: NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER: This appeal has been preferred by the Assessee against the order dated 23.12.2025, impugned herein, passed by the National Faceless Appeal Centre(NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2014-15.

“1. The appeal was instituted vide appeal no. NFAC/2012-13/10193669 on 26/08/2022 against the order dated 29.07.2022 passed under section 271C of the Income-tax Act by the Addl. Commissioner of Income Tax (TDS) Range -1(1), Mumbai for the assessment year 2014-15. 2. …………………………………………………………………………………………………… 3.……………………………………………………………………………………………….…… 4.…………………………………………………………………………………………….……… 5. Decision: 5.1 I have carefully considered the grounds of appeal, assessment order and material available on record. 5.2 The assessee has contested the grounds of appeal at Sr. No. 1 to 3 stating that the learned Addl Commissioner erred in levying the penalty of Rs. 24,08,594 u/s 271C of the Income-tax Act, 1961. It is submitted that the learned Addl Commissioner failed to appreciate the fact that no tax needs to be deducted in this case and that the order of the learned Addl Commissioner is based on surmises & conjunctures. It is also submitted that the learned Addl Commissioner erred in levying penalty without appreciating the fact that as per section 273B, if there is any reasonable cause, no penalty can be levied. It is further contested that the learned Addl Commissioner erred in levying penalty without appreciating the fact that there was a reasonable cause for the Appellant bank in not deducting the TDS. For the above-mentioned grounds or any other grounds that may be pressed at the time of hearing, the Appellant prays that its appeal be allowed. 5.3 It is found that during the penalty proceeding, the assessee has not deducted by the banks on the interest payment on fixed deposits made to Slum Rehabilitation Authority (SRA), Mumbai. A Spot verification u/s. 133B of the Income Tax Act, 1961 was carried out on 26.03.2019 at the business premises of M/s Canara Bank (Earlier known as M/s. Syndicate Bank). The assessee company is in the business of Bank. During spot verification it was found that the assessee company has not deducted TDS u/s 194A on interest. payment to Slum Rehabilitation Authority (SRA), Maharashtra Housing and Area Development Authority (MADA) and Mumbai Metropolitan Region Development Authority (MMRDA). Consequent to which proceeding u/s. 201/201(1A) of the Act, was initiated by the AO. Therefore, the AO has passed order u/s 201(1)/201(1A) of the Act was passed on 30.03.2021 with total default being worked out as under, after which the same was intimated to initiate penalty proceedings u/s 271C of the Act. 5.4 During the penalty proceedings, a show Cause notices u/s. 271C, dated 06.07.2022 and 18.07.2022 issued to the assessee. In response the assessee has submitted its submission and stated that the assessee has filed appeal before the Ld. CIT(A) against the order u/s. 201(1)/201(1A). After perusal of the submission of the assessee, the Addl. CIT came to conclusion that the assessee did not submit form 35 to substantiate its claim. Therefore, penalty order u/s. 271C has been passed on 29.07.2022 and levied penalty at Rs. 84,49,254/- . 5.5 Further, during the course of appellate proceedings, it is found that the assessee has contested order under section 201 dated 30.03.2021 passed by the ITO (TDS) WARD 2(2)(1), Mumbai (hereinafter referred to as “the AO”) (hereinafter referred to as “the Act”) for the A.Y. 2014-15 vide the appeal No. NFAC/2012- 13/10193668. The CIT(A) vide order dated 15/04/2025 DIN & Order No : ITBA/APL/S/250/2025-26/1075617987(1) dismissed the appal of the assessee as under —

“6. 6.1. DECISION: The facts and circumstances of the case, the observations of the AO and material available on record on the above matter have been considered. A perusal of the appellate proceedings shows that appellant have not made any submissions to prove that the conclusion reached by the AO was untrue. Further, the fact remained that the assessee had failed to furnish any document/evidence in support of the various grounds of appeal raised; and that therefore, the explanation submitted by the assessee in support of the grounds of appeal remained unsubstantiated. It remained inexplicable as to what had prevented the assessee not to produce documents even during the course of appellate proceedings. As mentioned in above paragraph of this appeal order, this office has issued several letters to file written submission. However, neither any adjournment was sought for nor any written submissions were filed. The details of letters were issued through ITBA System at the e-mail ID provided in ITBA System, are as under: XXXXX From the above conduct of the appellant, it is evident that the appellant is no more interested in pursuing the appeal. The Hon'ble Supreme Court in the case of CIT Vs B.N. Bhattachariee and others [1979] 10 CTR 354 (SC) observed that preferring an appeal, means effectively pursuing it. The Hon'ble M.P. High Court in the case of Estate of Late Tukojirao HolkarVs CWT [1979] 223 ITR 480 (M.P.) dismissed the reference filed at the instance of the assessee for default and for not taking necessary steps. Considering the conduct of the appellant in the present circumstance, | am of the view that the appellant is not interested in pursuing the appeal. This view has been affirmed by Hon'ble ITAT Ahmedabad in case of Amitkumar H. Shah Vs. ACIT in ITA No. 2985/Ahd/2010 vide their order dated 31.12.2013, wherein following the order of ITAT Delhi Bench in the case of CIT Vs Multiplan India Pvt. Ltd., [1991] 38 ITD 320 (Del), ITAT has dismissed the appeal filed by the assessee for want of persuasion. Under these circumstances, the current appeal of the appellant is liable to be dismissed.

As a result, the appeal stands Dismissed.”

5.6 Further, during the course of appellate proceedings, the assessee has relied upon NOTIFICATION S.O. 3489 [NO. 170 (F.NO. 12/164/68-ITCC/ITJ).], DATED 22- 10-1970 which interalia states as under —

“In pursuance of sub-clause (f) of clause (iii) of sub-section (3) of section 194A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notify the following for the purposes of the said sub-clause: 1. any corporation established by a Central, State or Provincial Act; 2. any company in which all the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a Corporation owned by that Bank; and 3. any undertaking or body, including a society registered under the Societies Registration Act, 1860 (21 of 1860), financed wholly by the Government”. 5.7 Further, the assessee has submitted that it falls within the meaning of ‘any corporation established by a Central, State or Provincial Act”, therefore, the assessee was not require to deduct TDS on payments made to Slum Rehabilitation Authority (SRA) by virtue of above mentioned notification. 6 Further, the assessee has also submitted a letter from the SRA stating that the SRA was covered by above mentioned notification and on by the provincial act of the state government viz. Maharashtra Slum Areas (Improvement, Clearance And Redevelopment) Act, 1971 (Maharashtra Act No. XXVIII Of 1971). The assessee has also furnished photocopy of such act for perusal and consideration. 6.1 The assessee has placed reliance upon the decision of Hon’ble Supreme Court in the case of CIT Vs Canara Bank [2018] 95 taxmann.com 81 (SC) wherein the Hon’ble Supreme Court has held that if a Corporation is established by the State Act, there is no need to deduct TDS on the payment of interest made by the bank to such Corporation. 7 I have considered facts and circumstances of the case, some of the assessee and material available on record, it is not disputed that the assessee has made payment to the SRA on which no deduction of TDS was made. The assessee has stated that the requirement of deduct TDS on such payment was waved of by virtue of the notification issued by the CBDT vide NOTIFICATION S.O. 3489 [NO. 170 (F.NO. 12/164/68-ITCC/ITJ).], DATED 22-10-1970 read with the Maharashtra Slum Areas (Improvement, Clearance And Redevelopment) Act, 1971 (Maharashtra Act No. XXVIII Of 1971) by which the payee, SRA was established by the State Government of Maharashtra. 7.1 It may be appreciated that the Hon’ble Supreme Court has discussed the applicability of provisions of section 194A and the NOTIFICATION S.O. 3489 [NO. 170 (F.NO. 12/164/68-ITCC/ITJ).], DATED 22-10-1970 in respect of payments made by the M/s Canara Bank to The New Okhla Industrial Development Authority (NOIDA), hereinafter referred to as "Authority" has been constituted by Notification dated 17.04.1976 issued under Section 3 of the Uttar Pradesh Industrial Area Development Act, 1976 in the case of CIT Vs Canara Bank [2018] 95 taxmann.com 81 (SC) as under — “………………………………………………………………………………………………… …………………………………………………………………………………………………… …………………………………………………………………………………………………… ……………………………………………………”

7.2 Further, the Hon’ble Supreme Court has analysed the of the NOIDA and came to conclusion that the assessee Canara Bank is not liable to deduct TDS on interest payment made to NOIDA within the meaning of provisions of section 7.3 It may be appreciated that in the impugned case, the only dispute arising with respect to the penalty under section 271C is in thick of the matter. It may be appreciated that the assessee has submitted that the SRA has given in writing to the assessee that it was covered by the definition of Corporation established by State Government within the meaning of notification S.O. 3489 [NO. 170 (F.NO. 12/164/68-ITCC/ITJ).], DATED 22-10-1970 read with the Maharashtra Slum Areas (Improvement, Clearance And Redevelopment) Act, 1971 (Maharashtra Act No. XXVIII Of 1971). 7.4 Therefore, considering the facts and circumstances of the case, it may be appreciated that the issue with respect to the the action of tedious on payments made by the assessee to that of SRA are debatable and covered by the reasonable cause within the meaning of provisions of section 273B. 7.5 Therefore, considering the facts and circumstances of the case, submission of the assessee and material available on record, notification issued by the CBDT and respectfully following the decision of Hon’ble Supreme Court in the case of Canara Bank (supra) grounds of appeal contested by the assessee at serial No. 1, 2 and 3 are allowed. 8 In result, the appeal of the assessee is allowed.”

“19. Thus, on the aforesaid analyzations, we reiterate that Section 194A imposes an obligation on persons, such as the Assessee to deduct tax at source, while making interest payment, however as per section 194A(3) (iii) (f) of the Act, the Central Government is empowered to notify payments made to a specified class institution(s) for exemption from this requirement. A notification dated 22nd October, 1970 issued by Central Government, exempting payments made to "any corporation established by a Central, State or Provincial Act" from the requirement of tax deduction at source. And the Corporation established by State Act is eligible for exemption from TDS provided u/s 194A(3)(iii) (f), as per judgement in CIT (TDS) and Anr V. Canara Bank (2018) 406 ITR 161 (SC) by the Hon'ble Apex Court. Since SRA/MMRDA/MHADA have been established under the Maharashtra State Acts, thus we are in agreement with the claim of the assessee that the assessee was not supposed to deduct any TDS on the payment of interest on the fixed deposits made with the assessee's bank, by SRA and MHADA and MMRDA and consequently, no liability was/is existing and/or payable under Section 201 (1) /201 (1a) of the Act. Consequently, the liability determined by the Assessment Order dated 30.03.2021, as affirmed by the Id. Commissioner vide order dated 15.04.2025, stands deleted and the appeal under consideration is allowed.”

Order pronounced in the open court on 23.06.2026.

Sd/- Sd/- JAGADISH NARENDER KUMAR CHOUDHRY ACCOUNTANT MEMBER JUDICIAL MEMBER (Tarun Kushwaha) Sr. Private Secretary

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order

Dy/Asstt. Registrar, ITAT, Mumbai.