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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
Per Bench These appeals by the assesses are directed against the common orders of CIT(Appeals), Hubli dated 05/05/2017 for the Assessment Years 2008-09 to 2011-12.
Common grounds of Appeals has been raised in all these Appeals. For the sake of brevity, we reproduce grounds in ITA no. 1526/Bang/2017 below:-
“1. The impugned order of the Commissioner of Income Tax (Appeals), Hubli passed under section 250 read with section 254 of the of the Income Tax Act, 1961 is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case.
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The learned Commissioner (Appeals) erred in law in holding that the appellant is to be treated as assessee deemed to be in default in respect of interest paid without TDS by the 118 branches of the appellant bank on the facts and circumstances of the case. 3. The learned Commissioner (Appeals) failed to appreciate that the head office of the appellant cannot be held to be assessee in default in respect of the 118 branches which are separate entities for the purposes of tax deduction at source on the facts and circumstances of the case. 4. The learned Commissioner (Appeals) failed to take note the fact that the show-cause notice was issued to the appellant in the name of the head office of the appellant only and therefore the assessing officer could only pass an order in respect of the head office of the appellant u/s 201(1) and 201(1A) on the facts and circumstances of the case. 5. The learned Commissioner (Appeals) erred in holding that the 118 branches of the appellant are to be treated as assessee deemed to be in default when there was no show-cause notice issued to these branches and hence order u/s 201(1) and 201(1A) could not have been passed by the assessing officer on such branches in respect of which there were no proceedings were initiated on the facts and circumstances of the case. 6. The learned Commissioner (Appeals) ought to have appreciated that an order u/s 201(1) and 201(1A) of the Act can be passed on the 118 branches only upon proceedings initiated on them individually and there being no such pending proceedings and further fresh proceedings being barred by limitation these branches cannot be held to assessees deemed to be in default on the facts and circumstance of the case. 7. The learned Commissioner (Appeals) failed to appreciate that this Hon'ble Tribunal has set aside the earlier order of the Commissioner (Appeals) and to verify and adjudicate the issue of jurisdiction and validity of order passed by the assessing officer and therefore all aspects of jurisdiction including the proper initiation of the proceedings u/s 201(1) and 201(1A) of the Act ought to have been considered appropriately by the learned
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Commissioner (Appeals) on the facts and circumstances of the case. 8. The Commissioner (Appeals) erred in law in holding against the appellant on the ground raised that there was no obligation to deduct tax at source on payment of interest to persons who have paid taxes thereon on the facts and circumstances of the case. 9. The Commissioner (Appeals) failed to consider that the predecessor of the Commissioner (Appeals) has already in the earlier order dated 09.01.2013 directed the assessing officer to duly consider the claim of the assessee that the payees have paid taxes on interest income and therefore reversal of this direction by implication was not called for on the facts and circumstances of the case. 10. The Commissioner (Appeals) is not justified in law in holding that the order passed u/s 201(1) is not barred by limitation on the facts and circumstances of the case. 11. The Commissioner (Appeals) erred in holding that the appellant has not filed statement u/s 200 when admittedly and also as noted by the Commissioner (Appeals) himself, the appellant has filed the statement u/s 200 and hence the order passed is barred by limitation on the facts and circumstances of the case. 12. The Commissioner (Appeals) is not justified in upholding the order passed u/s 201(1) and 201(1A) based on single common show-cause notice issued for the four assessment years on the facts and circumstances of the case. 13. The Commissioner (Appeals) ought to have appreciated that it is a well settled position of law that each assessment year is distinct and different under the income tax jurisprudence and any proceeding initiated has to be separate for each of the assessment years and consequently the order passed there under is liable to be quashed on the facts and circumstances of the case.
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The appellant craves for leave of this Hon'ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing. 15. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.”
Originally the Assessee came in Appeal before the Tribunal. The Tribunal vide order dated 25/05/2016 remitted the issue to the file of CIT(Appeals) with the following observations:-
“8. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee is engaged business of banking with its head office situated at Dharwad. It also not disputed that the assessee is having about 400 branches spread over the entire state of Karnataka. This fact has also been recorded by the AO in the impugned order u/s 201(1) that its branches are spread over various districts in the state doing the banking business. A survey u/s 133A of the Income-tax Act was conducted at the branch office of the bank to verify the compliances relating to TDS provision u/s 194A. It was found on verification that the interest on deposits to the customers was paid/credited without making TDS on such interest in some case and thus there was default of provision of 194A of the Income-tax Act. The AO proceeded to take action u/s 201(1) of the Act and finally passed order in r/o all four assessment years and held that the assessee bank is an 'assessee in default' in failure to deduct tax at source u/s 194A on the interest paid/credited to the customers. Therefore, it is clear that the AO while passing the order u/s 201(1) and201(1A) has treated the assessee has committed default in deduction of tax in respect of the interest paid by the various branches of the assessee. Whereas, it is a case where the default for non deduction of tax at source u/s 194A was committed by various branches of the assessee in respect of the interest credited/paid to the customer's deposits. The learned AR has submitted that each and every
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branch of the assessee has been issued a separate TAN No. and is filing separate return of income, therefore, head office of the assessee bank cannot be held as 'assessee in default' in respect of default committed by the various branches which are separate assessee and responsible for deduction of tax at source. We find that prima facie it is a case that the AO, TDS Ward(1), Hubli does not have jurisdiction other than the head office and branch office if any situated at Hubli and accordingly to that extent impugned order passed by the AO relating to the default committed by the branch situated beyond the jurisdiction of the AO, Ward-1, Hubli is not sustainable under the provision of the Act for want of jurisdiction of the AO. Section 194A also recognizes the income credited or paid in respect of the term deposit with banking company and the said amount shall be computed with reference to the income credited or paid by a branch of banking company. The first proviso of sub sec. 3 of sec. 194A reads as under:- “Interest other than "Interest on securities 194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income [by way of interest on securities], shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44,4E during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.] [Explanation.—For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such
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crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] (2)[Omitted by the Finance Act, 1992, w.e.f. I-6-1992.] (3) The provisions of sub-section (1) shall not apply- (1) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-section (1) to the account of or to, the payee, [does not exceed— (a) ten thousand rupees, where the payer is a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to in section 51 of that Act); (b) ten thousand rupees, where the payer is a co- operative society engaged in carrying on the business of banking; (c) ten thousand rupees, on any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf; and (d) (five thousand rupees in any other cases: Provided that in respect of the income credited or paid in respect of – (a) time deposits with a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or (b) time deposits with a co-operative society engaged in carrying on the business of banking; (c) deposits with a public company which is formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes —[and which is
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eligible for deduction under clause (viii) of sub- section (1) of section 36] the aforesaid amount shall be computed with reference to the income credited or paid by a branch of the banking company or the co-operative society or the public company, as the case may be [Provided further that the amount referred to in the first proviso shall be computed wish reference to the income credited or paid by the banking company or the co-operative society or the public company, as the case may be, where such banking company or the co-operative society or the public company has adopted core banking solutions: (ii) *** (iii) to such income credited or paid to-
(a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co- operative land mortgage bank), or (b) any financial corporation established by or under a Central, State or Provincial Act, or the Life Insurance Corporation of India established under - (c) the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any company or co-operative society carrying on the business of insurance, or (f) such other institution, association or body or class of institutions, associations or bodies] which the Central Government may,
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for reasons to be recorded in writing, notify in this behalf in the Official Gazette; iv) to such income credited or paid by a firm to a partner of the firm;] (v) to such income credited or (paid by a co-operative society (other than a co-operative bank) to a member thereof or to such income credited or paid by a co- operative society] to any other co-operative society;] Explanation.—For the purposes of this clause, "co- operative bank" shall have the same meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949): (vi) to such income credited or paid in respect of deposits under any scheme framed by the Central Government and notified'" by it in this behalf in the Official Gazette; (vii)to such income credited or paid in respect of deposits (other than time deposits made on or after the 1st day of July, 1995) with a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (viia) to such income credited or paid in respect of,— (a) deposits with a primary agricultural credit society or a primary credit society or a co- operative land mortgage bank or a co-operative land development bank; (b) deposits (other than time deposits made on or after the 131 day of July, 1995) with a co- operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking;] (viii) to such income credited or paid by the Central Government under any provision of this Act or the Indian Income-tax Act, 1922 (11 of 1922), or the Estate Duty Act, 1953 (34 of 1953), or the Wealth- tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958
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(18 of 1958), or the Super Profits Tax Act, 1963 (14 of 1963), or the Companies (Profits) Surtax Act, 1964 (7 of 1964), or the Interest-tax Act, 1974 (45 of 1974), (ix) to such income credited by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal; (ix a) to such income paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of the amounts of such income paid during the financial year does not exceed fifty thousand rupees: (x) to such income which is paid or payable by an infrastructure capital company or infrastructure capital fund or a public sector company or scheduled bank in relation to a zero coupon bond issued on or after the 1st day of June, 2005 by such company or fund or public sector company [or scheduled bank); (xi) to any income by way of interest referred to in clause(23 FC) of section 101 '[Explanation 2 —For the purposes of clauses (0, (vii) and (viia). "time deposits" means deposits [including recurring deposits) repayable on the expiry of fixed periods. Explanation 2.— (4) The person responsible for making the payment referred to in sub-section (1) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of ad' any excess or deficiency arising out of any previous declaration or failure to deduct during the financial year”. 9. Thus, it is clear that prior to the insertion of 2" proviso by the Finance Act, 2015 w.e.f 1/6/2015 for the purpose of deduction of tax at source tils 194A, the income credited or paid in respect of term deposit with the bank shall be
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computed with reference to the income credited or paid by the branch of banking company. Therefore, each and every branch is recognized as a separate assessee responsible for deduction of tax at source u/s 194A. In the case in hand, the AO has took the composite amount of interest paid or credited by all branches of the assessee bank and, therefore, the AO has exceeded its jurisdiction so far as the order touches the interest paid by the branch which are situated beyond the jurisdiction of the AO. Accordingly in the facts and circumstances of the case, where the AO has not given the separate amount of the interest credited/paid by each branch of the assessee as well as by the head office, it is not clear that whether any of the amount of the interest paid or credited falls under the jurisdiction of the AO, Ward-1, Hubli. Therefore, we set aside the matter to the record of the CIT(A) to verify this fact and then to adjudicate the issue of jurisdiction and validity of the orders passed by the AO u/s. 201(1) and 201(1A) of the Act. 10. Since, we have set aside the issue of validity of impugned orders, therefore, the issue on merit in appeals of the assessee is left open.”
Consequently the CIT (Appeals) observed as under:-
“8. The case is discussed and the submission considered. Also the case laws are perused. From a perusal of the details and on discussion, I find, there are a total of 451 number of branches of the bank and all the branches have their own DDOs and each DDO has separate TAN Number. From the details furnished, it is seen that, out of 451 number of branches, only 118 branches are situated within the jurisdictional area of ITO, TDS Ward, Hubli. These branches are located in the revenue districts of Dharwad and Gadag and 9 branches are in the Taluka of Uttar Kannada District. As held by the ITAT the ITO, TDS, Hubli has jurisdiction only over 118 branches which are located within the jurisdiction of ITO, TDS Ward, Hubli. As regards the interest paid by the other branches, it is held that, ITO, TDS Ward, Hubli has no jurisdiction over them. I therefore, hold that, the Assessing Officer will treat the appellant as assessee deemed to be in default
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only in respect of interest paid without TDS by the said 118 branches. The appellant bank will furnish relevant details to the Assessing Officer, who will consider it at the time of giving appeal effect to this order. Accordingly, I direct the Assessing Officer to reduce the demand raised in respect of interest oi paid by DDOs of other branches. Appeal of the assessee on this ground is partially allowed. 9. Coming to the stand of the assessee that, there was no obligation to deduct tax at source on payment of interest to persons who have declared the said interest income in their books and paid taxes thereon, I find the assessee has not furnished any details, nor has the assessee bank furnished form 26A. In the absence of such details I cannot take a decision in favour of the assessee. The appeal of the assessee on this ground fails. 10. The assessee has also raised objection to the order of the Assessing Officer on the ground that, the orders passed for the AY 2008-09 & 2009-10 are barred by limitation of time as provided u/s. 201(3). Reliance is placed on the decision in the case of Maratha Co-op bank Ltd., Vs. ITO ITA No.432/PNJ/2014/ ITAT Pune and Tata Tele Services Vs. Union of India (2016) 66 Taxman 157(Guj). The assessee has furnished the following details regarding limitation periods. Assessment Date of F.Y. in which Limitation Date of Year filing statement u/s. u/s. 203 S.201(1) statement 200 filed order u/s. 200 2008-09 15.7.2008 2008-09 31.3.2011 31.7.2012 2009-10 15.6.2009 2009-10 31.3.2012 31.7.2012
For the sake of quick reference, it would be appropriate to extract the provisions of section 201(3) hereunder. "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 the any time after the expiry of -
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(i) 2 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 have been filed; (ii) 6 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 first day of April 2007 may be passed at any time on or before the 31st day of March 2011". 12. From the above it could be seen that, limb (i) will apply only to cases where statement u/s. 200 is filed, in other words, where there is no statement filed u/s. 200, the second limit only will apply. In the case on hand, the assessee has not at all deducted tax at source on payment of interest on term deposits to members. Moreover, these details are not furnished in the statement filed u/s. 200. Therefore, there is no question arises that, the assessee filed statement u/s. 200. This is clearly a case where no statement u/s. 200 is filed. Therefore, the time limit of 2 years will not apply to the case of the assessee, i.e. the assessing officer had 6 years time to levy tax u/s. 201(1) and charge interest u/s. 201(1A). Accordingly, I hold that, the order passed by the assessing officer for the AYs 2008-09 & 2009-10 are not barred by limitation of time. Accordingly, the contention of the assessee is rejected and the grounds dismissed. 13. Last grievance of the assessee, in this appeal has been that, the Assessing Officer has passed a common order u/s. 201(1)/201(1A) for 4 years after issuing a common show cause notice. According to the assessee this action of the Assessing Officer is not in accordance with the provisions of law. I find, the Assessing Officer has passed a common order for the AY 2008- 09 to 2011-12 for the sake of convenience and brevity. The Income Tax law does not prohibit passing of common orders where common issues are involved. Nor does the Act prohibit issue of a common show cause notice for 4 years. The Assessing Officer has clearly communicated his intention to hold the assessee as assessee deemed to be in default for all the 4 years and accordingly he has passed the order. I find, there is no deficiency or infirmity in the order passed by the Assessing
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Officer. Accordingly the relevant grounds are rejected and dismissed. The order passed is upheld.”
Aggrieved by the above order of the CIT(Appeals), the assessee is in appeal before us.
Ground No.1 is general in nature.
With regard to ground Nos. 2 to 7 the ld. AR submitted that these grounds are with regard to jurisdiction of AO to issue common notice to the Head Office instead of all the 118 branches of the assessee bank. He submitted that the assessee is having 451 branches spread over 9 districts and the AO issued a common notice to the assessee HO, though all branches are having independent and distinct PAN. According to him, the common notice issued to all branches by the AO and passing order u/s. 201(1) & 201(1A) is bad in law. He ought to have issued independent and separate notice to each branch if there is failure to deduct tax at source by such branch.
The ld. DR submitted that for the sake of convenience, the AO issued common notice to all branches for non-deduction of tax at source to the Head Office and proper opportunity is given to assessee to present its case.
We have heard both the parties and perused the material on record. In the present case, though common notice is issued and common order passed by the AO u/s. 201(1) & 201(1A) of the Act in the name of assessee Head Office under their TAN No., it cannot be said that it is improper. The CIT(Appeals) rightly observed that all 118 branches are covered under the notice issued for non-deduction of tax and the order passed u/s. 201(1) & 201(1A) were within the jurisdiction of AO i.e., ITO, TDS Ward, Hubli. The
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common notice issued and common order is passed in this case for the sake of convenience, though each Branch is having separate TAN No. & DDO. Since the AO had the jurisdiction over all these 118 branches, consequent issue of common notice for non-deduction of tax at source and passing orders u/s 201(1) & 201(1A) cannot adversely affect the assessee and the assessee also participated during the course of assessment proceedings. We do not find any infirmity in the order of CIT(Appeals) on this count. Accordingly, these grounds are dismissed.
The next issue for our consideration is with regard to whether the orders passed u/s. 201(1) & 201(1A) of the Act are within time limit allowed u/s. 201(3) of the Act. It was submitted that the for AYs 2008-09 and 2009- 10, the assessee filed statement u/s. 200 and time limit to pass order 201(1) & 201(1A) is as per section 201(3) of the Act which states that no order shall be passed after expiry of two years from the end of financial year in which the statement referred to in section 200 is filed. In the case of assessee, details of statements filed by the assessee and the time limit are as follows:-
Asst. Date of filing F.Y. in which Limitation Date of Year statement u/s. 200 statement u/s. 200 u/s. 203 S.201(1) order filed 2008-09 15.7.2008 2008-09 31.3.2011 31.7.2012 2009-10 15.6.2009 2009-10 31.3.2012 31.7.2012
In view of the above, the ld. AR submitted that the orders passed u/s. 201(1) of the Act in respect of AYs 2008-09 & 2009-10 are barred by limitation. Reliance is placed on the decision of Pune Bench in Maratha Co-operative Bank Ltd. v. ITO in ITA No.432/PNJ/2014 dated 25.3.2015.
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He further submitted that the limitation period has been extended to seven years after the end of financial year in which payment or credit is given by the Finance (No.2) Act, 2014 w.e.f. 1.10.2014. This amendment will not be applicable retrospectively and therefore, no order u/s. 201(1) could have been passed for which limitation had already expired prior to amended section 201(3). Reliance is place on the decision of Gujarat High Court in the case of Tata Teleservices v. Union of India [2016] 66 taxmann.com 157 (Guj).
The ld. AR further submitted that the CIT(A) firstly admitted that the assessee has fled statement u/s. 200, but later contradicted his own findings by stating that assessee has not filed the statement u/s. 200 for the reason that taxes have not been deducted at source and not included in the statement filed u/s. 2009. Thus the CIT(A) erred in law and on facts. Further, there can be either of the above two situations viz., either the assessee has filed a statement or not filed a statement u/s. 200. In the instant case, there is evidence on record that statements u/s. 200 were filed on 15.7.2008 and 15.6.2009 for AYs 2008-09 & 2009-10 respectively. In the light of this evidence, there is no dispute as to the provisions of the Act and the limitation period is therefore two years from the end of the financial year in which statement u/s. 200 is filed by the assessee. He submitted that the order of the CIT(Appeals) is neither reasonable nor acceptable since it would otherwise render the provision of clause (i) of section 201(3) of the act otiose. Therefore, it was prayed that the order passed by the lower authorities insofar as AYs 2008-09 & 2009-10 are barred by limitation on the facts and circumstances of the case.
We have heard both the parties and perused the material on record. Admittedly, in this case, the assessee filed statements referred to u/s. 200 of the Act and there is no dispute on this issue. The only argument of the
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ld. DR is that the provision of section 201(3)(i) will apply only to cases where statement u/s. 200 is filed. In a case where there is no statement filed u/s. 200, the second limb clause (ii) of section 201(3) will apply. According to the ld. DR, the assessee has not at all deducted tax at source on payment of various terms deposits to its members. These details are not furnished in the statement u/s. 200. Therefore, no question arises on the filing of statement u/s. 200. Being so, it is to be considered that there is no statement filed u/s. 200. According to him, time limit available u/s. 201(ii) is six years from the end of financial year in which the payment is made or credit is given in any other case. As such, the order of the AO u/s. 201(1) & 201(1A) is not bared by limitation.
In our opinion, the argument of the ld. DR is totally misconceived. In the present case, admittedly, the assessee filed statement u/s. 200. Being so, the provisions of section 201(3)(i) is applicable i.e. two years from the end of financial year in which the statement is filed. Accordingly, for AY 2008-09 and 2009-10 the order passed by the AO u/s. 201(1) & 201(1A) of the Act are barred by time. Accordingly for these two assessment years i.e. AY 2008-09 & 2009-10, these orders are annulled.
However, for the other two years i.e., AY 2010-11 & 2011-12, the time limit available u/s. 201(3) is under clause (ii) and the orders passed in these years is within time. These orders of the AO are upheld.
The ld. AR made one more argument that there was no obligation to deduction tax at source on payment of interest to persons who have paid tax thereon. As such, the order passed u/s. 201(1A) is bad in law.
We have heard both the sides on the issue. As per Circular No.275/201/95-ii(B) dated 29.6.1992 issued by the CBDT, no demand u/s. 201 of the Act should be made after the tax payer has satisfied the Officer
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Incharge TDS that tax due has been paid by the deductee assessee. However, this will not alter to charge interest u/s. 201(1A) of the Act till the date of payment by deductee-assessee or liability for penalty u/s. 271C of the Act.
In the present case, there is no iota of evidence to suggest that deductee-assessee has paid the tax on the payment made to him. In the absence of any material on record before the lower authorities or even before us to show that deductee-assessee has paid tax on receipt of income, we are not in a position to appreciate the argument of the ld. AR. Accordingly, we dismiss these grounds.
In the result, ITA Nos.1526 & 1527/Bang/2017 are allowed, while ITA No.1528 & 159/Bang/2017 are dismissed.
Pronounced in the open court on this 28th day of February, 2022.
Sd/- Sd/- ( BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Bangalore, Dated, the 28th February, 2022. /Desai S Murthy /
Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order
Assistant Registrar ITAT, Bangalore.