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Facts
The assessee, a cooperative bank, filed an appeal with a delay of 279 days due to migration from physical to virtual mode during the COVID-19 lockdown. The Assessing Officer (AO) disallowed interest payments and payables for non-deduction of TDS, while the CIT(A) partially allowed the relief.
Held
The Tribunal condoned the delay, acknowledging the COVID-19 related issues. It noted factual gaps and incomplete examination at the assessment stage regarding interest payables and TDS. The Tribunal set aside the order and restored the matter to the AO for fresh examination.
Key Issues
Whether the delay in filing the appeal is condonable due to COVID-19 and whether the disallowance of interest payments and payables for non-deduction of TDS was made correctly without proper examination.
Sections Cited
271(1)(c), 40(a)(ia), 193
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the NFAC, Delhi for the assessment year 2016-17.
There was a delay of 279 days in filing the appeal by the assessee. The assessee filed a condonation petition supported by an affidavit, stating that the appeal was migrated from physical to virtual mode due to the COVID-19 lockdown. Therefore, the assessee was not aware of the notices issued by the learned CIT(A) or of the fact that the learned CIT(A) had passed the order.
The assessee became aware of the passing of the order by the learned CIT(A) only upon receiving a penalty notice under section 271(1)(c) of the Act. Thereafter, the assessee immediately preferred an appeal to the ITAT. However, in this process, a delay of 279 days occurred.
Besides, the learned Authorized Representative (AR) also contended that the assessee has a strong case on merits. Accordingly, the learned AR prayed for the condonation of the delay in filing the appeal by the assessee.
On the contrary, the learned Departmental Representative (DR) did not raise any objection if the delay is condoned, and the matter is decided on merits as per the provisions of law.
We have heard both the parties and perused the materials available on record. Considering the fact that the appeal was shifted from physical to virtual mode, and further noting that therefore the notices issued by the learned CIT(A) were not effectively communicated to the assessee regarding the date of hearing, we hold that there was a valid reason for the assessee being unaware of the fact that the order had been passed by the learned CIT(A). Accordingly, we condone the delay of 279 days and proceed to adjudicate the issue raised by the assessee on merits.
The facts in brief are that the assessee is a cooperative Bank. For the year under consideration, the assessee filed return of income . declaring total income of ₹30,00,820/- only. The return was selected for scrutiny assessment vide notice dated 18th September 2017.
During the assessment proceeding the AO observed that interest payment of ₹ 81,04,752 was claimed in the profit and loss account. On further verification it was noticed that the assessee has paid interest over ₹10,000/- to various person, but no tax at source was deducted nor the Form 15G or 15H furnished and such amount aggregates to ₹40,60,511/- only. It also noticed that an amount of ₹23,85,931/- was debited in the profit loss account as interest payable and an amount of ₹39,35,397/- was shown in balance sheet as interest payable outstanding. The assessee was asked to provide detail about these amounts shown in profit and loss and balance sheet as interest payable and the detail of TDS deducted on the same. But the assessee failed to provide any detail. Accordingly, the AO, in the absence of tax deducted and Form- 15G/H, vide show cause noticed dated 10th December 2018 purposes to make disallowance the payment of interest of ₹40,50,511/-, interest payable of ₹23,85,931/- debited in the profit and loss account and interest payable of ₹39,35,397/- shown in balance sheet as per the provision of section 40(a)(ia) of the Act.
However, the assessee failed to make reply to show cause notice. Hence, the AO disallowed above mentioned of amount of ₹40,50,511/-, ₹23,85,931/- and ₹39,35,397/- being the amount of interest paid or payable as per section 40(a)(ia) of the Act and added to the total income of the assessee.
The aggrieved assessee preferred an appeal before the learned CIT(A).
The assessee before the learned CIT(A) submitted that the AO issued show cause notice on 10th December 2018 and asked to provide all the details on or before 14th December 2018 which was not possible. However, the required detail were furnished as on 30th December 2018 but the AO meanwhile finalized the assessment vide order dated 23rd December 2018.
The learned CIT(A) after considering the facts allowed partial relief to the assessee by observing as under: 4.1 The total amount in respect of which 15G are furnished is Rs. 2,17,967/- and 15H are furnished for an amount of Rs. 13,58,501/-. The details are furnished in the paper document on 30/11/2016. Since the details were submitted more than seven years have passed. NO fresh 15G or 15H was furnished by the taxpayer during appeal proceeding even though case was posted for hearing on 02/01/2019 and 26/11/2023. The total amount for which 15G and 15H was produced are Rs. 3438111/-. Relief to that extent is given and the remaining amount is Rs. 8229304/-. Assessee has furnished chalan for Rs. 491160 as TDS which is towards an amount of Rs. 491160. This is also given credit. The remaining amount which has to furnish Form 15G and Form 15H is Rs. 323234. 4.2 There is an addition made by the assessing authority at Rs. 2386391 which is interest payable debited to P and L account. Out of that Rs. 1549466 is opening balance. Interest on securities. 193. The person responsible for paying [to a resident] any 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 at the rates in force on the amount of the interest payable : 4.3 As per the provisions in section 193 TDS is to be made on the interest payable. In this case no TDS is seen deducted. No 26AS is also seen furnished so no TDS is effected. Rs. 2386391 is the interest payable and still this amount is still lying in the books as interest not paid. Out of that Rs. 1549466 is opening balance. The addition is towards non deduction of TDS and provisions of section 193 r.w.s 40(a)(ia) is applicable. 4.4 The second addition is on account of non deduction of TDS on interest payable at Rs. 1549466. This is lying as an opening balance on 31/3/2016.
Since it's lying payable and not paid the provisions of section 193 r.w.s 40(a)(ia) is applicable. The addition made by the assessing authority is upheld. 4.5 The additions upheld are Rs. 323234, Rs. 1549466 and Rs. 2386391 totalling Rs. 4258631. In the result, the appeal is partly allowed.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before the Tribunal.
The learned AR before us filed a paper book running from pages 1 to 42 and contended that the authorities below have considered the amount of interest shown by the assessee as opening balance which should not have been considered for the year under consideration. Nevertheless, the learned AR prayed before us that the assessee failed to give necessary details during the proceedings before the authorities below and prayed for one more opportunity to represent the case before the AO for fresh adjudication as per the provisions of law.
On the other hand, the learned DR before us did not raise any objection if the matter is set aside to the file of the AO for fresh adjudication as per the provisions of law.
We have heard the rival contentions of both the parties and perused the materials available on record. It is noted that the primary issue under consideration revolves around the disallowance of interest payments and interest payable under section 40(a)(ia) of the Act, on the ground of non-deduction of tax at source (TDS) and non-furnishing of requisite Form 15G/15H declarations. The AO, in the course of the assessment proceedings, disallowed amounts aggregating to ₹40,50,511/-, ₹23,85,931/-, and ₹39,35,397/-, respectively, due to the assessee’s failure to furnish details or reply to the show cause notice . within the short window provided. The learned CIT(A), upon appeal, partially allowed the claim by granting relief only to the extent of the Forms 15G/15H and TDS challans produced, and upheld the remaining disallowance.
16.1 However, on careful perusal, we find that the matter suffers from serious factual gaps and incomplete examination at the assessment stage. The assessee has consistently contended that it had submitted the relevant details and supporting documents, albeit belatedly, due to the extremely narrow time frame allowed by the AO, who finalized the assessment order before considering the evidence filed subsequently. Moreover, the record indicates that certain amounts disallowed particularly those classified as “interest payable” include opening balances from prior periods, which may not attract disallowance under section 40(a)(ia), as the provisions apply only to amounts “payable” or “paid” during the year under assessment.
16.2 Furthermore, there appears to be a lack of clarity and detailed reconciliation in the treatment of the various components of interest payments, Forms 15G/15H submissions, and TDS deductions across the amounts disallowed. For example, the AO has disallowed the amount of interest paid for ₹40,50,511/-, interest payable of ₹23,85,931/-, and further interest payable of ₹39,35,397/-. Hence it not clear whether all these amounts are independent payment or interest paid debited in P&L account included in payable. Without a clear and comprehensive verification of these facts, any adjudication on merits would risk causing injustice either to the assessee or to the revenue. Therefore, we are of the considered opinion that the ends of justice would be best served by . setting aside the matter to the file of the AO for fresh examination, with clear directions to provide the assessee reasonable opportunity to submit all necessary details, explanations, and documentary evidence, including reconciliations, TDS challans, Forms 15G/15H, and explanations regarding the opening balances and the actual amounts of liability crystallized or paid during the year. The AO is further directed to verify these details thoroughly, apply the correct legal provisions in light of the established facts, and pass a fresh assessment order in accordance with law after granting due opportunity of being heard to the assessee.
16.3 Accordingly, the impugned order of the learned CIT(A) is set aside, and the matter is restored to the file of the AO for fresh assessment in accordance with the above directions. This finding is passed to ensure a fair and just adjudication, given the factual ambiguities and incomplete examination at the prior stages. Hence, the ground of appeal filed by the assessee is hereby allowed for statistical purposes.
In the result appeal of the assessee is allowed for statistical purposes.
Order pronounced in court on 29th day of May, 2025