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Income Tax Appellate Tribunal, AMRITSAR BENCH; AMRITSAR.
Before: SH. SANJAY ARORA & SH. N. K. CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 681/Asr/2017 (and Stay Application No. 01/Asr/2018) Assessment Year: 2014-15
The Gurdaspur Central Vs. Deputy Commissioner of Income Cooperative Bank, Sadar Tax, Circle-VI, Pathankot Bazar, Gurdaspur [PAN: AAAAT 0711A] (Appellant) (Respondent)
Appellant by : Sh. Vinamar Gupta & Vibhore Gupta (CAs.) Respondent by: Smt. Prabhjot Kaur CIT (D.R.) Date of Hearing: 07.03.2018 Date of Pronouncement: 24.05.2018
ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee agitating the Order by the Commissioner of Income Tax (Appeals)-2, Amritsar ('CIT(A)', for short) dated 10.08.2017, dismissing the assessee’s appeal contesting its’ assessment u/s. 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 26.12.2016 for Assessment Year (AY) 2014-15.
The disallowance under challenge in the instant case is u/s. 40(a)((ia), effected at Rs.38,63,16,050, on the ground of non-deduction of tax of source u/s. 194A by the assessee, a cooperative bank. The Authorized Representative (AR), the assessee’s counsel, would at the outset take us through the following tabular
2 ITA No.681/2017 & SANo.1/18(AY 2014-15) The Gurdaspur Central Co-op. Bank v. Dy. CIT chart whereby the assessee seeks to reconcile the total interest paid on its various deposit accounts with that on which tax stands deducted at source or is not required to under law, i.e., per the different excepting clauses of section 194A providing saving to the provision under specific circumstances and, submitting, on that basis, that no disallowance u/s. 40(a)(ia) is called for:
Particulars Amount (Rs.) Total Interest paid 394488470 Interest not disallowed -8172420 Total Interest disallowed 386,316,050 Saving Account Interest 128,724,577 RD Interest 1,705,554 FDR Interest below 10,000 66,007,012 196,437,143 189,878,907 FDR Interest on which tax deducted 21,917,552 Already allowed by Department -8,172,420 13,745,132 176,133,775 Interest paid to Societies -2,900,746 173,233,029 Interest wrongly posted Harial Branch (Interest Reversal on NPA wrongly posted) 4,245,414 Harchowal Branch (HO Interest) 338,239 Langah Jattan (H.O. Interest) 565,694 Ghasitpur (H.O. Interest) 3,406,266 8,555,613 FDR Interest for which 15G/15H obtained 164,677,416
On a query by the Bench as to why, in that case, the same was not furnished before the Revenue authorities, whose orders are sans any findings qua the excepting clauses, resulting in a huge disallowance (as well as its’ confirmation, and which would only be on the basis of the material on record), he conceded to the assessee having not furnished quarterly returns of tax deduction at source (TDS), even as
3 ITA No.681/2017 & SANo.1/18(AY 2014-15) The Gurdaspur Central Co-op. Bank v. Dy. CIT the information afore-said, albeit branch-wise, was furnished before the ld. CIT(A), and toward which he would take us to PB pgs. 35-36.
We have heard the parties, and perused the material on record. 3.1 It is apparent that the assessee has not made proper representation before the Revenue authorities, else their orders would bear the relevant findings, being essentially findings of fact. At the same time, the Revenue has also not exercised due diligence in the matter in-as-much as even the information contained in the tax audit report u/s. 44AB, furnished along with the returns of income, has not been taken into account even as that by the internal auditor - who was again constrained for want of some information to be provided by the assessee, has been, and which amounts to pick and choose. Sure, the assessee is liable to answer and explain the differences in the two reports, where and to the extent it obtains. Further, true, the assessee did not collate the information in an aggregate manner, as it has before us, but then it could, and rather ought to have been, called upon to do so. Levy of tax could, after all, be only on the basis of the facts of the case and in accordance with the law. While the Assessing Officer (AO) could be constrained for time, being bound to complete the assessment in a give time frame and, therefore, take cognizance of only the material/information that stands brought on record by the assessee, the same cannot be said of an appellate authority - the purview of which is the correct assessment of the assessee’s income and, consequently, the correct determination of his tax liability under law. The ld. CIT(A), enjoying coterminous powers, should have endeavored to cause to bring on record all the relevant and material facts. The assessee has not helped its’ cause by not adopting a proactive; rather, its conduct reflects a lackadaisical, approach. The matter, therefore, for appropriate verification and determination, shall have to travel back to the file of the AO. Though normally we would be inclined to impose a cost on the assessee,
4 ITA No.681/2017 & SANo.1/18(AY 2014-15) The Gurdaspur Central Co-op. Bank v. Dy. CIT we refrain from doing so in the present case as, as is apparent, it has already been subject to considerable hardship on account of coercive steps for recovery (of the demand) initiated by the Revenue, as explained by the ld. AR while making submissions qua stay, also posted for hearing alongwith.
3.2 Be that as it may, we shall, having heard the parties at length, also issue appropriate directions qua the claims by the assessee per the reconciliation statement, to enable a proper determination and resolution of the matter in the set aside proceedings: (a) Interest below rupees ten thousand: The same is excluded for TDS u/s. 194A(3)(i); the limit, as we see it, having been enhanced from Rs. 5,000/- by Finance Act, 2007 w.e.f. 01/6/2007. There is a vast difference between the figure taken in this respect by the AO, and that claimed by the assessee per its reconciliation statement. The former figure would again only be as per the assessee’s TDS returns. The figure reported per the audit report u/s. 44AB can reasonably be regarded as conclusive, subject of course to the verification – where and to the extent considered proper, by the Assessing Officer. In this regard, we may though add, the obligation to deduct tax at source (as per law) is on the assessee-bank, i.e., taken as one, single entity, so that even if the limit of Rs.10,000/- is breached qua a particular depositor (identified by PAN) across different branches of the bank, the liability to deduct tax at source would arise. This, again, is subject to any Circular or Instruction by the Board, where so, providing any relief in this respect in-as-much beneficial circulars by the Board are binding on the Revenue authorities (Navnit Lal C. Jhaveri v. AACIT [1965] 56 ITR 198 (SC)). We say so as the compliance of the provision entails the tedium of the aggregation of data (for the year) by the bank across its’ branches, by any means a stupendous task, unless of course the accounts are maintained in a computerized
5 ITA No.681/2017 & SANo.1/18(AY 2014-15) The Gurdaspur Central Co-op. Bank v. Dy. CIT environment which, rather, is a norm. The aggregation across branches would, we may add, apply only to interest other than on time deposits (defined per Explanation 1 to s. 194A), for which the limit of Rs. 10,000/- is to be reckoned on branch-wise basis.
(b) Interest subject to receipt of Forms 15G/15H: This exclusion, per section 197A(1A), is qua a depositor/s furnishing a declaration to the bank that no tax at source be deducted as no tax liability obtains on his total income - including the bank interest under reference, for the year. Surely, the said declaration, to be valid, is to be furnished to the bank before the last working day of the year (31st March, of the relevant previous year), on which the bank closes its’ accounts, and is in fact not open to the public. The same are required to be furnished by the assessee (bank) to the Revenue by the seventh day of April of the following year (i.e., the assessment year), the due date. Admittedly, no proof of furnishing the same was adduced, so that no credit for the same came to be allowed. The assessee has before us placed reliance on decisions by the tribunal to the effect that non-furnishing of proof of deposit of the declarations is an independent default, and does not lead to the inference of the assessee having not obtained the relevant declarations before the year-end, saving deduction of tax at source. True, though it is highly unlikely and inexplicable that an assessee in receipt of the declarations would not furnish the same, as required by law, to the Revenue by the due date, yet, without doubt, the two, i.e., being in receipt of the declarations from the depositors and furnishing the same to the Revenue, are independent of each other. Our concern extends to the former. The decisions do not assist the assessee’s case in any manner as, in effect, even where furnished to the Revenue by the due date, the same cannot be regarded as an evidence of the assessee being in receipt of the relevant declaration before the close of the year. In
6 ITA No.681/2017 & SANo.1/18(AY 2014-15) The Gurdaspur Central Co-op. Bank v. Dy. CIT other words, the relevant fact is the receipt (by the assessee) of the declarations before the year-end, the onus to evidence which is on the assessee. The due date for deposit of declarations thereto being quite proximate to the close of the year, the Revenue accepts, and pragmatically so, the forms submitted by the due date as having been in fact obtained by the payer by the close of the year. The assessee has before us submitted copies of the dispatch register (of the different branches) in evidence of the relevant forms having been dispatched by them to the Revenue (in the concerned office), which it seeks for being admitted as an additional evidence/s. Why, we wonder, were the same not presented before the assessing or even the first appellate authority? Then, again, the same are not from all the branches, 44 in number. Is it a tacit admission of the said forms having not been dispatched by the other branches? Further still, how we wonder does it advance the assessee’s case. The same, firstly, do not indicate the number of declarations being remitted. This, though, could be resolved on the basis of the number of forms, where so, stated in the forwarding letter, or received by the Revenue with reference to the said dispatch number/letter. Two, based on the decisions by the tribunal cited supra, non-furnishing of the proof of the submission of the forms to the Revenue (by the due date) in no manner diminishes the assessee’s case of having obtained or, rather, being in receipt of the said forms, before the end of the relevant year. The same, i.e., the said receipt, is, by own admission, a separate transactions/event and, therefore, to be independently evidenced. The receipt of the declaration forms by the assessee from its depositors, which could in fact be at any time of the relevant year, would surely stand to be evidenced by the assessee’s internal record, and on the basis of which the internal as well as the external (statutory) auditor would have finalized their respective audit reports. In the absence of such a record, how would the bank monitor and exercise control over the said function? How would it know as to which of its’ depositors have and, therefore, have not,
7 ITA No.681/2017 & SANo.1/18(AY 2014-15) The Gurdaspur Central Co-op. Bank v. Dy. CIT furnished the declarations, i.e., as at any given point of time, in which case therefore tax at source is to be deducted, i.e., upon credit of interest. That is, the bank would have certainly evolved some mechanism for regulating the said function, which would also evidence the receipt (including its’ date) of the relevant forms. It is this evidence, contemporaneous in nature, that is relevant. We have not placed any restriction - the matter being factual, on the material that can be relied upon by the assessee in the set aside proceedings.
(c) Interest paid/allowed subject to deduction tax at source: The difference in this figure, i.e., as per the assessment order and the reconciliation statement, is again quizzical, indicating, once again, a complete absence of proper representation of its case as well as lack of proper application of mind by the Revenue. The figure in a tax of report u/s. 44AB ought surely to have been given credence by the Revenue even as it is entitled (if not duty bound) to verify the same, and seek satisfaction in its respect. This exercise in fact stands greatly facilitated and enabled by the logging of the relevant information online, as per the current procedures.
(d) Interest paid to HO/societies/reversal: The assessee has accounted for interest under the said categories in the reconciliation statement, which could be subject to verification. The interest to HO would stand netted in-as-much it is not an expenditure, finding reflection only in the branch, and not the consolidated, accounts. Similarly, the interest reversed would stand to be netted, and there is no question of the assessee claiming deduction in its respect.
3.2 Our observations may be regarded as instructive. The matter is accordingly the set aside to the file of the AO for adjudication afresh by issuing definite
8 ITA No.681/2017 & SANo.1/18(AY 2014-15) The Gurdaspur Central Co-op. Bank v. Dy. CIT findings of fact, considering any material deemed relevant and adduced by the assessee in support, or on which the AO may wish to place reliance on; the assessee having made out its’ case per the reconciliation statement afore-referred. The burden of proof, we may add, qua its’ various claims, would be on the assessee. The assessment having been set aside thus to the file of the AO, the impugned demand obtains no longer, for us to pass any separate order qua the assessee’s stay petition, which thus becomes infructuous. We decide accordingly.
In the result, the assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on May 24, 2018
Sd/- Sd/- (N. K. Choudhry) (Sanjay Arora) Judicial Member Accountant Member Date: 24.05.2018 /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: The Gurdaspur Central Co-op. Bank, Gurdaspur (2) The Respondent: Dy. CIT, Circle-VI, Pathankot (3) The CIT(Appeals)-2, Amritsar (4) The CIT concerned (5) The CIT- DR, I.T.A.T.