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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri P.M. Jagtap(KZ) &Shri A. T. Varkey, JM]
ORDER
Per A. T. Varkey, JM:
This is an appeal preferred by the assessee against the order of Ld. CIT(A)-Burdwan dated 29-05-2019 and 06.06.2019 for Assessment Years 2014-15 and 2015-16 respectively passed against the separate orders passed by the AO u/s. 201(1) and u/s. 201(1A) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). Since the issues are common and both the appeals have been heard together, we dispose of both these appeals by this consolidated order for the sake of convenience. Since the issues are common the impugned order of AY 2014-15 is taken as the lead case and the result of which will be followed for the AY 2015- 15.
At the outset, we note that there is a delay of 224 days and 202 days in respect of AYs 2014-15 and 2015-16 respectively. The assessee has filed condonation petition along with affidavit. We have gone through the same and find the reasons given therein that there was no deliberate action on the part of assessee not to have filed the appeals on time andthe Ld. DR after having gone through the contents of the application for condonation of delay does not object for condoning the delay, therefore, we condone the delay and admit the appeals for hearing.
Brief facts (for AY 2014-15) of the case are that the AO notes that the assessee is a Government Bank engaged in banking activities and it takes deposits from customer and against such deposit, the customers earn interest on their deposit. The AO notes that a survey operation was conducted on 18.03.2016 at the Union Bank of India, Burdwan Main Branch with a view to verify the deduction of TDS against the interest credited/paid to the customer. The AO acknowledges that the customers filed Form 15G/15H and so the bank did not resort to deduct TDS. However, the main objection of AO is that these Forms i.e. 15G/15H were accepted by the bank blindly without verifying whether their Forms have been correctly filled or not and, according to AO, the bank did not deduct TDS where applicable as per provision of section 194A of the Act. According to the AO, in some cases the customers have earned interest from their deposit which is more than the limit of taxable income in AYs 2014-15 and 2015-16 and since the bank failed to deduct tax by accepting Form 15G/15H was wrong. Accordingly, notice was issued to the bank to show cause as to why action should not be taken against it by holding the bank as an assessee in default for not deducting TDS and took up the case of two customers (i) Shri Debabrata Hati and (ii) Smt. Kamala Nag. Even though the AO acknowledges that both the customers have filed Form 15G as provided u/s. 197A(1)/1A and read with Rule 29C,however, the AO was of the opinion that since the interest amount exceeded the threshold limit of taxable income, the AO declared assessee bank as an assessee in default and noted that since those customers have not furnished the certificate from an accountant as per section 201(1) of the Act, the AO passed the order by raising a demand of Rs.1,71,540/- u/s. 201(1)/201(1A) of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee citing the reasons that none appeared before him on behalf of the assessee and by this non- attendance, he was of the opinion that assessee was not interested in pursuing the appeal and, therefore, dismissed the appeal ex parte qua the assessee. Aggrieved, the assessee is before us.
We have heard rival submissions and gone through facts and circumstances of the case. We note that the assessee is a Public Sector bank situated at Burdwan and is providing banking facility to semi urban and rural people in and around Burdwan. After the survey having taken place in its premises on 18.03.2016, the AO found that two customers have been given interest on their deposit without deducting tax at source in violation of section 194A of the Act. According to the AO, the appellant bank ought to have deducted tax when it has come to its notice that the interest given to them exceeded the threshold limit of taxable interest income. According to the AO, the assessee failed to furnish form 26A as per rule 31ACB,despite the fact that interest income of those customers were more than the taxable income, therefore, he declared the appellant bank as an assessee in default as per the provision of section 201(1) and 201(1A) of the Act and levied a total demand of Rs.1,71,540/-. During the hearing of the appeal, it has been brought to our notice that the recipient of interest income (both customers) against whom the AO had found that the assessee is in default [for not deducting tax at source since interest income exceeds taxable limit], the payees/customers have already paid taxes on the interest income disbursed by the assessee bank to them. In the light of this fact, it would be proper to refer to section 201 of the Act, relevant portion of which is reproduced as under:
“Consequences of failure to deduct or pay. 201. [(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 subsection (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] (l) 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]”emphasis supplied
From a perusal of the aforesaid provision it is clear that the assessee bank should not be deemed to be an assessee in default for non-deduction of tax at source in respect of a payee if it (payee) satisfy the following conditions:
(i) the payee has furnished his return of income u/s. 139; (ii) payee has taken into account such sum for computing income in such return of income and ; (iii) payee has paid the taxes due on the income declared by him in such return of income and the payee furnishes a certificate to this effect from an accountant in such form prescribed ( i.e. form no. 26AS) read with Rule 31ACB.
Even though as per section 197A of the Act no deduction of tax is to be made by the payer (assessee-bank in this case) if the payee (customers who received interest)files Form No. 15G/15H, however, if the income exceeds the threshold limit exempted for taxation then this provision does not apply. However, we note that the first proviso to section 201 of the Act has been brought in by Finance Act, 2012 w.e.f. 01.07.2012 which has inserted the first proviso an amendment that if the payer of income (assessee in this case) is able to bring to the notice of the AO that the payee (recipient of income) has already paid tax on the amount received from the payer(assessee bank) then the assessee bank/payer cannot be treated as an assessee in default. Consequently, department is precluded from recovering tax from the payer(assessee bank) on the same income by treating the payer to be an assessee in default for short- fall in its amount of tax deducted at source. For this proposition of law, we rely on the decision of Hon’ble Supreme Court in Hindusthan Co-cola Breverages Ltd. Vs. CIT reported in 293 ITR 226 (SC). In the light of the aforesaid discussion and taking into consideration the assertion given by the Ld. AR that both the customers against whom the AO has found that the assessee bank failed to deduct tax have duly reflected and shown the entire interest income in their respective return of income for AYs 2014-15 and 2015-16 and has remitted the tax on it, then in such a scenario the assessee bank cannot be held to be an assessee in default. However, according to the AO, the assessee did not fulfill the conditions specified as per the first proviso to section 201 of the Act. In the light of the discussion, we set aside the order of the Ld. CIT(A) and remand the issue back to the file of the AO and direct the appellant bank to furnish the documents as required under first proviso to section 201 of the Act and if the assessee files the same before the AO; and if the AO is satisfied that both the customers have shown their interest income received from the assessee bank in their respective Return of Income and they have remitted the tax on it, then the assessee bank should not be treated as an assessee in default. In case if the assessee fails to file the documents, then the AO is a liberty to pass order in accordance to law. With this observation, the appeals of the assessee are allowed for statistical purposes.
In the result, the appeals of the assessee are allowed for statistical purposes.
Order is pronounced in the open court on 9th October, 2020.