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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 728 /JPR/2024
PER DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of ld. Addl/JCIT (A)-1, Coimbatore dated 21.03.2024 passed under section 250 of the I.T. Act, 1961, for the assessment year 2015-16. The assessee has raised the following grounds of appeal :-
1. 1. On the facts and circumstances of the case the ld. AO erred in initiating the proceedings against the bank as the spot verification has been done in State Bank of India, Jaipur. the present case without following the income tax provisions. Thus, the proceedings initiated by the ld.AO and he assessment concluded thereafter by the ld AO was illegal and void-abinitio and not a curable defect u/s 292BB, therefore the Order u/s 201/201(A) dated 19.02.2015 deserves to be set aside and quashed.
2. Without prejudice to the GOA-1, under the facts and circumstances of the case, the ld. AO erred in passing the assessment order on the assessee -in default (deductor bank) for two Assessment Years jointly through a single Assessment Order which is in violation of the provisions of the Income Tax Act. Thus, the assessment order passed u/s 201/201(A) of the Act is unjustified and illegal and therefore, the same deserves to be quashed and set-aside.
3. Without prejudice to the GOA 1 & 2, under the facts and circumstances of the case the ld. AO erred in raising the demand & Hon’ble CIT erred in confirming the demand on the assessee-in default (deductor bank) during the pendency of the SLP No. 16734/2023 & stay order wherein the assessee bank is bound to not to make any recoveries from the employee. Thus, the assessment order passed u/s 201/201(1A) of the Act deserves to be quashed and set aside.
4. Without prejudice to the GOA 1 to 3, under the facts and circumstances of the case, the ld. AO & Hon’ble CIT erred in not considering the fact that the assessee deductor bank is bound by the orders of the Hon’ble High Court & Apex Court during the matter in pendency and therefore, taking any action by them would have resultant to contempt of court. However, during the proceedings before the Hon’ble Courts, the department is no where bound to issue any notice to any of the employees who actually enjoyed the benefit of LTC and initiating proceedings solely on the assessee bank is against the Principle of Natural Justice. Thus, the assessment order passed u/s 201/201(1A) OF THE Act deserves to be quashed and set aside.
5. Without prejudice to the GOA 1 to 3, under the facts and circumstances of the case, the ld. AO erred in considering the assesee deductor bank as assessee-in default despite knowing the fact that the bank is under this State Bank of India, Jaipur. bonafide belief of not deducting the TDS amount in LTC due to the bank circulars and not initiating any proceedings against the “assessee- employee” who was liable to pay the tax liability on the benefit of LTC, in terms of the provisions of the Act which creates the equal responsibility on the assessee-employee in respect of Section 4(1) i.e. charge of income r.w.s. sections 190 and section 191(1). Thus considering the provisions stated herein above, the bank cannot be treated as the assessee in default and therefore the assessment order deserves to be quashed and set-aside.
The appellant reserves his right to add, alter, modify or delete any grounds of appeal.
The brief facts of the case are that the assessee-deductor is a public sector bank and provides the benefit of Leave Travel Concession to its employees in line with the State Bank of India Officers’ Service Rules,1992. As per the order under section 201(1) and 201(1A), the spot verification for TDS was done on 19.02.2014 and 22.03.2014. The spot verification order does not contain the section and approval details. Show cause notices (SCN) dated 16.12.2014 and 08.01.2015 were issued to the assessee for the FY 2012-13 and 2013-14. The Show Cause Notices do not contain any default amount. Thereafter the AO passed the assessment order on 19.02.2015 wherein the ld. AO treated the bank as the assessee-in-default and raised the demand of Rs. 19,86,439/- for the Assessment Year 2014-15 (F.Ys 2012-13 & 2013-14 by a single order) w.r.t. section 10(5) of the I.T. Act, 1961, relating to LTC. The details of demand are as under :-
Aggrieved by the order of the AO, the assessee bank preferred appeal before the ld. CIT (Appeals). The ld. CIT (Appeals) relying on the judgment of Hon’ble Apex Court in the case of State Bank of India vs. Assistant Commissioner of Income-tax (2022) 144 taxmann.com 131 dated 04.11.2022, dismissed 28 appeals including the appeal of the assessee vide its order dated 21.03.2024. Hence, the bank has preferred the present appeal before us.
Before us, the ld. A/R of the assessee submitted his written submission which are reproduced as under :- “ 1. On the facts and circumstances of the case the ld. AO erred in initiating the proceedings against the bank as the spot verification has been done in the present case without following the income tax provisions. The proceedings initiated by the ld. AO and the concluded assessment thereafter by the ld. AO was illegal and void-abinitio and therefore not a curable defect u/s 292BB. Therefore, the Order u/s 201/201(A) dated 19.02.2015 deserves to be set aside and quashed.
State Bank of India, Jaipur. “ The humble assessee hereby submits that as per the assessment order dt. 19.02.2015, the spot verification was conducted on 19.02.2014 & 22.03.2014 at the Office of Dy. General Manager, AO- 1. State Bank of India, A-5, Nehru Place, Tonk Road, Jaipur for the purpose of TDS. In this case a show cause notice was served upon the assessee. The ld. AO passed the order u/s 201(1) & 201(1A) of the Act for F.Y. 2012-13 & 2013-14 by an order dated 19.02.2015. It is pertinent to mention here that the spot verification which was done on 19.02.2014 & 22.03.2014 was not in accordance to the provision as contained u/s 133A of the Income Tax Act.
Power of Survey has been specified u/s 133A but as per proviso, no action under sub section (1) shall be taken by without obtaining the approval of the Joint Commissioner or the Joint Director as the case may be. Power of survey. 133A. (1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter— (a) any place within the limits of the area assigned to him, or (b) any place occupied by any person in respect of whom he exercises jurisdiction, or [(c) any place in respect of which he is authorised for the purposes of this section by such income-tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place,] at which a business or profession is carried on, whether such place be the principal place or not of such business or profession, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession — State Bank of India, Jaipur. (i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, (ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and (iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act. Explanation.—For the purposes of this sub-section, a place where a business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept. (2) An income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset. (3) An income-tax authority acting under this section may,— (i) if he so deems necessary, place marks of identification on the books of account or other documents inspected by him and make or cause to be made extracts or copies therefrom, (ia) impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him: Provided that such income-tax authority shall not— (a) impound any books of account or other documents except after recording his reasons for so doing; or [(b) retain in his custody any such books of account or other documents for a period exceeding ten days (exclusive of holidays) without obtaining the approval of the Chief Commissioner or the Director General or the Director General therefor, as the case may be,] (ii) make an inventory of any cash, stock or other valuable article or thing checked or verified by him, (iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act.
State Bank of India, Jaipur. (4) An income-tax authority acting under this section shall, on no account, remove or cause to be removed from the place wherein he has entered, any cash, stock or other valuable article or thing. (5) Where, having regard to the nature and scale of expenditure incurred by an assessee, in connection with any function, ceremony or event, the income-tax authority is of the opinion that it is necessary or expedient so to do, he may, at any time after such function, ceremony or event, require the assessee by whom such expenditure has been incurred or any person who, in the opinion of the income-tax authority, is likely to possess information as respects the expenditure incurred, to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act and may have the statements of the assessee or any other person recorded and any statement so recorded may thereafter be used in evidence in any proceeding under this Act. (6) If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made :
Provided that no action under sub-section (1) shall be taken by an Assistant Director or a Deputy Director or an Assessing Officer or a Tax Recovery Officer or an Inspector of Income-tax without obtaining the approval of the Joint Director of the Joint Commissioner, as the case may be] Explanation.—In this section,— [(a) "income-tax authority" means— a Commissioner, a Joint Commissioner, a Director, a Joint Director, an Assistant Director or a Deputy Director or an Assessing Officer or a Tax Recovery Officer, and for the purposes of clause (i) of sub-section (1), clause (i) of sub-section (3) and sub-section (5), includes an Inspector of Income-tax] (b) "proceeding" means any proceeding under this Act in respect of any year which may be pending on the date on which the powers under this section are exercised or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.
State Bank of India, Jaipur. Although Clause 2A was inserted by the Finance (No.2) Act, 2014, w.e.f. 1.10.2014. “(2A) Without prejudice to the provisions of sub-section (1), an incometax authority acting under this sub-section may for the purpose of verifying that tax has been deducted or collected at source in accordance with the provisions under sub-heading B of Chapter XVII or under sub-heading BB of Chapter XVII, as the case may be, enter, after sunrise and before sunset, any office, or any other place where business or profession is carried on, within the limits of the area assigned to him, or any place in respect of which he is authorised for the purposes of this section by such income-tax authority who is assigned the area within which such place is situated, where books of account or documents are kept and require the deductor or the collector or any other person who may at that time and place be attending in any manner to such work,— (i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, and (ii) to furnish such information as he may require in relation to such matter.”;] This clearly shows that before 01.10.2014 the survey or spot verification can only be done the approval of the Joint Commissioner or the Joint Director which was not complied. The ld. D/R has provided the following documents after the instruction of the Hon’ble Bench relating to spot verification approval and show cause notice in response to the additional GOA admitted :
(a) Letter No. ACIT (TDS)/JPR/2013-14/1749 dt. 22.03.2014 about verification of TDS :
State Bank of India, Jaipur. (i) The letter authorized verification of TDS for the year 2011-12 only and no approval was taken of the Joint Commissioner or the Joint Director as the case may be. (ii) No particular section was specified which authorize the ld. ACIT (TDS) for issuing such a notice and therefore no defense was available to the assessee. (iii) The spot verification was done on 19.02.2014 i.e. before the date of authorization. (iv) The year for verification was authorized 2011-12 only. (b) Show cause dt. 16.12.2014 in which reference of verification mentioned dt. 19.02.2014 & 22.03.2014. This verification instruction/notice was relating to the year 2011-12 only but the details requested in the show cause notice pertains to the year 2012-13 & 2013-14 u/s 201(1)/201(1A). The due date of reply mentioned in show cause notice dt. 16.12.2014 was 06.01.2014 i.e. well before the d ate of issuing the notice. Show cause dt. 08.01.2015 in which reference of verification mentioned dt. 19.02.2014 & 22.03.2014. The due date of reply mentioned was 16.01.2015 and the notice served to the branch on 15.01.2015. This is to be noted that the verification was relating to the year 2011-12 but the show cause notice pertains to the year 2012-13 & 2013-14 u/s 201(1)/201(1A)with no default amount. Therefore, the survey which was conducted illegally and ordered for different year. The show cause notice stated with no default amount but for the different years. Considering the facts and circumstances of the case the action of the ld. AO is illegal, and against the principal of natural justice. The same is a non curable defect u/s 292BB and thus, the order dated 19.02.2015 deserves to be set aside and quashed.
State Bank of India, Jaipur. 2. Without prejudice to the GOA-1, under the facts and circumstances of the case, the ld. AO erred in passing the assessment order on the assessee-in dfault (deductor bank) for two assessment years jointly through a single assessment order which is in violation of the provisions of the Income Tax Act. Thus, the assessment order passed u/s 201/201(1A) of the Act is unjustified and illegal and therefore, the same deserves to be quashed and set-aside.
In reference to this GOA-2, the humble assessee hereby submits the reply that the Assessment Year is defined u/s 2(9) means the period of twelve months commencing on the 1st day of April every year i.e. a period of twelve months beginning from April and ended by March.
Chapter XIV (Section 139 to 158) deals with the procedure for assessment and it specifically deals with assessment for a period of twelve months and not more than tax except for the block assessment. Likewise section 201 also enumerates the assessment for 12 months period only i.e. assessment year not more than 12 months period by a single assessment order.
It is further stated that all the appellate/demand/rectification proceedings are dealt with assessment year basis only i.e. for twelve months period only. In none of the situation assessment for two years is specified by the law. Hence, the order passed by the ld.AO jointly for the two assessment years was not in accordance with law and invalid.
In favour of the bank, the judgment is cited below for your ready reference :
Income Tax Appellate Tribunal – Delhi - M/s. Barnala Steel Industries Ltd. vs. ACIT, Muzaffarnagar on 5 September, 2019. The relevant para no. 8 is quoted here as under : “We have heard both the parties and perused all the relevant material on record. From the perusal of the notice issued u/s 153A r.w.s. 153C/143(2) of the Act, it is a clear case of overlooking the procedure and provisions set out5 in the Income Tax Act, 1961. Under these sections, the Assessing Officer cannot issue consolidated notices for different Assessment Years. It is a statutory requirement for each assessment year to issue statutory notice separately. The assessing Officer failed to comply with the statute under which the prescribed procedure is mandatory for the Revenue to be followed. The reliance of the ld.AR in case of Y. Narayana Chetty vs. ITO (35 ITR 388)(SC) is relevant in the present case, therefore, the notice itself is bad inlaw and void ab- initio. Thus, the assessment order does not survive. Thus is allowed. There is no need to go into the merits of the case.
Hence considering the aforesaid facts and judgments cited above, the order dated 19.02.2015 passed u/s 201(1) deserves to be set aside and quashed, as the ld.AO had failed to comply with the necessary guidelines/provisions in the matter i.e. proceedings were initiated and concluded without the authority of law and assessment of two years by a single order.
3. Without prejudice to the GOA-1 & 2, under the facts and circumstances of the case, the ld. AO erred in raising demand & Hon’ble CIT (A) erred in confirming the demand on the assessee- in-default (deductor bank) during the pendency of the SLP No. 16734/2023 & stay order wherein the assessee bank is bound to not to make any recoveries from the employee. Thus, the assessment order passed u/s 201/201(1A) of the Act deserves to be quashed and set-aside.
In reference to this GOA-3, it is hereby submitted that the SLP© No. 16734/2023 before the Supreme Court is pending. In the said SLP, Apex Court vide its Order 28.08.2023 has stayed the operation of the judgement of the Madras High Court in W.A. No. 1653/2022 and the Bank is directed not to make any recoveries from its employees during the pendency of the SLP. Even the ld. CIT (Appeals) in its order dated 21.03.2024 in Para 5.10(viii) has apprised the facts in relation to the stay of operation by the Hon’ble Apex Court vide interim order dated 28.08.2023. Further, the Hon’ble CIT Appeals has specifically mentioned in his order 5.23(i) ‘ The recovery of tax must be stayed by the AO till the stay of the Apex Court is vacated.’
Thus the ld.CIT (A) duly aware of the facts of the case but do not understand the bank’s position. Considering the same, the order
On the other hand, the ld. D/R supported the orders of the lower authorities and submitted that the order of the ld. CIT (A) be upheld.
We have heard the rival submission and perused the material on record. We note from the submission of Ld. AR for the assessee that on the issue of spot verification in this case under section 133A was conducted without obtaining proper authorization from the Competent Authority and therefore, the spot verification so conducted by the TDS Wing of the Department is illegal. Further the We directed the ld. D/R to provide the relevant material in this regard, in response to which, reply has been submitted by the ld. D/R on 25.09.2024 enclosing therewith spot verification approval and a sanction granted by ACIT TDS dated 22.03.2014 only and that too for FY 2011-12. We note that on verification of the documents so produced, it is apparent that for the FY 2011-12 the authorization was granted by the ACIT TDS only and no sanction was given for the FY 2012-13 and 2013-14 by the ACIT TDS or any higher authority of the Department. Whereas the matter in the instant appeal pertains to FY 2012-13 and 2013-14. As per proviso to section 133A, no action under sub-section (1) of section State Bank of India, Jaipur. 133A shall be taken by an Assistant Director or a Deputy Director or an Assessing Officer or a Tax Recovery Officer or an Inspector of Income-tax without obtaining the approval of the Joint Director of the Joint Commissioner, as the case may be. Since in this case no approval was granted by the Joint Commissioner of Income- tax or the Joint Director of Income-tax for the FY 2012-13 and 2013-14, therefore, the Spot Verification conducted by the ACIT TDS is without authority of law and is illegal. Taking into present facts and circumstances of the case Therefore, we are of the opinion that since the survey conducted by the ACIT TDS is illegal, hence no cognizance of the same can be taken thereon. Considering the above legal position, we quash the orders passed under section201/201(1A) of the IT Act.
5.1. From perusal of the record, we further noted from the copy of the judgment of the Hon’ble Supreme Court in SLP No. 16734/2023 dated 28.08.2023 furnished by the ld. A/R, the Hon’ble Supreme Court has till further orders, stayed the operation of the impugned judgment, and the Assessee shall not make any recoveries from its employees during the pendency of the present petition.
5.2. We, therefore considering the above legal aspects of the matter and respectfully following the judgment of Hon’ble Supreme Court, the order passed State Bank of India, Jaipur. by the ld. Addl./JCIT (A)-1 is against law and the same is set aside. Ground No. 1 allowed. 6. Since we have allowed Ground No. 1 and we do not consider it fit to go into merits of other grounds. 7. In the result, appeal of the assessee is allowed.