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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Hon’ble Shri M.Balaganesh, AM ]
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH : KOLKATA [Before Hon’ble Shri N.V.Vasudevan, JM & Hon’ble Shri M.Balaganesh, AM ] I.T.A No. 1827/Kol/2016 Assessment Year : 2004-05 M/s SLS Investments Pvt. Ltd. -vs- ITO, Ward-59(3),TDS,Kolkata [PAN: AADCS 9398 H] (Appellant) (Respondent)
For the Appellant : Shri S.M. Surana, Advocate For the Revenue : Shri Arindam Bhattacharjee, Addl. CIT
Date of Hearing : 09.01.2018 Date of Pronouncement : 12.01.2018
ORDER Per M.Balaganesh, AM
This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-24, Kolkata [in short the ld CITA] in Appeal No. 55/CIT(A)-24/Kol/2008-09 dated 17.06.2016 against the order passed by the ITO, Ward-59(3), Kolkata [ in short the ld AO] under section 201(1)/201(1A) of the Income Tax Act, 1961 (in short “the Act”) dated 19.03.2008 for the Assessment Year 2004-05.
The brief facts of this issue is that the assessee paid interest to the tune of Rs. 2,13,087/- to 5 parties as under:
2 ITA No.1827/Kol/2016 M/s SLS Investments Private Limited A.Yr.2004-05
These payments were made without deduction of tax at source. The Ld. AO vide office letter dated 04.03.2008 asked to the assessee to explain with supporting documents as to why the assessee should not be treated as assessee in default u/s 201(1) of the Act in respect of such non-deduction of tax at source for payment of interest and why the order u/s 201(1)/201(1A) of the Act should not be passed against it for the said default. The assessee did not furnish any explanation to office letter and accordingly, the Ld. AO proceeded to levy tax and interest payable on the assessee amounting to Rs. 64,650/- by passing an order u/s 201(1)/201(1A) of the Act on 19.03.2008.
Before the Ld. CIT(A), the assessee pleaded that it had total paid a sum of Rs. 14,93,611/- towards interest during the financial year 2003-04 and has properly
3 ITA No.1827/Kol/2016 M/s SLS Investments Private Limited A.Yr.2004-05 deducted the tax at source thereon. In respect of interest payments made to aforesaid five parties, since the parties had provided form 15G to the assessee, no tax was deducted at source on these payments. It was further pleaded that all these assessees were not having any taxable income and hence, the assessee was not liable for deduction of tax at source. The assessee also stated that the copy of form 15G provided by these five parties were duly filed by the assessee before the Jurisdictional Commissioner of Income Tax-XXI, Kolkata on 07.04.2004. The Ld. CIT(A) called for the remand report from the Assessing Officer in this regard. The ld. AO in the remand report observed that the Inspector of Income Tax was deputed to verify whether the form no. 15G were actually filed by the assessee on 07.04.2004 in the office of the Ld. CIT. The Inspector reported that the office superintendent of the CIT office could not trace the relevant records/registers to check the veracity of the claim made by the assessee. The Inspector further verified the receipt register of the CIT(TDS), Kolkata, for the relevant period and observed that no such forms (i.e. form 15G) were received in the office of CIT(TDS), Kolkata on 07.04.2004. Accordingly, the Ld. AO in the remand report confirmed that the claim made by the assessee is not verifiable and the form no. 15G was not filed by the assessee before the Ld. CIT in due time. The Ld. CIT(A) accordingly dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before us on the following grounds: 1. That the appellant has submitted the form 15G at the office of CIT-XXI on 07.04.2004 vide its letter dated nil. If the relevant records/register could not be traced then the benefit should have been allowed to your appellant.
The Ld. CIT(A) has erred in fact and law by holding “The purported copy of form 15G has thus been furnished for the first time in the appeal stage and that too in June, 2012 more than eight years after the relevant financial year.”In fact these could not have been produced earlier as the Ld.ITO, TDS passed the order on the very next day of the first date fixed 3
4 ITA No.1827/Kol/2016 M/s SLS Investments Private Limited A.Yr.2004-05 for hearing when the Authorized Representative could not appear. Hence, there was no opportunity to produce the Form 15G earlier.
The Ld. CIT(A) has erred in fact and law by holding “The copies of the purported Form 15G has also been furnished much after the appeal was filed.” The evidence can be adduced at any time during the hearing and at the beginning it was argued that the Ld. ITO has erred in fact and law by holding that the Tax was not deducted on payment of interest to the corporate entities whereas the payment was made to individuals.
That the appellant craves the leaves to add, alter or abrogate any ground of appeal at the time of hearing.
We have heard the rival submissions. The Ld. AR placed on record a copy of form no. 26 containing the entire details of interest and tax particulars thereon made by the assessee for the total interest payment of Rs. 14,93,611/- which admittedly included the interest paid to the disputed aforesaid five parties in the sum of Rs. 2,13,087/-. He drew our attention to note no.6 attached to the said form no. 26 which is reproduced hereunder for the sake of convenience: “6. Write ‘A’ if the ‘lower deduction’ or ‘no deduction’ is on account of a certificate u/s 197. Write ‘B’ if no deduction is on account of declaration u/s 197A.” We find that the assessee had duly filled up in the column for non-deduction of tax at source explaining the reasons as ‘B’ in respect of interest paid to the aforesaid five parties. This goes to prove that the assessee had duly reflected in form no. 26 that there is no obligation for the assessee to deduct tax at source in respect of interest payment made to aforesaid five parties. Moreover, the Ld. AR also produced the copy of profit and loss balance sheet in respect of two parties before us for the relevant assessment year wherein we find that those parties do not have taxable income and hence the assessee would also not be entitled for
5 ITA No.1827/Kol/2016 M/s SLS Investments Private Limited A.Yr.2004-05 deduction of tax at source in terms of the ratio laid down by the Hon'ble Supreme Court in the case of Hindusthan Cocacola Beverages vs CIT reported in 293 ITR 226(SC). Hence, the assessee could not be treated as assessee in default even on this ground. With regard to the issue of form 15G not being verifiable, we find that the provision of Section 197A(1) of the Act clearly says that if the payees furnish declaration in writing to the assessee in the prescribed form, then the assessee need not deduct tax at source on the payments made to such payees. The provisions for furnishing of the said statutory forms (i.e. form 15G obtained from the payees) by the assessee before the Jurisdictional Commissioner of Income Tax is provided in 197A(2) of the Act, which in our considered opinion, is only procedural in nature. The said provision cannot be construed as mandatory condition and is only directory in nature. Moreover, the scheme of taxation provides for a separate penalty for violation of provisions of Section 197A(2) of the Act by imposing penalty u/s 272A(2)(f) of the Act, which is an independent issue. This goes to prove that the scheme of taxation had provided necessary checks and balances to take care of different provisions.
In view of the aforesaid facts and circumstances, we hold as under:
(i) It is not in dispute that the assessee had indeed obtained form 15G declaration in writing from the aforesaid five payees in time. Hence, the assessee is not liable for deduction of tax at source in terms of Section 197A(1) of the Act.
(ii) From the paper book filed by the assessee we find that Shri Sohanlal Joshi and Shri Somani Ram Avatar were not having taxable income and hence in any
6 ITA No.1827/Kol/2016 M/s SLS Investments Private Limited A.Yr.2004-05 case the assessee could not be treated as assessee in default in terms of ratio laid down by the Hon'ble Supreme Court in 293 ITR 226 (supra).
(iii) It has been orally mentioned by the Ld. AR that the remaining three parties also do not have any taxable income, though no evidences were furnished before us to that effect.
(iv) The assessee had duly reflected in the relevant column in form no. 26 by mentioning as ‘B’ which clearly stipulates the assessee had indeed obtained declaration in form 15G from the respective five payees in time. It is not in dispute that the said form no. 15G was very much available before the ld. AO before framing the assessment which is quite evident from the first line of the assessment order wherein the Ld. AO states that on ‘verification of records’ it was found……………………..
We find that the assessee had indeed deducted tax at source in support of other interest payments made by it as is evident from form no. 26. This goes to prove the bonafide conduct of the assessee in compliance with the provisions of the Act. The requirement of furnishing of form no. 15G declarations before the Jurisdictional Commissioner of Income Tax as per Section 197A(2) of the Act should only have to be constituted as directory in nature and not mandatory. Separate penal proceedings are provided u/s 272A(2)(f) of the Act for violation of procedural requirements provided in section 197A(2) of the Act.
In view of the aforesaid findings, we have no hesitation to hold that the assessee could not be treated as assessee in default in the facts and circumstances 6
7 ITA No.1827/Kol/2016 M/s SLS Investments Private Limited A.Yr.2004-05 of the case and accordingly the tax and interest levied in the sum of Rs. 64,650/- u/s 201(1)/201(1A) of the Act deserves to be cancelled. Accordingly, the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 12.01.2018
Sd/- Sd/- [N.V. Vasudevan] [ M.Balaganesh ] Judicial Member Accountant Member Dated : 12.01.2018 SB, Sr. PS Copy of the order forwarded to: 1. M/s SLS Investments Private Limited, 25, Strand Road, 4th Floor, Marshall House, R/n-430, Kolkata-700001. 2. ITO, Ward-59(3),TDS, Kolkata, 10B, Middleton Row, Kolkata-700071. 3..C.I.T.(A)- , Kolkata 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.