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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Satbeer Singh Godara & Shri Amarjit Singh
Revenue by : Sri.Sanjit Kumar Das, CIT-DR & Assessee by : Sri.N.R.Neelakandan, CA Date of Pronouncement : 13.08.2024 Date of Hearing : 13.08.2024 O R D E R Per Bench : This Revenue’s appeal in Cross Objection No.06/Coch/2024 arise out of order of the National Faceless Appeal Centre, Delhi (NFAC) [CIT(A)] dated 17.10.2023 vide DIN & Order No.ITBA/NFAC/S/250/2023-24/1057146676(1) passed u/s. 250 of the Income Tax Act, 1961 (the Act) for Asst.Year 2015-2016.
Heard both the parties. Case files perused.
“1. The learned Commissioner of income tax (appeals) erred in deleting the disallowance of Rs.5,84,50,143/- u/s 40a(ia) out of total disallowance of Rs. 14,77,64,857/- made in the assessment order.
2. The learned Commissioner of income tax(appeals) erred in not appreciating the fact that the disallowance of Rs.14,77,64,8571- (being 30% of Rs.49,25,49,525/-) was done for the reason that the assessee had made interest payments of Rs.57,85,99,593/- without deduction of TDS. The assessee had claimed that these payments were made to persons to whom the interest payments made during the Financial Year 2014-15 was less than Rs.10,000/-. However, on verification during assessment, it was found that interest payments to many of the depositors were more than Rs.10,000/-which was split and paid in various part of below Rs. 10,000/- and therefore the interest payments totaling to Rs.49,25,49,525/- were liable for TDS. This fact was not appreciated by the learned Commissioner of income tax(appeals) in his appellate order.
3. The learned Commissioner of income tax(appeals) erred in not appreciating the fact that the total interest payments made by the assessee during the Financial year 2014-15 was Rs.2,52,50,91,569/- (Rs.252.5 crores) and disallowance was made only on interest payments of Rs.57,85,99,593/-(57.86 crores). Out of Rs.252.20 crores, allowance was already given for payments which did not attract TDS such as interest paid to member societies amounting to Rs.152.37 crores, interest paid to exempted institutions amounting to Rs.15.9 crores and interest paid on receipt of 15G/H amounting to Rs. 19.48 crores.
4. Thus, allowance for Rs. 19,48,33,810/- (on account of Form 15G/H) was already given by the assessing officer during the course of assessment. This amount has again been allowed by the learned Commissioner of income tax appeals) stating that this is a double addition, without appreciating the facts of the case. It is very clear that the disallowance made in the assessment order of Rs.14,77,64,857/- (30% of Rs. 49,25,49,525/-) was a separate disallowance and was made after excluding the payments to persons from whom form 15G/H were collected.
The Palakkad District Co-op Society Ltd. 5. The learned Commissioner of income tax(appeals) erred in merely relying upon the submission of the assessee in their grounds of appeal that the said depositors from whom TDS was not deducted had submitted form 15G/H, without verifying the details or calling for a remand report from the Assessing Officer.
6. The act of the learned Commissioner of income tax(appeals) in deleting the addition of Rs.5,84,50,143/- being 30% of 19,48,33,810 is against the facts and circumstances of the case and not acceptable as per law.
7. For these and other grounds that may be urged at the time of hearing, the order of the Ld. CIT (A) may kindly be set aside and that of the Assessing Officer be kindly restored.
8. The appellant craves leave to add or amend any ground of appeal before it is finally disposed off.”
3. It emerges at the outset that the Revenue’s substantive grievance canvassed in the instant appeal seeks to revive the Assessing Officer’s action in invoking section 40(a)(ia) disallowance (s) of the Act on the ground that the assessee; a co-operative bank, had not deducted any TDS on the interest payment made to its members. We reiterate that the assessment year before us for A.Y. 2015-2016. And that the corresponding statutory provision herein, i.e., sec.194A(3)(v) has witnessed an amendment vide Finance Act, 2015 with effect from 01.06.2015 excluding only co-operate banks from TDS deductions than also including the societies from TDS exemption. We further clarify that there is further no material that the assessee / society had paid interest to non-members mandating TDS compliance. We thus conclude that even if the assessee is treated as a society or a bank, as the case may be, there is no merit in the Revenue’s instant appeal. which stands rejected therefore.
4. Next comes the assessee’s cross objection in CO No.06/Coch/2024, pleading the following substantive grounds:-
“1. The Learned CIT(A) - NFAC is not justified in disposing the appeal ex-parte without due regard to the change in composition of the Respondent's Charter by virtue of merger of Co-operative Societies thereby reducing the scope for receipt of communication of hearing notices due to obliteration of email address and other vital communication data percolated qua the Form No.35 filed along with the appeal before the first appellate authority.
The learned CIT (A) erred in concluding the appeal without due regard to the fact that the respondent had undergone a name change to Kerala Cooperative Bank Ltd since 29th November 2019 thereby preventing the service of notice effectively on the respondent and the access thereof through the tax portal of the department.
The Learned CIT (A) - NFAC is not justified in attributing contumacious conduct on the respondent to respond to posting of appeals by emails and percolation into ITBA Portal when there was a supervening impossibility on the part of the respondent to access the tax portal on account of change in constitution of the appellant.
The Learned CIT (A) - NFAC is not justified in alleging careless and non-serious attitude to respond to hearing notices without proper basis.
The Learned CIT (A) - NFAC is not justified in holding that the Assessing Officer has not exceeded his brief under limited CASS scrutiny by misinterpreting the scope therefor in respect of reasons for limited scrutiny to state that reasons for scrutiny are comprehensive.
6. The Learned CIT (A) - NFAC is not justified in disregarding the scope of limited scrutiny in respect of large other expenses shown in the P&L Account at Rs.95,94,732/- to dovetail the same under the scope of expenses in P&L Account as a generic word without proper basis.
The Learned CIT (A) - NFAC is not justified in misinterpreting the reasons for limited scrutiny under the heading "High Interest expenditure" against New Capital WIP The Palakkad District Co-op Society Ltd. or Fixed Assets to cover payment of interest to depositors under Sec.40a(ia) to dismiss the issue of breach of conditions for limited scrutiny initiated at the threshold in scrutiny proceedings for this assessment.
The Learned CIT (A) - NFAC erred in not granting opportunity to prove the exigencies for payment of interest beyond Rs.10,000/- without tax deduction at source in terms of declaration us.197A mandating non-deduction of tax at source to avoid mischief of Sec.40a(ia) of the Act.
The Learned CIT (A) - NFAC failed to understand the import of exclusions to disallowances u/s.40a(ia) applicable to the facts of the case and grant appropriate relief.
In any event the order of the Learned CIT (A) - NFAC to condone the acts of the Assessing Officer to exceed the brief of limited scrutiny under CASS and adjudicate on the merits of the disallowances is illegal, arbitrary, capricious and made without due regard to facts and circumstances on the appellant's case and the law applicable thereto.
The appeal filed by the department ought to be dismissed in-limini since the cause title of the respondent is wrongly shown to be "The Palakkad district cooperative society limited" in form no 36 signed by the appellant, instead of "The Palakkad district cooperative Bank limited".
For these grounds and for such other grounds that may be adduced at the time of hearing, it is prayed that the order of the Learned CIT (A) - NFAC be modified accordingly.”
5. Learned Counsel sought to justify the assessee’s alleged non-appearance in the lower appellate proceedings on account of communication gap(s). The fact also remains that the lower appellate authority has not adjudicated its various substantive grievances since he had chosen to restrict the impugned disallowance at 30% only. Faced with this situation, we deem it as a fit in the larger interest of justice, to restore the assessee’s cross objections back to the file of the CIT(A)/NFAC for his fresh appropriate adjudication as per The Palakkad District Co-op Society Ltd. law subject to a rider that the taxpayer shall plead and prove all the relevant facts within effective three opportunities at its risk only in the consequential proceedings.
This Revenue appeal 798/Coch/2023 is dismissed and assessee’s cross objection CO No.6/Coch/2024 is allowed for statistical purposes. A copy of this common order be placed in the respective case files.
Order pronounced in the open court on this 13th Day of August, 2024.