DCIT(TDS) CIR-58, KOLKATA, KOLKATA vs. ORIENTAL BANK OF COMMERCE, KOLKATA

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-XX, Kolkata dated 24.01.2014. Assessment was framed by ACIT(TDS), Circle-58, Kolkata u/s 201(1)/201(1A) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 30.03.2011 for assessment year 2009-10.

None appeared on behalf of assessee though notice of hearing was sent to assessee through RPAD. However we decided to hear the present appeal where we find that the hearing is possible without the appearance of A.Y. 2009-10 DCIT(TDS), Cir-58 Kol. Vs. Oriental Bank of Commerce Page 2 assessee or by Ld. AR. Md. Ghayas Uddin, Ld. Senior Departmental Representative represented on behalf of Revenue.

Only issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by Assessing Officer on account of short deduction of TDS on the payment of interest on securities.

Briefly, the facts are that assessee in the present case is a scheduled Bank and engaged in the banking business. The assessee in the year under consideration has made the payment of interest on securities without deducting TDS. Therefore, the AO has raised demand for TDS and interest u/s. 201(1)/201(1A) of the Act by treating the assessee in default.

Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition by observing as under:- “3. There is only one issue involved in all the grounds of appeal which relates to contention of the appellant against demand raised under order passed u/s 201/201(1A) of the IT Act, 1961 by the AO. The fact of the case is that the AO found that there was short deduction of tax during the year and therefore he passed the order u/s. 201(1)/201(1A) and raised a total demand of Rs.10,44,960/-. However, the appellant filed a copy of certificate issued by ACIT, Circle-3, Kolkata u/s 197(1) of the IT Act, 1961 dated 19.03.2008 by which tax was to be deducted at 0.10% out of payments were to be made to M/s. The Peerless General Finance and Investment Company Ltd. The certificate was valid from 01.04.2008 to 31.03.09. The AO had not considered the copy of certificate furnished by them, thereby, the tax was deducted and deposited as per IT Act, 1961 and there was no short deduction of tax as held by the AO. After going through the facts and circumstances of the case, I find merit in the argument of the appellant that the tax was deducted on the basis of certificate issued u/s. 197(1) of the IT Act, 1961. Therefore, there was no short deduction of tax on the part of the appellant. Hence, appeal on this ground is allowed.”

Before us Ld. DR submitted that assessee failed to furnish certificate issued u/s. 197 of the Act before AO at the time of assessment proceedings. The certificate was produced before appellate stage for the first time by assessee before the ld. CIT(A) which was admitted in contravention of the provision of Rule 46A of the Income Tax Rules, 1962. He further submitted that the TDS certificate u/s 197 of the Act which was submitted before Ld. CIT(A) at the time of appellate stage was issued by ACIT, Circle-3, Kolkata, which, in fact, should have been issued by TDS authorities. Ld. DR vehemently relied on the order of AO.

Heard Ld. DR and perused and carefully considered the materials available on record. The issue in the instant case relates to non-deduction of TDS on the payment of interest on securities. However, Ld. CIT(A) deleted the addition made by AO by having reliance on the certificate issued u/s 197 of the Act. It is settled proposition of law where the payee issues certificate to the deductor u/s. 197 of the Act then the TDS needs to be deducted @ specified in the certificate which is issued by the TDS authorities. However, on perusal of order of Authorities Below, we find the following defects in the order of Ld. CIT(A):- i) Additional evidence in the form of certificate u/s 197 of the Act has been accepted by Ld. CIT(A) in contravention of the Rule 46A of IT Rules, 1962 ii) TDS certificate has been issued by ACIT, Circle-3, Kolkata which in our considered view should have been issued by the TDS Authorities.