INDIAN OVERSEAS BANK,CHENNAI vs. DCIT, CHENNAI

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

The assessee filed seven appeals against different orders

of Commissioner of Income-Tax, Chennai dated 25.03.2015 for the

ITA Nos.1320 to :- 2 -: 1326/Mds/2015.

above assessment years passed u/s.263 of the Income Tax Act, 1961

(herein after referred to as ‘the Act’). Since the issue in these appeals

are common in nature, hence these appeals are combined, heard

together, and disposed of by a common order for the sake of

convenience.

‘’1.1. The learned Commissioner of Income Tax erred in invoking revisionary proceeding under section 263 setting aside the order of AO granting refund and interest on TDS refunded with a direction to verify documents and exclude the period of delay attributable to assessee.

1.2. The learned CIT failed to appreciate that the order of AO was not erroneous and prejudicial to revenue, since the TDS was refunded based on "Indemnity Bond" in respect of "defective TDS" certificates, and in any case the appellant could not be held responsible for defects in TDS Certificates issued by Payee on whom duty is cast to issue valid certificate. Hence time taken to cure defects cannot be construed as delay in proceedings attributable to the appellant and interest withheld.

1.3. The learned CIT failed to appreciate that since money deposited on TDS made was with the government from the beginning and that there is no loss of revenue in the case of clerical mistakes on the certificates, setting aside an order of rectification of

ITA Nos.1320 to :- 3 -: 1326/Mds/2015.

AO, based on the strength of Indemnity Bond is unwarranted and unreasonable’’.

We consider the facts narrated in ITA No.1320/Mds/2015 3.

for assessment year 2001-02 for adjudication. The assessee bank

made a petition u/s.154 of the Act to the Assessing Officer to grant

credit of TDS not allowed in the original assessment though TDS

certificate are filed alongwith return of income. The assessee bank

while claiming TDS credit as per return of income found the TDS

certificates as defective due to technical mistakes in the nature of PAN

number, TDS challan particulars, date of deposit and no rubber stamp

of the deductor. The ld. Assessing Officer on verification of the TDS

certificates and supporting payments come to a conclusion as

genuiness of claim and TDS certificate are issued by banking

institutions, insurance companies and Government undertaking and

further on sample checking satisfied that the receipts have been

incorporated in the books of accounts. The ld.AO on the basis of

genuinity of transactions and Indemnity bond submitted by the bank

granted refund of TDS alongwith interest u/s.244A of the Act by

rectification order u/s.154 Dated 19.04.2013 as under:-

ITA Nos.1320 to :- 4 -: 1326/Mds/2015.

TDS credit as claimed by the 36,37,57,680/- assessee Less TDS credit given in the previous 22,15,22,032/- orders Balance TDS credit to be given as 14,22,35,648 claimed in the indemnity bond by the assessee Add Interest u/s.244A from April -01 - 11,24,21,352/- March 13

REFUNDABLE 25,46,57,000/-

Subsequently, the Commissioner of Income Tax issued show cause

notice for initiating proceedings u/s.263 of the Act dated 28.11.2014

as the assessee has filed return of income on 31.10.2001 and return

was processed u/s.143(1) of the Act on 29.11.2002. The ld.

Assessing Officer granted TDS credit to the extent of �22,15,22,032/-

as against total credit of �36,37,57,680/- in return of income and no

credit was allowed for defective TDS certificates to the extent of

�14,22,35,648/- and Assessing Officer completed assessment

u/s.143(3) dated 31.03.2004. Subsequent to the assessment,

assessee bank filed rectification petition, which the Assessing Officer

considered and passed order u/s.154 of the Act on 19.04.2013 granted

TDS claim based on Indemnity bond filed by the assessee alongwith

interest u/s.244A of the Act. The interest u/s.244A of the Act was

granted ignoring the fact of delay in filing of TDS certificate

attributable to the assessee and there is no proper verification by the

ITA Nos.1320 to :- 5 -: 1326/Mds/2015.

Assessing Officer and proceedings are erroneous and prejudicial to the

interest of the Revenue.

On the date of hearing, the assessee filed explanation by 4.

letter dated 13.12.2014 and also written submissions on defect in TDS

certificates and delay in refund of tax. On the issue of delay

attributable to the assessee, the assessee relied on the decisions of

various High Court and the Commissioner of Income Tax referred in

the order at page 3 as under:-

‘’As has been held in ClT v. Hindustan Lever Ltd ( 2012) 343 ITR 161, merely because the assessment order does not give any reasons for allowing the claim is not by itself indicative of the fact that the Assessing- Officer has not applied his mind on the issue. All the circumstances have to be seen. The credit for TDS claimed by the assessee is based on the strength of certificates produced before the AO. If there were any defects, the same is curable and not incurable. Once the defects were cured, the refund is made along with interest. This is an accepted position in law as to grant of credit. Withholding TDS credit on technical grounds causes harassment to the assessee. We invite your kind attention the order of Delhi High Court, decided on its own motion, All India Federation of Tax practitioners, (Writ Petition 2659 of 2012 dated 14.03.2013) directed CBDT to comply with various Mandamus issued by it. The court clearly held that, Denying the benefit of TDS because of the fault of the deductor, which is not attributable to the deductee causes unwarranted harassment and inconvenience etc. Viewing in this back ground, in our view, the order of the AO in compliance with Law cannot be held to be erroneous and prejudicial to revenue. Further, interest is granted for refund due to the assessee which is locked up with the

ITA Nos.1320 to :- 6 -: 1326/Mds/2015.

government and the technical defects, if any, will not disentitle the interest legitimately due’’.

The ld. AR considering the facts, submissions before Assessing Officer

and judicial decisions, such delay is not attributable to the assessee

and pleaded the order of the Assessing Officer is not erroneous or

prejudicial to the interest of the Revenue and drop the proceedings.

The ld. CIT considered the facts, rectification petition and order of

Assessing Officer and made a elaborate findings on the original

assessment and re-assessment proceedings were the assessee was

denied TDS credit in respect of TDS certificate which are defective as

per the order sheet entry dated 10.08.2007. The defective TDS

certificate were handover to the assessee and there is no evidence

regarding rectification of defects by the assessee. The Commissioner

of Income Tax (Appeals) on the order of original assessment has

directed the Assessing Officer to carry out verification of TDS claim.

Subsequently, the assessee filed a letter dated 15.03.2013 requesting

the Assessing Officer to allow TDS claim and submitted indemnity

bond. The ld. Assessing Officer on the basis of indemnity bond passed

rectification order u/sec. 154 of the Act dated 19.04.2013 allowing TDS

credit and granting interest u/s.244A of the Act on the refund to the

assessee from April, 2001 to March, 2013. The Assessing Officer

while granting refund has not done proper verification or applied his

ITA Nos.1320 to :- 7 -: 1326/Mds/2015.

mind whether the delay in proceedings resulting in refund wholly and

partly attributable to the assessee or whether any period to be

excluded under provisions u/s.244A(2) of the Act. Prime facie, the

Assessing Officer has not considered the time taken by the assessee to

file belatedly TDS certificates. Further, the ld. Commissioner of

Income Tax on perusal of the submissions and explanations of the

assessee bank was not satisfied with the issue of granting interest on

refund ignoring the delay attributable to the assessee and relied on the

Apex Court decision of Malabar Industrial Co. Ltd vs. CIT 243 ITR 83

observed at page 4 of order as under:-

‘’ There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is also when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind’’

and following the principles, the ld. Assessing Officer erroneously gave

TDS credit based on indemnity bond and interest u/s.244A without

excluding the period of delay attributable to the assessee. As no

interest u/sec.244A of the Act is payable for delay and also if there is

dispute on the time period exclusion, the matter has to be referred to

the Chief Commissioner of Income Tax who shall adjudicate on

ITA Nos.1320 to :- 8 -: 1326/Mds/2015.

granting of refund. In the present case, the Assessing Officer has not

referred to the higher authorities and granted refunded. The ld. CIT

for non application of mind by Assessing Officer and not excluding any

period of delay due to the lapse on the part of the assessee, relied on

the findings of the Mumbai Tribunal in the case of Kotak Mahindra

Finance Ltd vs. DCIT 93 ITD 7 further defective TDS certificates

collected for rectification of defects on 10.08.2007 and assessee has

not submitted TDS certificates after correcting the defects. The ld.

Authorised Representative at the time of hearing could not

substantiate arguments or gave a suitable reply regarding evidence of

rectification of defects in the certificate and returning to the Income

Tax Department. The factual findings being the Assessing Officer has

granted interest on refund based on the indemnity bond for the entire

period without excluding the delay attributable to the assessee as per

the provisions of law, therefore the order of the Assessing Officer is

erroneous and prejudicial to the interest of revenue and the ld.

Commissioner of Income Tax has set aside the rectification order

dated 19.04.2013 directing the Assessing Officer to examine the issue

afresh and verify the documents and also exclude the period of delay

attributable to the assessee for granting interest u/s.244A of the Act.

Aggrieved by the order of the Commissioner of Income Tax, the

assessee filed an appeal before the Tribunal.

ITA Nos.1320 to :- 9 -: 1326/Mds/2015.

Before us, the ld. Authorised Representative reiterated his 5.

submissions alongwith evidence and material filed before the Assessing

Officer and Commissioner of Income Tax in Revision proceedings and

argued the grounds that Direction of Commissioner of Income Tax

under revision proceedings in set aside off the rectification order of

Assessing Officer granting refund and interest on TDS to exclude the

period of delay attributable to the assessee is without any basis. The

TDS was refunded based on the indemnity bond and TDS has been

deducted, paid by Government institutions or other public sector

undertaking, further the time taken to cure defects cannot be

construed as delay attributable to the deductee as TDS was

deposited with the Government Treasury which is not disputed but

due to mistake in TDS certificates the action of the Assessing Officer

cannot be prejudicial to the interest of the Revenue and relied on the

findings of the Assessing Officer.

opposed to the grounds and the order is erroneous and prejudicial to

the interest of the Revenue as assessee bank has not submitted

rectified TDS certificates further Assessing Officer relied on the

indemnity bond and overlooked the provisions of Sec. 244A(2) of the

ITA Nos.1320 to :- 10 -: 1326/Mds/2015.

Act and relied on the Commissioner of Income Tax order and

substantiated his arguments with the judicial decisions.

We heard the rival submissions and perused the material on 7.

record, judicial decisions and circulars. The ld. Authorised

Representative of the bank submitted that the issue in dispute is on

the time lag of submitting rectified defective TDS certificates is not

attributable to the assessee as the deductee bank has to rectify with

correct PAN number, TDS Challan details and signature and rubber

stamp of the concerned authorities. For the above assessment year

there was a manual system of issuing form 16A by the deductor and

TDS credit is given on the basis of form 16A provided it is a defect free

and the Income Tax Department obtain indemnity bond from the

assessee for granting TDS credit in defective TDS certificate cases and

such practice is prevailing over a time and there is no dispute on the

issue of refund and interest on TDS based on indemnity bond but, the

Assessing Officer has to consider the provisions of Sec. 244A(2) of the

Act before granting the interest as under:-

‘’If the proceedings resulting in the refund are delay for reasons attributable to the assessee, whether wholly and in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the [Principal Chief Commissioner or]

ITA Nos.1320 to :- 11 -: 1326/Mds/2015.

Chief Commissioner of [Principal Commissioner or] Commissioner whose decision thereon shall be final’’.

We on perusal of rectification order, the Assessing Officer has not

made calculation sheet in granting interest for a specified period on

the refund and application of provision of Sec. 244A(2) of the Act

excluding the delay period attributable to the assessee. The return of

income filed manually alongwith TDS certificate before due date of

return if any TDS certificates could not filed alongwith return, it is duty

cast on the assessee to file its separately alongwith corresponding

letters at the earliest. As per the provisions, TDS credit has to be

given from the date of submissions of certificates. The Commissioner

of Income Tax has dealt in his revision order but Assessing Officer

seems to have overlooked the such calculations. We rely on the

decision of CIT vs. Varanasi Khanta Rao (2015) 56 Taxmann.com 175

(AP) were the lordship held the Commissioner of Income Tax has got

the power to point out errors which effect on Revenue and similar

issue of Sec.244A of the Act dealt by the High Court of Telangana and

Andhra Pradesh in the case of L. Madanlal Steels Ltd. vs. CCIT (2015)

56 taxmnn.com 13 (AP) where the assessee claimed for interest on

delay of refund based on the TDS certificate obtained subsequently,

and filed an affidavit and indemnity bond and it was held that where

ITA Nos.1320 to :- 12 -: 1326/Mds/2015.

there is no delay on part of the Department in making refund after

giving indemnity bond by the assessee no interest was allowable.

We considered the factual circumstances and the provisions 8.

of TDS and grant of interest u/s.244A of the Act, the assessee has

legitimate right to claim interest on refund provided the assessee

submits correct TDS certificate within the time and eligible for

interest on refund. It is the duty of the assessee in case of manual

certificate in form 16A to verify and submit to the Income Tax

Department and rectify the defects at the earliest. Such delay shall

not be a hindrance to the Department for granting refund. The

provisions of section 244A(2) of the Act should be considered at the

time of granting interest. The ld. Commissioner of Income Tax has

examined the issue and called for the explanations and verified the

provisions with the judicial decisions viz-a-viz explanations of the

assessee and we are not inclined to interfere with the order of

Commissioner of Income Tax in setting aside the rectification order

of Assessing Officer for verification and examine on provisions

applicable for granting interest. We, therefore do not interfere with

the order of Commissioner of Income Tax and uphold the same.

ITA Nos.1320 to :- 13 -: 1326/Mds/2015.

The appeal of the assessee in ITA No.1320/Mds/2015 is dismissed.

Consequently, the appeals of the assessee in ITA No. 1321 9. to 1326/Mds/2015 are also dismissed.

Order pronounced on Thursday, the 17th day of March, 2016, at Chennai.

Sd/- Sd/- (चं� पूजार�) (जी. पवन कुमार) (G. PAVAN KUMAR) (CHANDRA POOJARI) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य /ACCOUNTANT MEMBER चे�नई/Chennai �दनांक/Dated:17.03.2016 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF