BANK OF INDIA,NAGPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, TDS, CIRCLE-51(1), NAGPUR

PER BENCH :

The instant batch of fourteen cases pertains to a

single assessee herein i.e., Bank of India [different branch(es)],

arises out of the National Faceless Appeal Centre [NFAC],

Delhi’s separate orders u/s.250 of the Income Tax Act, 1961

2 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

(in short "the Act"), involving proceedings u/sec.201 of the

Income Tax Act, 1961 (in short "the Act"). Relevant assessment

years are A.Y. 2012-13 to 2014-15; as the case may be.

Heard both the parties at length. Case files perused.

able assistance coming from both the parties that the

assessee’s identical sole substantive ground canvassed in the

instant appeals challenges correctness of the lower authorities

action treating it as an assessee-in-default for the purpose of

raising TDS demands u/sec.201(1) and consequential interest

thereupon u/sec.201(1A) of the Act, for the precise reason that

it had failed to deduct TDS on interest income(s) credited to various account holders. The assessee’s stand all along inter alia pleaded before the learned lower authorities that it had

duly collected Forms 15G/15H from the corresponding

account holders which forming the primary reason for not

deducting TDS on their respective interest incomes has

admittedly failed to invoke the learned lower authorities

concurrence thereby resulting in the impugned TDS recovery

and interest demands involving varying sums in the instant

batch of fourteen appeals. This leaves the assessee aggrieved.

respective stands during the course of hearing. Learned

counsel representing the assessee more particularly argued

3 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

that the impugned proceedings are time barred in assessment

year 2012-13 and 2013-14’s appeals as well u/sec.201(1)(3)

amended Finance Act, 2012 and 2014, as the case may be. His

next submission is that once the assessee bank has collected

the Forms 15G/15H from the corresponding customers, the

impugned TDS demands hardly deserve to be upheld in all

these cases.

learned lower authorities action treating the assessee to be in

default for having not deducted TDS on the interest income

credited in the respective account holder’s favour.

recent coordinate bench’s order in assessee’s case

ITA.No.277/Nag./2022 dated 28.08.2023 has rejected the

foregoing legal arguments and restored the latter issue on

merits back to the Assessing Officer as under :

“2. The only issue raised in this appeal is against the

confirmation of the order passed by the Assessing Officer (AO)

u/s.201(1)/201(1A) of the Act treating the assessee in default for

non-deduction of tax at source u/s 194A on interest paid/credited

to its customers along with interest thereon and also non-

condonation of delay by the ld. CIT(A) in presenting the appeal

before him.

4 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

Nationalised Bank engaged in the banking business. Section 194A

mandates that tax has to be deducted at source in respect of

interest paid/credited to the account of the customers. A spot

verification in some branches of the assessee bank was conducted

in March, 2016 and default in compliance was found anent to the

TDS provisions under the section. Information was collected from

Zonal office as regards the branches paying/crediting interest to

customers’ accounts, for an amount in excess of the basic

exemption limit, without deduction of tax at source on receiving

Form Nos.15G/15H. On perusal of such information, the AO

noted four cases, as tabulated on page 4 of his order, where

interest paid was more than the basic exemption limit but no

deduction of tax at source was made on receiving Form

Nos.15G/15H. After considering the reply and getting partially

satisfied, the AO held the assessee to be in default u/s.201 to the

tune of Rs.1,90,801/-.

delayed by 633 days. After granting credit in respect of Corona

period, the ld. CIT(A) observed that still there was delay of 324

days. The assessee tendered explanation in support of the delay,

as has been recorded in the impugned order as well. Not satisfied,

5 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

he did not condone the delay and dismissed the appeal on this

score. Without prejudice, he also discussed the issue on merits

rejecting the assessee’s contention that the order passed by the AO

u/s.201(1)/201(1A) was time barred and also that the AO was not

right in treating the assessee in default. Aggrieved thereby, the

assessee is in appeal before the Tribunal.

relevant material on record. The extant appeal came to be

dismissed by the ld. CIT(A) primarily on the ground of delay on

presentation. He did not agree with the assessee’s contention of

reasonable cause. The Pune Tribunal has dealt with a similar

issue of delay in preferring appeal before the Tribunal in the case

of Bank of India, Dongargaon Branch VS. DCIT (TDS) in ITA No.

337/Nag/2022 and others. The delay has been condoned vide order

dated 23.08.2023 holding that there was a reasonable cause in

presenting the appeal belatedly before the ld. CIT(A). Both the

sides are in agreement that the facts and circumstances of the

appeal under consideration are similar to those of the above

referred order. Following the similar view, we condone the delay

in presenting the appeal before the ld. CIT(A).

passing of the order u/s 201(1)/(1A). The claim of the assessee is

6 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

that the order passed by the AO was time barred in view of the

provisions contained in section 201(3)(i) as per which if the

statement is filed, then the time limit for passing of the order would

be two years from the end of the relevant assessment year in which

the statement is filed. For this proposition, he relied on the above

Pune tribunal order in its own case holding the order to be barred

by limitation. Per contra, the ld. DR contended that the time limit

for the year under consideration would be governed by the

amendment made to section 201(3) by the Finance (No.2) Act,

2014 w.e.f. 01-10-2014.

Act, 2014 w.e.f. 01-10-2014, provided a time limit of two years

from the end of the financial year in which the statement referred to in section 200 has been filed. The afore noted order of the Pune

Tribunal in the case of the assessee related to the Financial years 2009-10 and 2010-11 and the Tribunal held the orders u/s 201(1) as

time barred by noting that the period of two years from the end of the financial year in which the statement for the last quarter was filed,

expired prior to 1.10.2014, being, the date from which the substituted sub-section (3) came into existence. Instantly, we are dealing with the

financial year 2011-12. The statement for the last quarter in this case was filed on 15.5.2012. A period of two years from the end of the

financial year in which the last statement was filed expires on

7 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

31.3.2015. By that time, the substituted sub-section (3) has already come into place. Hence the case gets covered under the substituted provision.

has done away with the two classifications in the earlier provision,

viz., where the statement is filed by the person responsible and

where no such statement is filed. The time limit under the

substituted provision is seven years from the end of the financial

year in which the payment is made or credit for the income is

allowed. The order u/s 201(1)/(1A) came to be passed in this case

on 27.3.2019, which is within a period of seven years from the end

of the financial year in which the interest income was paid/credited

to the customers’ accounts. Such an order is clearly within the

limitation period. Thus, the ground of limitation raised by the

assessee does not stand. The same is, ergo, dismissed.

assessee to deduct tax at source. The ld. AR contended that the

assessee received Form Nos.15G/15H from the customers and as

such it was discharged from deducting tax at source. He relied on

Explanation to section 191 to contend that the assessee may be

treated as default only where the payees did not pay tax. It was

submitted that the submission of Form Nos. 15G/15H by the

8 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

depositors was sufficient enough to infer by the AO that the no tax

was payable by them on the interest income. This was opposed by

the ld. DR.

would be befitting to reproduce Explanation to section 191 as

under :

“Explanation.—For the removal of doubts, it is hereby declared that if any person including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer,

does not deduct, or after so deducting fails to pay, or does not pay, the whole or any part of the tax, as required by or under this Act, and where the assessee has also failed to pay such tax directly, then, such person shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default within the meaning of sub-section (1) of section 201, in respect of such tax.” 11. On going through the mandate of this Explanation, it gets

overt that the person responsible for deduction of tax at source can

be treated as assessee in default section 201(1) in respect of such

tax only if he does not deduct or fails to pay thereafter AND the

recipient has also failed to pay such tax directly. It is only upon the

cumulative satisfaction of both the conditions that the person

responsible can be treated as assessee in default. If there is failure

on the part of the assessee to deduct or pay after deducting the tax

at source, but the recipient has paid such tax directly on the

income, then the person responsible cannot be treated as an

9 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

assessee in default. It is the primary responsibility of the deductor

to deduct tax at source under the relevant provisions. When the

person responsible fails to deduct tax at source or pay after

deducting, he is to be treated as an assessee in default. The

deductor is relieved from this obligation with the payee including

such income in his total income and directly paying tax thereon.

In the absence of the recipient paying tax directly, the obligation of

the person responsible remains as it is. Another thing which

follows from this Explanation is that where the assessee (i.e. the

payee) has paid tax directly, the person responsible gets

discharged from the obligation in respect of such tax u/s 201(1). It

has no application qua the interest payable in terms of section

201(1A) of the Act.

admitted position that the assessee did not deduct tax source on the

interest payment made to its customers in respect of which it has

been treated as an assessee in default u/s.201(1). However, there

is no material to show that the recipient also paid such tax

directly. The contention of the ld. AR that on receipt of Form

No.15G/15H, its obligation is discharged and the assessee cannot

be treated as an assessee in default u/s.201(1), in our view, does

not pass the scrutiny of the mandate of Explanation to section 191,

10 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

which clearly provides that the recipient “has also failed to pay

such tax directly”. The requirement is to pay the tax directly and

not simply furnish Form No.15G/15H. The bank will be

discharged from the obligation of deducting tax at source when

Form No. 15G/15H is filed only to the extent of the relaxation

given section 197A.

197A with the heading: `No deduction to be made in certain

cases’. Sub-section (1) of section 197A provides that where the

recipient furnishes a declaration in writing (Form no. 15G) in

duplicate that the tax on his estimated total income in which such

income is included in computing total income will be Nil, then

there will be no obligation to deduct tax at source. Sub-section (1)

of section 197A covers certain sections, which does not include

section 194A. The latter section was there in sub-section (1) prior

to its omission by the Finance Act, 1992 w.e.f. 01-06-1992.

Simultaneous with such omission of section 194A from section

197A(1), sub-section (1A) of section 197A came to be inserted by

the Finance Act, 1992 w.e.f. 01-06-1992 including section 194A

within its ambit and providing that no deduction of tax shall be

made in the case of person (not being a company or firm) if such

person furnishes to the person responsible for paying any income

11 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

referred to in that section a declaration in writing to the effect that

tax on his estimated income of the previous year in which such

income is to be included in computing his total income, will be Nil.

Sub-section (1B) has been inserted by the Finance Act, 2002 w.e.f.

01-06-2002 providing that the provisions of section 197A shall not

apply where the amount of any income of the nature referred to in

sub-section (1)/sub-section (1A), if the aggregate of the amount of

such income credited/paid exceeds the maximum amount

chargeable to tax. When we read sub-section (1A) in juxtaposition

to sub-section (1B) of section 197A, it transpires that even if the

tax on the estimated total income of the recipient including interest

other than interest on securities will be Nil, but deduction of tax at

source would still be required where the amount of interest income

exceeds the basic exemption limit. Thus, on a harmonious

construction of the above provisions, it is manifest that a bank can

receive form no. 15G and need not deduct tax at source only in the

cases, where the declaration is given that the tax liability on total

income including the interest income will be Nil provided the

interest income does not exceed the basic exemption limit. But

where the interest income exceeds the basic exemption limit, the

bank needs to deduct tax at source notwithstanding the furnishing

of declaration in Form No. 15G and the bank will be treated as

12 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

assessee in default u/s 201(1), where not only it failed to deduct tax

at source but the customer also failed to pay such tax directly.

Reverting to the order u/s.201(1)/201(1A), it is seen that the AO

took up only those cases for treating the assessee in default where

the customers furnished Form No. 15G and the amount of interest

income exceeded the basic exemption limit.

notwithstanding anything contained, inter alia, in section 194A, no

deduction of tax shall be made in the case of any individual

resident in India who is of the age of 60 years or more at any time

during the previous year and he furnishes a declaration (in Form

No. 15H) to the person responsible that tax on his estimated total

income, will be Nil. The age of 60 years has been substituted for

the age of 65 years by the Finance Act, 2012 w.e.f. 01-07-2012.

read with section 197A and 201 is that there will be no obligation

to deduct tax at source on furnishing the necessary declaration by

customers where either the interest income does not exceed the

basic exemption limit or the depositor is more than the prescribed

age and he furnishes the declaration that tax on his total income

including interest from the bank will be Nil. In order to treat a

person as assessee in default, firstly, there should be an obligation

13 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

to deduct tax at source and despite such obligation, the person

fails to deduct tax at source or pay after such deduction and

further the payee has also not paid tax directly.

AO u/s.201(1)/201(1A). The effect of Explanation to section 191 is

that the payer cannot be treated as assessee in default in respect of

such tax notwithstanding the non-deduction of tax at source, where

the payee has paid the tax directly. The immunity on the payment

of tax directly by the payee is only anent to default in respect of tax

under section 201(1) and not 201(1A). In other words, even if the

assessee is not be treated as in default on the recipient paying the

tax directly, the assessee bank will still be under an obligation to

pay interest u/s.201(1A) for the period when the tax was deductible

up to the time of payment of tax by the payee.

i. Delay in filing the appeal before the ld. CIT(A) is condoned.

ii. The order u/s 201(1)/(1A) is not time barred.

iii. The question whether the assessee is in default in terms of

section 201(1) needs to be determined in the light of

Explanation to section 191. Howbeit, the cases covered u/s

197A(1A) [i.e. the eligible person furnishing declaration in

form No. 15G that his tax liability on total income, including

14 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

the interest, will be Nil] but not hit by section 197A(1B) [i.e.

interest income other than interest on securities as referred

to in section 194A does not exceed the basic exemption limit],

will at the outset be excluded from consideration as not

entailing any obligation to deduct tax at source. Similarly,

the cases covered u/s 194A(1C) [i.e. persons exceeding the

specified age furnishing form No. 15H to the effect that tax

on their total income including such interest will be Nil] will

also be excluded.

iv. Interest u/s 201(1A) is payable by the assessee - even w.r.t.

the cases where it is not in default in terms of Explanation to

section 191 - from the date when the tax was deductible up to

the date of filing of return by the payee including the interest

income in his total income. However, the cases in which

there is no obligation to deduct tax at source will not be

considered for interest u/s 201(1A) of the Act.

and send the matter back to the AO for passing a fresh order u/s

201(1)/(1A) in the light of above directions. In case it is found that

the recipients included such amount of interest in their total

income, then the assessee should not be treated in default in terms

15 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

of section 201(1). Needless to say, the assessee will be allowed

adequate opportunity of hearing in such fresh proceedings.”

We adopt the above reasoning mutatis mutandis in 6.

the instant batch of assessees’ appeals going by judicial

consistency to restore all these substantive grounds on merits

back to the Assessing Officer in very terms. Ordered

accordingly.

No other ground or argument has been pressed

before us.

allowed/allowed for statistical purposes in above terms. A copy

of this common order be placed in the respective case files.

Order pronounced in the open Court on 28.09.2023.

Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 28th September, 2023 VBP/- Copy to 1. The applicant 2. The respondent 3. The NFAC, Delhi. 4. The PCIT (TDS), Nagpur concerned. 5. D.R. ITAT, Nagpur Bench, Nagpur. 6. Guard File. //By Order// //True Copy //

Assistant Registrar, ITAT, Pune Benches, Pune.

16 I.T.A.Nos.359 to 366, 386 to 389, 391 & 392/NAG./2022

S.No. Details Date 1 Draft dictated on 26.09.2023 Sr.PS 2 Draft placed before author 27.09.2023 Sr.PS 3 Draft proposed & placed before the Author .09.2023 J.M. 4 .09.2023 A.M. Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS .09.2023 Sr.PS 6 Kept for pronouncement on .09.2023 Sr.PS .09.2023 7 Date of uploading of Order Sr.PS 8 File sent to Bench Clerk .09.2023 Sr.PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order