2014 (5) TMI 1041 - AT - Income Tax

Non deduction of tds - demand raised under section 201(1) and interest under section 201(1A) - assessees-in-default for non-deduction of tax at source on the interest paid to the depositors - Held that - A plain reading of section 197A(1A) shows that the said provision overrides the provisions of section 194A if the modalities prescribed in section 197A(1A) are complied with. The section further states that the person responsible for paying any income of the nature referred to in section 194 or section 194A or section 194K shall not deduct tax under any of the abovesaid sections in the case of a person, if such person furnishes a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner. Hence, it was contended by the learned authorised representative that the assessee cannot deduct tax at source, if the recipient of the interest amount furnishes declaration in the prescribed form. We have already noticed that the duplicate copies of declarations furnished by the depositors in Form 15H/15G are required to be filed with the Chief Commissioner or Commissioner. Under these circumstances, it is not clear as to how the Income-tax Officer (TDS) can reject those declarations furnished by the depositors. We notice that the tax authorities have not addressed these contentions also. Thus the Income- tax Officer (TDS) has passed the impugned orders without properly addressing the various contentions of the assessee. Accordingly, this matter requires fresh examination at the end of the Assessing Officer. Restore all the matters to the file of the Income-tax Officer (TDS) with the direction to examine all the issues afresh by duly considering various contentions urged by the assessee and take appropriate decision in accordance with the law. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Whether the learned Commissioner of Income-tax (Appeals) was justified in confirming the demand raised under section 201(1) and interest under section 201(1A) by treating the assessees as "assessees-in-default" for non-deduction of tax at source on interest paid to depositors.

Analysis:
The appeals were filed against orders by the Commissioner of Income-tax (Appeals)-III, Kochi for assessment years 2010-11 and 2011-12. The main issue was whether the demand raised under section 201(1) and interest under section 201(1A) was justified due to non-deduction of tax at source on interest paid to depositors. The assessees were branches of a Co-op Bank, and the Income-tax Officer found them in default for not deducting tax at source under section 194A of the Act. The assessees claimed they didn't deduct tax as depositors provided Form 15G/15H, exempting them from TDS under section 197A(1A). The Income-tax Officer noted delays in submitting forms to the Commissioner and defects in forms filled by depositors.

The first appellate authority upheld the Income-tax Officer's decision, leading to the appeals. The assessees argued they followed section 197A(1A) and weren't required to deduct tax. They cited a Gujarat High Court decision supporting their stance. The Department contended the assessees violated rule 29C(3) by not timely filing forms, and highlighted the requirement of furnishing permanent account numbers in declarations. The Tribunal noted discrepancies in the Income-tax Officer's observations and lack of clarity on defects in forms.

The Tribunal found the Income-tax Officer's orders lacking proper consideration of the assessees' contentions. It emphasized section 197A(1A) overriding section 194A and the need for compliance with prescribed forms. The Tribunal concluded the matter needed fresh examination by the Income-tax Officer, directing a reevaluation of all issues considering the assessees' arguments and making decisions in accordance with the law. Consequently, the appeals were allowed for statistical purposes, and the orders were set aside for reassessment.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both sides, and the Tribunal's decision to remand the matter for fresh examination, ensuring a fair and thorough review of the case.