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2014 (11) TMI 717 - AT - Income TaxTDS u/s 194 - Failure to prove regarding forwarding of Form No. 15G/H or not - Order u/s 201(1) and 201(1A) assessee in default - Held that - The assessee has furnished declarations in the prescribed format in respect of interest payment/credit made to depositors wherein tax was not deducted at source - instead of pointing out certain defects deficiencies/technical objections the AO should have accepted the declaration - Once a declaration is received from the depositor in the prescribed manner the deductor is under a statutory obligation not to deduct tax - the assessee cannot be penalized or saddled with liability u/s 201(1) or 201(1A) of the Act when the depositors to whom interest has been paid/credited have furnished declarations in the prescribed manner requesting not to deduct tax - merely because there are some technical defects in the declaration or they have been received after the date of credit of interest to the account of the payee they cannot be rejected thus the order of the CIT(A) is upheld Decided against revenue. Deletion of penalty u/s 271C Demand already set aside so penalty cannot be levied - Held that - Before the AO u/s 201(1) & 201(1A) of the Act the assessee had produced declaration in form 15G in respect of the payments/credits where tax has not been deducted at source the AO has not accepted the declaration by observing that at the time of survey only some of the declarations were found and others were obtained by the assessee only after the date of payment/credit of the interest - Even out of the declarations found at the time of survey the AO refused to accept many by pointing out certain defects and deficiencies - the demands have been deleted the penalty also cannot survive - once the depositors have furnished the declaration in prescribed manner requesting the deductor not to deduct tax at source the deductor is under a statutory obligation not to deduct tax thus the order of the CIT(A) is upheld Decided against revenue.
Issues Involved:
1. Deletion of demand raised under sections 201(1) and 201(1A) of the Income-tax Act for the assessment year 2009-10. 2. Deletion of penalty imposed under section 271C of the Income-tax Act for the assessment years 2009-10 and 2010-11. Issue-wise Detailed Analysis: 1. Deletion of Demand Raised Under Sections 201(1) and 201(1A) of the Income-tax Act for the Assessment Year 2009-10 The department appealed against the CIT(A)'s order that deleted the demand raised under sections 201(1) and 201(1A) of the Income-tax Act for the assessment year 2009-10. The department's grounds for appeal included the assessee's failure to produce evidence that Form No. 15G/H had been forwarded to the jurisdictional Commissioner of Income-tax, which is a statutory requirement, and the contention that the Assessing Officer (AO) had provided sufficient opportunity to the assessee. The assessee, a Public Sector Bank, was subjected to a survey under section 133A, where discrepancies in TDS compliance were found. The AO initiated proceedings under section 201 and found that the bank had not deducted tax in cases where interest payments exceeded Rs. 10,000, and the necessary Form 15G declarations were either missing or defective. Consequently, the AO raised a total demand of Rs. 4,72,009 under sections 201(1) and 201(1A). Upon appeal, the CIT(A) deleted the demand, reasoning that the Forms 15G/15H were available but not seized during the survey, and that the AO should have allowed the assessee to rectify deficiencies in the forms. The CIT(A) cited case laws, including the ITAT Jodhpur Bench in the case of *Income Tax Officer v. Pearl Organic Coating* and the Hon'ble Madras High Court in *Vijay Hemanth Finance and Estate Limited v. ITO*, which supported the view that declarations received after the date of credit of interest could still be valid and the assessee should be given an opportunity to rectify deficiencies. The Tribunal upheld the CIT(A)'s order, agreeing that the AO's rejection of the declarations based on presumption and technical defects was incorrect. The Tribunal emphasized that once a declaration in the prescribed manner is received, the deductor is under a statutory obligation not to deduct tax. Thus, the assessee could not be penalized or held liable under sections 201(1) and 201(1A) when the depositors had furnished the necessary declarations. The department's appeal was dismissed. 2. Deletion of Penalty Imposed Under Section 271C of the Income-tax Act for the Assessment Years 2009-10 and 2010-11 The department also appealed against the CIT(A)'s order that deleted the penalty imposed under section 271C for the assessment years 2009-10 and 2010-11. The AO had imposed penalties based on the demands raised under sections 201(1) and 201(1A), as the assessee failed to appear and explain during the penalty proceedings. The CIT(A) deleted the penalties, noting that the defaults were curable and that the AO should have given the assessee an opportunity to rectify deficiencies in the declarations. The CIT(A) referenced the ITAT Jodhpur Bench's decision in *Pearl Organic Coating* and the Hon'ble Madras High Court's decision in *Vijay Hemanth Finance and Estate Limited v. ITO*, which supported the view that penalties should not be imposed when the declarations were subsequently rectified. The Tribunal upheld the CIT(A)'s order, stating that the penalties could not survive since the demands had been deleted. The Tribunal reiterated that once the depositors furnished the declarations in the prescribed manner, the deductor was under a statutory obligation not to deduct tax, and thus, could not be penalized for non-deduction. The department's appeals were dismissed. Conclusion In conclusion, the Tribunal upheld the CIT(A)'s orders, deleting both the demand raised under sections 201(1) and 201(1A) and the penalties imposed under section 271C for the relevant assessment years. The Tribunal emphasized the importance of allowing the assessee to rectify deficiencies and the statutory obligation of the deductor not to deduct tax upon receiving the necessary declarations. Both the department's appeals and the assessee's cross objections were dismissed.
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