2018 (2) TMI 876 - HC - Income Tax

TDS u/s 194(A)(1) - non deuction of tds on interest payments exceeding ₹ 10,000/- - provisions under Section 40(a)(ia) invoked - assessee contended that the co-operative bank was not required to deduct tax at source from the payment of interest on time deposits of its members paid or credited before 01.06.2015 - Held that - There has not been due application of mind to the stand taken by the petitioner in their reply dated 04.12.2017. The respondent has proceeded entirely on a different ground than what was mentioned in the show cause notice. The decision arrived at while completing the assessment is not on the ground on which the petitioner was required to show cause. This would be sufficient to set aside the impugned proceedings. That apart, the respondent has passed the impugned order by drawing a distinction between different types of Cooperative Societies and has stated that the petitioner is involved in banking business though it is a cooperative society and tax has to be deducted at source. In fact, this very issue was considered in M/s The Coimbatore District Central Co-operative Bank case 2016 (1) TMI 370 - MADRAS HIGH COURT . Respondent has not gone through the decision, copy of which was filed by the petitioner along with their reply to the show cause notice. The Assessing Officer was bound by the decision rendered by the jurisdictional High Court. It is stated that as on date there is no appeal by the revenue as against the decision in the case of Coimbatore District Central Cooperative Bank Ltd. That apart, in the assessee s own case for the previous assessment years, the Tribunal has held in favour of the petitioner assessee. Thus the impugned order calls for interference. Accordingly, the writ petition is allowed, the impugned order is set aside and the matter is remanded to the respondent for passing fresh orders

Summary

Issues:
Challenge to assessment order under Income Tax Act, 1961 for the assessment year 2015-2016 by a cooperative society. Maintainability of writ petition against assessment order. Non-compliance of TDS deduction under Section 194(A)(1) read with Section 194A(i)(b) of the Act by the petitioner cooperative society. Interpretation of exemption from TDS deduction provided under Section 194A from a prospective date. Application of decision of Division Bench in similar case. Distinction between different types of cooperative societies regarding TDS deduction. Effect of pending appeals on the orders passed by ITAT.

Analysis:
The judgment dealt with the challenge raised by a cooperative society against an assessment order under the Income Tax Act, 1961 for the assessment year 2015-2016. The respondent contended that the writ petition was not maintainable and the petitioner should pursue appellate remedies instead. However, the Court held that if there is a palpable error in the order, it can be challenged under Article 226 of the Constitution of India. The Court decided to entertain the writ petition based on settled legal principles.

The issue of non-compliance with TDS deduction under Section 194(A)(1) was raised by the respondent against the petitioner cooperative society. The petitioner argued that they were not required to deduct TDS before a specific date based on a circular issued by CBDT. Reference was made to a decision by a Division Bench in a similar case. The concept of single transaction and prospectivity vs. retrospectivity were discussed, supported by relevant documents and decisions.

The Court found that the assessment order did not consider the petitioner's submissions adequately and proceeded on different grounds. It highlighted the importance of following decisions of jurisdictional High Courts and noted the absence of any appeal against a relevant decision. The Court emphasized that pending appeals do not automatically stay orders passed by ITAT, which are binding on the Assessing Officer.

Ultimately, the Court set aside the impugned order and remanded the matter to the respondent for fresh orders. The respondent was directed to consider the Division Bench's decision and the CBDT circular while re-doing the assessment. The Court also referenced observations made by the Supreme Court in a related case. The judgment concluded by allowing the writ petition, without imposing costs, and closed the connected Miscellaneous Petition.