2019 (4) TMI 1480 - AT - Income Tax

Short deduction of TDS made to some specified parties - Assessee in default u/s 201(1A) - assessee filed revised return because there were some mistakes on the part of the assessee, wherein the LTDC (low tax deduction certificate) was rectified which was considered by the TDS - Assessee has taken a plea that online facility for verification of validity of LTDC was not functional at the time of deduction of taxes by the appellant on payments to the payees and therefore, the assessee cannot be termed as assessee in default - HELD THAT - This fact needs verification to ascertain the default of the assessee, particularly when no cancellation order of LTDC was supplied to the assessee. The assessee has objected that Annexure to Form 26A obtained from the payees was filed but the same has not been considered by the CIT(A), whereas in ground No. 9, the assessee states that no opportunity was given to the assessee to furnish Form 26A. It is necessary to examine Form No. 26 and all its annexures filed by the payees and the assessee is required to furnish the same in its support for verification. Assessee has challenged that the CIT(A) has failed to verify whether the payees have paid taxes on the income or not before saddling interest liability against the assessee. This fact also requires verification at the stage of AO before holding the assessee in default. In presence of all these facts, we remit the case back to the AO for deciding the core issue involved in this appeal after making due verification of the aforesaid aspects. Appeal is allowed for statistical purposes.

Summary

Issues Involved:
1. Demand upheld by CIT(A) - ?40,55,630
2. Legality of intimation under Section 154 and Section 200A
3. Demand raised due to processing of tax deduction statement under Section 200A
4. Violation of natural justice in issuing intimation under Section 154
5. Cancellation of certificates under Section 197 and principles of natural justice
6. Non-functional online verification facility for tax deduction certificates
7. Assessee's default status under Section 201(1)
8. Verification of payees' tax payments before raising demand
9. Non-compliance with Section 201(1) proviso and Form 26A submission
10. Levy of interest under Section 201(1A) for alleged short-deduction

Analysis:
1. The appeal challenged the CIT(A)'s decision upholding a demand of ?40,55,630 against the appellant. The appellant argued that the intimation under Section 154 and Section 200A was legally flawed, as it did not arise from an arithmetical error or incorrect claim apparent from the statement.

2. The appellant contended that the intimation issued by the Assessing Officer (AO) violated Section 154(3) and principles of natural justice by not providing an opportunity to show cause. Additionally, the cancellation of certificates under Section 197 was deemed unjust and against natural justice.

3. The non-functional online verification facility for tax deduction certificates was highlighted as a factor contributing to the appellant's non-compliance. The appellant argued that without proper verification tools, they could not be considered in default under Section 201(1).

4. The appellant raised concerns regarding the CIT(A)'s failure to verify payees' tax payments before raising the demand. It was argued that without this verification, interest liability under Section 201(1A) could not be justified.

5. The Tribunal remitted the case back to the Assessing Officer for thorough verification of various aspects, including the functionality of online verification tools, submission of Form 26A, payees' tax payments, and compliance with Section 201(1) proviso. The appellant was granted a reasonable opportunity to present evidence and arguments.

6. Ultimately, the Tribunal allowed the appeal for statistical purposes, emphasizing the need for proper verification and compliance before determining the appellant's default status and interest liability.