2021 (10) TMI 5 - AT - Income Tax

TDS u/s 194A - Short deduction of tax /default in tax deduction on interest paid on FDR s/KDR s - HELD THAT - During the course of hearing, the appellant was asked to furnish copy of FDRs accounts to show and establish that no interest is accrued and credited to the specific accounts during the year. The appellant failed to furnish the same during the course of appeal proceedings - as brought out by the A.O. the appellant was deducting and depositing TDS on quarterly basis on these FDRs/KDRs till 2011-12. As appellant has not been able to establish that it is covered by circular 3/2010. By not deducting T.D.S. at the time of making a provision, the appellant has violated the explanation to section 194A therefore, hold that the order passed by the Assessing Officer treating the appellant as an assessee in default, u/s.201 r.w.s. 194A of the Income tax Act is correct and deserves to be sustained. A.O. has already passed the rectification order dated 12.01.07 wherein the demand on account of short deduction has been reducedby giving credit for TDS deducted at the year end. The balance short deduction and interest computed in the aforementioned rectification order is accordingly upheld. We have gone through the same and do not find any infirmity. Allowing set off of excess tax deducted in subsequent quarters - We find that the same has already been considered and allowed by the CIT(A). After confirming the order of the AO that TDS on interest paid on FDR s and TDR s was required to be deducted quarterly as opposed to yearly deduction by the assessee, he went on to hold that the AO should give credit of tax deducted at the year end and further noted that a rectification order dated 12.01.07 to this effect reducing the demand on account of short deduction of TDS has already been passed by the AO. We fail to understand the grievance now remaining to be addressed on this account. Ground of appeal No.1 is therefore dismissed. Not implementing Circular No.03/2010 of the CBDT - We find that the Ld.CIT(A) has given a clear finding that the assessee was unable to establish how it was covered under the said circular. The import of the said circular, we find is that the CBDT had clarified that on account of the Core Branch Banking Solution (CBS) Software wherein for monitoring purposes alone interest is calculated on daily or monthly basis and is swept and kept in provisioning account, TDS is not to be deducted at this point but at the time of giving actual credit to the depositors. CIT(A) found that the assessee was unable to establish that it was covered by the said circular - no reason to interfere with the order of the Ld.CIT(A). Default for not deducting tax on interest payments where Form No.15G/15H had not been obtained - plea of the assessee being that the interest payment related to persons who were litigants on whose behalf various courts/judges/registrar of High Court had made deposits with the bank - Before us the plea of the assessee is that the said circular has been quashed by Hon ble Delhi High Court. But no such decision has been brought to our notice. In view of the same, we cannot but uphold the findings of the Ld.CIT(A).

Summary

Issues Involved:
1. Appeal against order passed by CIT(A) under Income Tax Act, 1961.
2. Failure of assessee to attend proceedings leading to ex parte hearing.
3. Default in TDS compliance by a Public Sector Bank during survey action.
4. Dismissal of additional grounds raised by assessee before CIT(A).
5. Grounds of appeal related to TDS deduction, Circular No. 03/2010, and non-deduction of tax on interest payments.
6. Interpretation of Circular No. 03/2010 and Circular No. 8 of 2011 by CIT(A).
7. Denial of relief to assessee for not deducting tax on interest payments without Form No. 15G/15H.
8. Allegation of Circular No. 8 of 2011 being quashed by Delhi High Court.

Analysis:
1. The appeal was filed against the CIT(A)'s order under the Income Tax Act, 1961. The assessee failed to attend proceedings, leading to an ex parte hearing. The case involved a Public Sector Bank's default in TDS compliance during a survey action, where issues related to TDS deduction and non-compliance with tax deduction provisions were raised.
2. The CIT(A) dismissed additional grounds raised by the assessee and upheld the AO's order on TDS default issues. The grounds of appeal included challenges to the demand raised, interest charges, and non-implementation of Circular No. 03/2010 by the assessee.
3. The CIT(A) interpreted Circular No. 03/2010 and Circular No. 8 of 2011, finding that the assessee failed to establish coverage under the circulars. The CIT(A) denied relief to the assessee for not deducting tax on interest payments without obtaining Form No. 15G/15H.
4. The assessee's plea regarding the quashing of Circular No. 8 of 2011 by the Delhi High Court was not substantiated. As a result, the findings of the CIT(A) were upheld, leading to the dismissal of the appeal. The judgment was pronounced on 27.08.2021.