2022 (1) TMI 1087 - AT - Income Tax

TDS u/s 194A - assessee in default under the provisions of section 201(1)/201 (1A) of the Act on account of non-deduction of TDS - HELD THAT - The proviso to section 201(1) provides that the assessee shall not be deemed assessee in default provided if the payee has furnished the return of income u/s 139 of the Act after considering the income which was subject to the provisions of TDS and paid the tax on such income. To this effect, the assessee was to furnish the certificate from the qualified chartered accountant in the prescribed form. Admittedly, the contentions raised before us were also raised by the assessee before the learned CIT (A) but no benefit was extended by the learned CIT (A) to the assessee on the ground that the submission of the assessee was without the supporting evidence. Even before us, we do not find any documents supporting the contention of the assessee except the submission as discussed in the preceding paragraph. Onus upon the assessee to furnish the CA certificates that the payee has paid necessary taxes on income credited by the assessee. However in the case on hand the assessee has submitted PAN of the payee and claimed that the payee has filed income tax return for the year dated 13-07-2009 and declared gross total income of ₹ 1,71,031/- before claiming deduction under section 80C and 80D for ₹ 56,230/- which includes interest income credited by assessee bank. The claim of the assessee bank was very much verifiable by the revenue authority from the income tax record of the payee. None of the authorities below verified the genuineness of the claim of the assessee. We are of the view that the proviso to section 201(1) in beneficial in nature hence the same should be applied in liberal manner. In the case on hand the payee to whom interest income was credited by the assessee bank is an individual and arguably declaring very nominal income which is below the taxable limit. Thus in our understanding the fact that weather the payee has included the interest income in return of income can be easily verified. Therefore we set aside the issue to the file of the AO with the liberty to verify the fact that weather the payee has included the interest income in his return filed for the year or not and determine the issue accordingly. Hence, the ground of appeal of the assessee is allowed for the statistical purposes.

Issues:
1. Assessee's failure to appear for the hearing despite multiple notices.
2. Grounds of appeal raised by the assessee.
3. Treatment of the assessee as in default under sections 201(1) and 201(1A) of the Income Tax Act.
4. Interpretation of provisions related to TDS under section 194A of the Act.
5. Discrepancy regarding TDS deduction on interest paid by the bank.
6. Consideration of payee's income tax return in determining default status.
7. Application of the proviso to section 201(1) of the Act.
8. Verification of payee's inclusion of interest income in the income tax return.

Analysis:

1. The appeal was filed by the Assessee against the order of the Commissioner of Income Tax (Appeals) but the Assessee failed to appear for the hearing despite multiple notices. The tribunal decided to proceed with the adjudication after noting the lack of cooperation from the Assessee's side.

2. The Assessee raised several grounds of appeal, challenging the actions of the Commissioner of Income Tax (Appeals) in passing the appellate order related to TDS, interest, and the handling of the appeal proceedings.

3. The main issue was whether the Assessee should be treated as in default under sections 201(1) and 201(1A) of the Income Tax Act due to non-deduction of TDS under section 194A. The Assessee argued that no TDS was deducted based on the payee's declaration below the taxable limit.

4. The Assessing Officer (AO) calculated the TDS amount due under section 194A and raised a demand, contending that the payee's income exceeded the non-taxable limit specified in section 197A(1A) of the Act.

5. The tribunal considered the discrepancy in TDS deduction on interest paid by the bank to a party and the contention that the payee had submitted Form 15H/15G, exempting TDS deduction.

6. The tribunal analyzed the treatment of the Assessee as in default under section 201(1) based on the payee's income tax return and the claim that the payee had already considered the interest income received from the bank.

7. The tribunal applied the proviso to section 201(1) which provides conditions for not deeming the Assessee as in default if the payee has paid tax on the income subject to TDS. The importance of furnishing a certificate from a chartered accountant was highlighted.

8. The tribunal emphasized the need for supporting evidence regarding the payee's tax payments and directed the Assessing Officer to verify whether the payee had included the interest income in the income tax return. The tribunal allowed the appeal for statistical purposes.

In conclusion, the tribunal's decision focused on the verification of the payee's income tax return to determine the default status of the Assessee regarding TDS deductions on interest payments, emphasizing the importance of supporting evidence and fair application of the relevant provisions of the Income Tax Act.

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