2022 (12) TMI 643 - AT - Income Tax

Short payment of TDS u/s 195 - error in depositing TDS under the wrong challan - assessee has declared dividends to its shareholder who is a non-resident as per the provisions of the Act - demand raised vide intimation issued u/s 200A/206CB - HELD THAT - Wrong challan filed by the assessee while depositing the tax deducted at source u/s 195 in respect of payment of dividend to the non-resident shareholder. From the applications filed by the assessee, a copy of which has been brought on record, we find that the assessee has pursued this matter with the concerned authorities and not only requested to consider the deposit of taxes on dividends by the company but has also prayed for correction of the challan from challan No. 280 to challan No. 281. From the copy of the email dated 06/12/2022, filed by the learned DR, we find that the office of DCIT (OSD) TDS has escalated the issue to CPC TDS for either necessitating the required changes in the challan from the backend or enabling the system to allow the TDS AO to do the same from his login at TRACES AO Portal. Therefore, we deem it appropriate to direct the concerned authority to make every possible endeavour of carrying out the necessary correction in the challan within a period of 2 months from the date of receipt of this order and grant the relief to the assessee as per law. As a result, grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues:
1. Challenge to demand raised for short payment of TDS under section 195 of the Income Tax Act, 1961.
2. Calculation of interest on short payment and late deduction of TDS under section 201 of the Act.

Analysis:

Issue 1: Challenge to demand for short payment of TDS under section 195:
The appeal was filed challenging the order passed by the Commissioner of Income Tax (Appeals) regarding the demand raised due to an error in depositing TDS under the wrong challan. The assessee declared dividends to a non-resident shareholder, deducting taxes under section 195 but mistakenly deposited the taxes using challan No. 280 instead of challan No. 281 meant for TDS. The assessee requested correction of the challan, but the demand was upheld by the CIT(A) as no formal request for correction was made to the TDS assessing officer. During the hearing, it was revealed that the assessee had filed letters requesting challan correction, and the TDS office was trying to rectify the error. The Tribunal directed the concerned authority to make efforts to correct the challan within two months and granted relief to the assessee.

Issue 2: Calculation of interest on short payment and late deduction of TDS under section 201:
The appeal also contested the calculation of interest on short payment and late deduction of TDS under section 201 of the Act. The CIT(A) upheld the interest levied, emphasizing the need for a formal request for correction of the challan. However, the Tribunal's decision to allow the appeal for statistical purposes implies a favorable outcome for the assessee regarding the interest calculation as well.

In conclusion, the Tribunal's decision favored the assessee by directing the concerned authority to correct the challan error and granting relief as per the law. The appeal was allowed for statistical purposes, indicating a positive outcome for the assessee in both the challenge to the demand for short payment of TDS under section 195 and the calculation of interest under section 201 of the Act.