2023 (7) TMI 1446 - AT - Income Tax

Assessee in default u/s 201 - assessee was required to deduct TDS on the payment of interest by the assessee to its customers - assessee has not submitted complete documentary evidence showing party-wise interest payment and the corresponding 15G/15H for verification - as per AO deductor had paid an amount of interest in excess of Rs.10,000/- on deposits made by the customers on which TDS was applicable but the deductor-assessee has failed to deduct the TDS. HELD THAT - It is pertinent to note that the assessee must be maintaining accounts of its customers to whom interest was paid. Even if somebody has made Fixed Deposits, then also, it must be having complete details of the person, who has made the Fixed Deposits. The identity of those individuals could be matched with Form Nos. 15G 15H along with payment details. There fore by making a sweeping observation in a negative manner would not be sufficed to hold that information was not submitted by the assessee. The ld. Assessing Officer was required to specifically make reference to those details. Assessee has filed paper books in each year in A.Ys. 2016-17, 2017-18 and 2018-19 whereby it has tabulated the name of the person, to whom interest was paid, PAN, status and other details. Therefore, it is also pertinent to note that it is a District Central Cooperative Bank, who has maintained the details properly. Therefore, we are of the view that the impugned orders are not sustainable because the authorities below have failed to record specific finding of fact based on the documents submitted by the assessee in the Form 15G and 15H. Both the authorities have failed to comprehend that if the Forms 15G and 15H are partly submitted, then also the assessee will not be entitled for exclusion of that amount from the gross interest payment for which it can be held as the assessee in default. If this logic of the Revenue is accepted, then if one Form is not submitted then the assessee could be considered as an assessee in default for the whole interest payment, which was paid after collecting these forms properly. If the assessee is able to submit the details with respect to part of the amount paid without deducting the tax, then those details are to be considered by the Revenue before treating the assesese in default. For example in A.Y. 2016-17, the stand of the assessee is that it has submitted forms to the extent of Rs.4,07,56,170/- out of the total payment. This aspect ought to have been specifically dealt and a finding should have been recorded as to why this amount should also be considered for levying the TDS @ 10% alongwith interest. The persons who have received the interest payment from the assessee might not be a taxable assessee - Thus we allow all these appeals and set aside the impugned orders. We restore this issue to the file of ld. Assessing Officer for fresh adjudication - Appeals of the assessee are allowed for statistical purposes.

Issues Involved:
1. Whether the assessee should be treated as an assessee in default under section 201 of the Income Tax Act for failure to deduct TDS on interest payments.
2. Whether the assessee's submission of Forms 15G and 15H absolves it from the obligation to deduct TDS.
3. Calculation of interest under section 201(1A) of the Income Tax Act for failure to deduct TDS.
4. Verification of the default period and credit of TDS already paid.

Issue-wise Detailed Analysis:

1. Treatment as Assessee in Default:
The primary issue is whether the assessee, a Cooperative Society engaged in the banking business, should be treated as an assessee in default under section 201 of the Income Tax Act for failing to deduct TDS on interest payments to its customers. The Assessing Officer found that the assessee paid interest exceeding Rs.10,000 to customers without deducting TDS, leading to a significant tax liability. The assessee argued that it had obtained Forms 15G and 15H from customers, which should exempt it from the obligation to deduct TDS. However, the Assessing Officer rejected this contention because the assessee failed to upload these forms to the Income Tax Department's web portal as required by Rule 29C and 31ACB.

2. Submission of Forms 15G and 15H:
The assessee contended that it had obtained Forms 15G and 15H from customers, which should exempt it from deducting TDS. The CIT(Appeals) held that merely obtaining these forms does not absolve the deductor from being treated as an assessee in default. The Income Tax Act and Rule 29C mandate that the person responsible for paying any income must allot a unique identification number to each declaration received and furnish the particulars in quarterly statements to the Director General of Income Tax (Systems). The assessee failed to fulfill these requirements, leading to the conclusion that it should be treated as an assessee in default.

3. Calculation of Interest under Section 201(1A):
Since the assessee was treated as an assessee in default, the interest under section 201(1A) of the Income Tax Act became consequential and mandatory. The CIT(Appeals) directed that interest should be calculated from the date on which the tax was deductible to the date on which it was actually paid. The interest rate is 1% for every month or part of a month from the date the tax was deductible to the date it was deducted, and 1.5% for every month or part of a month from the date the tax was deducted to the date it was remitted to the government.

4. Verification of Default Period and Credit of TDS Already Paid:
The CIT(Appeals) directed the Assessing Officer to verify and calculate the default period for levying interest under section 201(1A) and to allow credit for TDS already paid by the assessee. The assessee had deposited a sum of Rs.69,11,617, which should be verified and credited accordingly. The Tribunal noted that the assessee had provided detailed records of interest payments and corresponding Forms 15G and 15H, which should be considered by the Assessing Officer before treating the assessee as in default for the entire amount.

Conclusion:
The Tribunal found that both the Assessing Officer and the CIT(Appeals) failed to record specific findings based on the documents submitted by the assessee. The Tribunal allowed the appeals for statistical purposes and remanded the case back to the Assessing Officer for fresh adjudication, emphasizing the need to verify the details provided by the assessee and to consider the forms submitted for part of the amount paid without deducting TDS. The Tribunal also highlighted that the assessee should not be treated as in default for the entire interest payment if it had submitted forms for part of the amount.

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