2024 (11) TMI 626 - AT - Income Tax

Failure to submit the form 15G/H to the Commissioner fo r TDS u/s 194A - Addition u/s 40(a)(ia) - branches had obtained Forms 15G/15H as applicable but assessee had not delivered the same to the prescribed authority under section 197A(2) - HELD THAT - We find that it is not in dispute that the assessee has collected the Forms 15G/15H from the depositors, to whom it has paid interest. However, on account of the fact that the assessee had not deposited the same before the concerned CIT, AO and the ld. CIT(A) have refused to consider this and the ld. CIT(A) has gone on to hold that these forms may be manipulated. It is observed that the AO has not examined or verified any of the Forms 15G/15H and therefore, such a conclusion, without examination, is not warranted. In the case of The Karur Vysya Bank Limited, Bellary 2017 (9) TMI 829 - ITAT BANGALORE referred to various judgments wherein it had been held that wherever there is any irregularity in the submission of forms for non-deduction of tax at source, the proper course of action is for the ld. Assessing Officer to verify the correctness of the forms and if the forms are found to be correct, the assessee cannot be held to be in default and no demand can be raised under section 201(1) and 201(1A). Thus we feel the failure to submit the form 15G/H to the Commissioner is a technical breach and the assessee cannot be saddled with a tax liability, only on this account. We observe that the basic purpose of submission of these forms to the Commissioner, is to enable verification of the same. Thus, we deem it appropriate, that the ld. Assessing Officer should verify the correctness of the Forms 15G/15H and if the forms are found to be correct, the assessee should be granted the relief under section 197A - restore the matter back to the file of the ld. Assessing Officer. Appeal of assessee is allowed for statistical purposes.

Summary

Issues:
1. Failure to deliver Forms 15G/15H to the prescribed authority under section 197A(2).
2. Disallowance of interest payments under section 40(a)(ia) due to non-deduction of tax at source.
3. Applicability of legal precedents regarding verification of Forms 15G/15H.

Analysis:

Issue 1: Failure to deliver Forms 15G/15H to the prescribed authority under section 197A(2).
The appeal was filed against the order of the ld. CIT(A)- Bareilly, which upheld the order of the Assessing Officer due to the failure of the assessee to deliver Forms 15G/15H to the Income tax authorities. The appellant argued that it had collected the required forms but failed to deliver them to the prescribed authority. The Tribunal referred to a similar case law where the appeal was allowed for statistical purposes as the forms were submitted but not considered in time by the authorities. The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to re-examine the issue after verifying the correctness of the forms.

Issue 2: Disallowance of interest payments under section 40(a)(ia) due to non-deduction of tax at source.
The District Cooperative Bank paid interest to depositors without deducting tax at source. The Assessing Officer disallowed a sum of interest payments under section 40(a)(ia) as the bank could not prove how Forms 15G/15H were obtained and submitted to the jurisdictional Commissioner. The CIT(A) upheld this decision, stating that failure to deliver the forms to the Income tax authorities raised suspicions of manipulation. The Tribunal noted that the bank had collected the forms but had not deposited them, leading to the disallowance. However, it emphasized the need for verification of the forms before imposing tax liability.

Issue 3: Applicability of legal precedents regarding verification of Forms 15G/15H.
The Tribunal cited various judgments emphasizing the importance of verifying Forms 15G/15H before holding the assessee in default for non-deduction of tax at source. It noted that failure to submit the forms to the Commissioner was a technical breach and should not automatically lead to tax liability. Following legal precedents, the Tribunal directed the Assessing Officer to verify the correctness of the forms and grant relief under section 197A if found correct. If not verifiable, the Assessing Officer was instructed to act in accordance with the law.

In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the CIT(A)'s orders and directing a fresh assessment after verification of Forms 15G/15H by the Assessing Officer.