2025 (4) TMI 919 - AT - Income Tax

Orders passed u/s 201(1)/201(1A) - short or non deduction of TDS on interest payment - HELD THAT - Assessee submitted that assessee being the branch of the bank has to file the relevant evidence as to availing of Form no. 15G/H or 27BA so prove that the payee has paid the tax. From the order it is also revealed that in some case PAN number was not mentioned but in fact branch may have the same and the assessee might have submitted those details along with the form 15G/H in the alleged default of the short deduction or non-deduction cases as listed in the order under challenged. Based on that set of facts assessee prayed to grant an opportunity to the assessee to present those facts on merits of the disputes as the assessee has sufficient reason to establish the non-deduction of tax by filing 27BA also that the tax to that interest paid by the branch has already subjected to tax by the payee. Considering the specific prayer of the assessee the bench is of the view that lis between the parties has to be decided on merits so that nobody s rights could be scuttled down without providing an opportunity of being heard to the assessee. Therefore based on those facts we deem it fit to remand the matter to the file of the ld. AO who will consider the factual aspect of the matter as raised by the assessee after due verification of the facts and charge the correct income in hands of the assessee after affording due opportunity to the assessee and dealing with the evidence placed on record. However the assessee will not seek any adjournment on frivolous ground and remain cooperative during proceedings before the ld. AO. Appeal filed by the assessee is allowed for statistical purposes.

Issues Presented and Considered

1. Whether the delay of 482 days in filing the appeals by the assessee is liable to be condoned under Section 5 of the Limitation Act, 1963, considering the reasons advanced by the assessee including merger of the bank, administrative changes, and communication gaps.

2. Whether the orders passed under Section 201(1)/201(1A) of the Income Tax Act, 1961, and the corresponding notices issued by the Assessing Officer (AO) are valid and within jurisdiction.

3. Whether the ex-parte disposal of the appeals by the learned Commissioner of Income Tax (Appeals) (CIT(A)) due to alleged non-service of notices and non-filing of evidence by the assessee violated principles of natural justice and is liable to be set aside.

4. Whether the demand of tax and interest under Section 201(1) and 201(1A) of the Income Tax Act on account of short or non-deduction of Tax Deducted at Source (TDS) on interest payments is justified and sustainable in law and on facts.

5. Whether the assessee, being a branch of a nationalized bank, is entitled to file relevant evidence such as Forms 15G/H or 27BA to prove that tax was already paid by the payees, thereby negating the liability for short deduction or non-deduction of TDS.

Issue-wise Detailed Analysis

1. Condonation of Delay in Filing Appeals

Legal Framework and Precedents: Section 5 of the Limitation Act, 1963 empowers courts and tribunals to condone delay if sufficient cause is shown. The Supreme Court in Collector, Land & Acquisition v. Mst. Katiji & Others (1987) 167 ITR 471 (SC) emphasized a liberal approach to condonation of delay to ensure substantial justice. Subsequent decisions such as N. Balakrishnan v. M. Krishna Murthy (1998) 7 SCC 123 and Vedbai vs. Shantaram Baburam Patil & Others 253 ITR 798 (SC) reiterated that "sufficient cause" should receive a liberal construction, and delays caused by counsel's mistakes or administrative changes constitute sufficient cause.

Court's Interpretation and Reasoning: The assessee, a branch of a nationalized bank, contended that the delay was caused due to merger of the bank (Oriental Bank of Commerce with Punjab National Bank), resulting in administrative restructuring, changes in email IDs, and communication gaps. Notices and orders were sent to obsolete or unmonitored email IDs, and the counsel was under the impression that the assessee was duly informed. The delay was not due to negligence but bona fide reasons.

The Tribunal noted that the delay of 482 days was substantial but accepted the reasons as sufficient cause. The Tribunal relied on the binding precedent of Collector, Land & Acquisition v. Mst. Katiji & Others and other Supreme Court rulings advocating a liberal approach. The Revenue did not dispute the facts but left the decision to the Tribunal's discretion.

Conclusion: The Tribunal held that the delay in filing the appeals was condoned, allowing the appeals to be heard on merits.

2. Validity and Jurisdiction of Orders under Section 201(1)/201(1A)

Legal Framework: Section 201(1) of the Income Tax Act, 1961, deals with the liability of a person responsible for deducting tax at source who fails to do so. Section 201(1A) provides for interest on such default. The jurisdiction of the AO to pass such orders is governed by the Act and procedural fairness.

Court's Interpretation and Reasoning: The assessee challenged the validity of the orders and notices issued under Section 201(1)/201(1A) on grounds of jurisdiction and procedural irregularities. The Tribunal observed that the AO issued a letter seeking information on interest paid/credited on fixed deposits. The bank submitted the information, and the AO found short deduction of TDS amounting to Rs. 7,26,006/- and computed interest accordingly.

The Tribunal did not find any jurisdictional infirmity in the issuance of orders and notices by the AO. The orders were passed in accordance with the provisions of the Act and based on information submitted by the assessee.

Conclusion: The orders and notices under Section 201(1)/201(1A) were valid and within jurisdiction.

3. Ex-parte Disposal of Appeals by CIT(A) and Violation of Natural Justice

Legal Framework: Principles of natural justice require that an assessee is given adequate and reasonable opportunity of being heard before adverse orders are passed. Ex-parte orders can be passed only if the assessee deliberately avoids participation or fails to respond despite opportunities.

Court's Interpretation and Reasoning: The CIT(A) had dismissed the appeals ex-parte on the ground that the assessee failed to file sufficient evidence or respond to notices, despite receiving the assessment order and filing the appeal. The CIT(A) held that the assessee showed disregard for due process and failed to avail opportunities to plead its case.

The Tribunal noted the CIT(A)'s findings but also considered the assessee's contention that the ex-parte order was passed without providing adequate opportunity and that the non-filing of evidence was due to genuine reasons such as absence of PAN details and submission of Forms 15G/H or 27BA which could prove tax payment by payees.

Application of Law to Facts: The Tribunal emphasized that the lis between parties should be decided on merits and that nobody's rights should be scuttled without an opportunity to be heard. The Tribunal found merit in the assessee's plea for an opportunity to present evidence and set aside the ex-parte order.

Conclusion: The ex-parte order was set aside, and the matter was remanded to the AO for fresh adjudication after affording due opportunity to the assessee.

4. Demand of Tax and Interest under Section 201(1) and 201(1A) on Short/Non-Deduction of TDS

Legal Framework: Section 201(1) imposes liability on a person responsible for deducting tax who fails to do so. Section 201(1A) provides for interest on such defaults. The assessee can discharge liability by proving that tax was deducted and paid or that the payee had already paid tax.

Court's Interpretation and Reasoning: The AO found short deduction of TDS on interest payments to depositors. The assessee contended that it had submitted Forms 15G/H or 27BA to prove that payees had paid tax, which would absolve the assessee from liability.

The Tribunal held that the factual aspects concerning submission of such forms and evidence of tax payment by payees require verification. It directed the AO to consider these facts afresh after due opportunity to the assessee.

Conclusion: The demand and interest under Section 201(1) and 201(1A) were not upheld outright; the matter was remanded for fresh adjudication on merits.

5. Entitlement of Assessee to Submit Forms 15G/H or 27BA as Evidence

Legal Framework: Form 15G/H are declarations by payees claiming non-deduction of TDS, and Form 27BA is a certificate of TDS deduction by banks. Submission of these forms can establish that tax liability was discharged by payees or deducted by the bank.

Court's Interpretation and Reasoning: The assessee argued that as a branch, it may not have PAN details of all payees but had submitted these forms to prove tax compliance. The Tribunal recognized the relevance of such evidence in determining the correctness of the AO's demand.

The Tribunal's direction to the AO to consider these forms and evidence ensures that the assessee's rights are protected and that liability is not imposed without proper verification.

Conclusion: The assessee is entitled to submit Forms 15G/H or 27BA as evidence, and the AO must consider them before finalizing the demand.

Significant Holdings

"The expression 'sufficient cause' employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subserves the ends of justice-that being the life-purpose of the existence of the institution of Courts."

"The appellant bank was provided sufficient opportunities to plead its case and contest the matter, but the appellant bank chose to let the case proceed ex-parte. The appellant bank has failed to make out any credible or cogent ground for not to decide the appeal ex-parte despite getting adequate and sufficient opportunities of being heard."

"The lis between the parties has to be decided on merits so that nobody's rights could be scuttled down without providing an opportunity of being heard to the assessee."

"The delay of 482 days in filing the appeal by the assessee is condoned in view of the decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji and Others, 167 ITR 471 (SC) as the assessee is prevented by sufficient cause."

"The matter is remanded to the file of the ld. AO who will consider the factual aspect of the matter as raised by the assessee after due verification of the facts and charge the correct income in hands of the assessee after affording due opportunity to the assessee and dealing with the evidence placed on record."

Core Principles Established

1. Delay in filing appeals should be condoned liberally if sufficient cause is shown, especially in cases involving administrative changes and communication gaps.

2. Ex-parte orders should not be passed without providing adequate opportunity of hearing; failure to respond must be due to deliberate avoidance, not bona fide reasons.

3. Liability under Section 201(1)/201(1A) must be adjudicated on merits, considering all relevant evidence including Forms 15G/H and 27BA.

4. The right to be heard and to present evidence is fundamental and must be upheld to ensure justice.

Final Determinations

1. The delay of 482 days in filing the appeals is condoned.

2. The ex-parte dismissal of the appeals by the CIT(A) is set aside.

3. The appeals are allowed for statistical purposes and remanded to the AO for fresh adjudication after affording the assessee an opportunity to present evidence and be heard.

4. The orders passed under Section 201(1)/201(1A) are valid but require reconsideration in light of the evidence to be submitted by the assessee.

5. The Tribunal's decision in the lead appeal (ITA No. 263/JP/2025) applies mutatis mutandis to the other appeals (ITA Nos. 264 to 266/JP/2025) for subsequent assessment years.

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