2017 (2) TMI 325 - AT - Income Tax

Short deduction of TDS - Liability deduct TDS on interest payment - non availability of PAN - @ 20% OR 10% - Held that - We find that it is not a case that PAN of payees available with the assessee was not correct but this is a case where due to typographical error or much volume of entries in TDS return, wrong PAN of only one payee was mentioned in the original TDS return though the payee appears to have supplied correct PAN to the assessee. Similarly, Shri Prafull Kumar Jain is old assessee. Therefore, it is a clerical and typographical error while feeding data in TDS return which led to wrong application of tax rate of 20% in the case of one deductee whereas the assessee might have paid interest to a large number of persons, the assessee being a public sector bank. Since the mistake of quoting wrong PAN has been rectified in the revised TDS return filed by the assessee which has been accepted by the department, therefore, there is no justification in raising a demand on account of short deduction of TDS. Assessing Officer was not justified in adopting the rate of 20% as against 10%. We, therefore, delete the demand and interest thereon - Decided in favour of assessee

Summary

Issues:
1. Incorrect TDS rate applied due to wrong PAN in TDS return.
2. Discrepancy in TDS deduction leading to demand and interest imposition.
3. Appeal against the order of the CIT(A) regarding TDS deduction.

Detailed Analysis:
1. The appeal was filed against the CIT(A)'s order concerning the incorrect TDS rate applied on interest payment due to a wrong PAN in the TDS return. The issue revolved around the applicability of section 206AA of the Income Tax Act, 1961, which mandates a higher TDS rate of 20% in case of non-availability of PAN, compared to the normal rate of 10%. The appellant contended that the correct PAN was available, and the wrong PAN was a result of a typographical error in the original TDS return. The correct PAN was later updated in the revised return, which was accepted by the department. The appellant argued that the demand for short deduction of TDS and interest was unjustified due to the rectification made in the revised return.

2. The brief facts of the case highlighted that the appellant, a nationalized bank, deducted TDS at 10% for a payee but was required to deduct at 20% due to a wrongly quoted PAN. This led to a demand of ?8,780 for short deduction of TDS and an interest levy of ?1,025. The CIT(A) confirmed the Assessing Officer's action, resulting in the appellant filing an appeal before the Tribunal. The appellant emphasized that the correct PAN was available, and the error was inadvertent, corrected in the revised return. The appellant argued that penalizing for a clerical error in quoting the PAN was unwarranted, especially when compliance with statutory provisions was maintained.

3. The Tribunal, after considering the submissions, found that the incorrect TDS rate application was a result of a clerical error in the TDS return due to a typographical mistake. It noted that the correct PAN was available with the appellant, and the mistake was rectified in the revised return, which was accepted by the department. The Tribunal opined that penalizing the appellant for a rectified error was unjustified. Relying on case laws and circulars, the Tribunal held that the Assessing Officer's decision to adopt a 20% TDS rate was incorrect. Consequently, the demand of ?8,780 and interest of ?1,025 were deleted, and the appeal of the assessee was allowed. The judgment was pronounced on 18th August 2016.