2017 (4) TMI 1141 - AT - Income Tax

TDS deducted but not remitted into government account - Short deduction of TDS - assessee in default u/s 201(1) & 201(1A) - Held that - We find force in the arguments of the assessee for the reason that the assessee being a public sector bank normally comply with TDS as per the provisions of the Act. As claimed by the assessee, its TDS aspect has been taken care by centralised core banking system, which will automatically deduct TDS as per the provisions of the Act. Though, there are few technical issues, like nons-ubmission of declaration forms within due date, the same cannot be a valid reason for treating the assessee as an assessee in default u/s 201(1) of the Act, particularly when assessee explains the reasons for such mistakes. We further observe that the assessee has furnished all details and requested for one more opportunity to explain its case. Therefore, keeping in view overall facts and circumstances of the case, we deem it appropriate to remit the issue back to the file of the A.O. and direct the A.O. to examine the case with reference to the details furnished by the assessee and re-compute the short deduction of tax, TDS deducted but not remitted into government account and interest as per the provisions of the Act. Needless to say, the assessee is directed to furnish the necessary information without seeking any adjournments. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
Assessment of short deduction of tax at source, TDS deducted but not remitted into government account, and interest on short deduction of TDS and delay in remittance of TDS to government account.

Analysis:
The case involved an appeal by a public sector bank against the order of the CIT(A) pertaining to the assessment year 2012-13. A survey revealed irregularities in the bank's TDS compliance for the financial years 2008-09 to 2011-12. The assessing officer initiated proceedings under section 201(1) of the Income Tax Act, 1961. The bank explained the discrepancies, attributing them to issues such as non-furnishing of PAN numbers by depositors and delays in remittance due to staff shortages. The assessing officer determined the bank as an assessee in default for non-compliance of TDS provisions.

The CIT(A) upheld the additions made by the assessing officer, as the bank failed to appear or provide justifications during the hearings. The bank, in its appeal, argued that the demand determination was erroneous, emphasizing that TDS compliance was managed by the core banking system. The bank requested an opportunity to furnish additional details to rectify the discrepancies.

After hearing both parties, the Tribunal found merit in the bank's arguments. It acknowledged the bank's efforts to comply with TDS provisions through the centralised core banking system. Despite technical issues like delayed submission of declaration forms, the Tribunal deemed it inappropriate to treat the bank as an assessee in default. The Tribunal directed the assessing officer to re-examine the case based on the bank's submissions and recalculate the deductions in accordance with the law.

Ultimately, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of furnishing necessary information promptly. A stay application for the outstanding demand was dismissed as the appeal had been resolved. The Tribunal's decision aimed to ensure fair assessment and compliance with TDS regulations while providing the bank with an opportunity to rectify any errors.

This detailed analysis of the judgment highlights the complexities of TDS compliance issues faced by the public sector bank and the legal proceedings that ensued to address the discrepancies identified during the survey operation.