ACIT., Central Circle-1(1), Tirupati, Tirupathi V. The Chittoor Dist Co-Operative Central Bank Limited, Chittoor

CO 65/HYD/2014

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4126 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 23-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 18-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Retrospective amendment; Non-deduction of tax; Difference of opinion; Reason to believe; Change of opinion; TDS; Set aside
• Section: 40(a)(ia); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NO.1581/HYD/2014 : ASSESSMENT YEARS 2007- 08 ITA NO.1582/HYD/2014 : ASSESSMENT YEARS 2010- 11 ASST. COMMISSIONER OF INCOME- TAX CIRCLE 1(1), TIRUPATI V/S CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR (PAN AABCT 3971 D) (APPELLANT) (RESPONDENT) C.O. NO.64/HYD/2014(IN ITA NO.1581/HYD/2014) : ASSESSMENT YEARS 2007- 08 C.O. NO.65/HYD/2014(IN ITA NO.1582/HYD/2014 : ASSESSMENT YEARS 2010- 11 CHITTOOR DIST. CO - OPERATIVE CENTRAL BANK LTD., CHITTOOR (PAN AABCT 3971 D) V/S ASST. COMMISSIONER OF INCOME - TAX CIRCLE 1(1), TIRUAPTI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T.CHAITANYAKUMAR DEPARTMENT BY : SHRI J.SIRI KUMAR, DR DATE OF HEARING 23.6.2016 DATE OF PRONOUNCEMENT 06.07.2016 O R D E R PER BENCH : THE REVENUE HAS PREFERRED APPEALS FOR THE ASSESS MENT YEARS 2007-08 AND 2000-11 AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) GUNTUR DATED 25 .6.2014. THE ASSESSEE HAS ALSO FILED ITS CROSS-OBJECTIONS UNDER S.253(4) OF THE ACT. ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 2 SINCE ISSUES INVOLVED AS WELL AS THE ORDER IMPUGNED ARE COMMON, ALL THESE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN BOTH THE APPEALS OF THE REVENUE, THE SOLITAR Y ISSUE INVOLVED IS THAT THE CIT(A) IS NOT JUSTIFIED IN DEL ETING THE ADDITIONS MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVI SIONS OF S.40A(IA) OF THE ACT, FOR NON-DEDUCTION OF TAX ON INTEREST PA ID BY THE ASSESSEE IN TERMS OF S.194A OF THE ACT. IN ITS CROSS-OBJECTION S, THE ASSESSEE HAS IMPUGNED THE LEGALITY OF THE ACTION OF THE ASSESSI NG OFFICER IN REOPENING THE ASSESSMENTS UNDER S.147 OF THE ACT. 3. FACTS OF THE CASE, COMMON FOR BOTH THE YEARS EX CEPT FOR THE AMOUNTS AND DATES ETC. INVOLVED, AS TAKEN FROM THE APPEAL FOR ASSESSMENT YEAR 2007-08, ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY CARRYING ON BANKING ACTIVITIES. FOR THE AS SESSMENT YEAR 2007- 08, ASSESSEE ORIGINALLY FIELD RETURN OF INCOME ON 2 9.10.2007 ADMITTING LOSS OF RS.4,73,54,180. THE ASSESSMENT WAS FRAMED UNDER S.143(3) ON 9.12.2009, DETERMINING THE LOSS OF THE ASSESSEE AT RS.1,15,28,930, AFTER MAKING CERTAIN DISALLOWANCES OF RS.3,58,84,05 0. THE SAID ASSESSMENT WAS THEREAFTER REOPENED BY ISSUE OF NOTI CE UNDER S.148 DATED 20 TH JANUARY, 2012. THE ASSESSMENT WAS REOPENED TO WI THDRAW THE HOUSE PROPERTY LOSS WRONGLY ADJUSTED AND TO RE COMPUTE THE BUSINESS LOSS OF THE ASSESSEE. THE ASSESSING OFFICE R HOWEVER COMPLETED THE RE-ASSESSMENT DETERMINING THE TOTAL I NCOME OF THE ASSESSEE AT RS.5,25,22,858. WHILE FRAMING THE RE-A SSESSMENT, THE ASSESSING OFFICER INTER ALIA MADE A DISALLOWANCE OF RS.6,37,64,249 BEING INTEREST PAID TO INDIVIDUAL MEMBERS OF THE CO OPERATIVE SOCIETY AND OTHER INSTITUTIONS AND SOCIETIES AND LOCAL BODI ES, WITHOUT DEDUCTION OF TAX AT SOURCE ON SUCH INTEREST PAYMENTS. THE ASS ESSING OFFICER ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 3 OBSERVED THAT THE ASSESSEE IS NOT JUST A COOPERATIV E SOCIETY, BUT A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANK ING, AS REFERRED TO IN S.194A(3)(I)(B) AND THEREFORE, THE ASSESSEE-BANK IS REQUIRED TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO VAR IOUS PERSONS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE ANY NIL OR LOWER DEDUCTION CERTIFICATES ISSUED BY THE INCOM E-TAX OFFICERS OF THE RESPECTIVE DEDUCTEES. THE ASSESSING OFFICER ALSO OB SERVED THAT FORMS 15G/15H/60 ETC. WERE ALSO NOT FURNISHED TOWARDS NON -DEDUCTION. THE ASSESSING OFFICER RELIED UPON CBDT CIRCULAR NO.9 OF 2002 DATED 11.9.2009 AND HELD THAT EXEMPTION UNDER S.194A(3)(V ) WOULD BE AVAILABLE ONLY TO SUCH MEMBERS WHO HAVE JOINED IN APPLICATION FOR THE REGISTRATION OF THE COOPERATIVE SOCIETY AND THOSE W HO ARE ADMITTED TO MEMBERSHIP AFTER REGISTRATION IN ACCORDANCE WITH T HE BYE-LAWS AND RULES. HE THEREFORE HELD THAT INTEREST PAID TO V ARIOUS PERSONS REQUIRES TO BE DISALLOWED FOR VIOLATION OF S.194A, IN THE LIGHT OF PROVISIONS OF S.40A(IA). HE ACCORDINGLY INTER ALIA DISALLOWED THE INTEREST PAID TO THE TUNE OF RS.6,37,64,249 WHILE F RAMING RE- ASSESSMENT ORDER. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND RAISED TWO FOLD OBJECTIONS. THE ASSESSEE FIRSTLY CHALLENGE D THAT THE REOPENING UNDER S.147 IS NOT PERMISSIBLE SINCE ORIGINAL ASSES SMENT UNDER S.143(3) WAS MADE AFTER VERIFYING THE RELEVANT DETA ILS AND AFTER CERTAIN SUMS WERE ALSO DISALLOWED. NO NEW MATERIAL /EVIDENCE HAS COME TO THE NOTICE OF THE ASSESSING OFFICER AFTER THE COMPLETION OF THE ASSESSMENT. THE ENTIRE ASSESSMENT WAS REOPENED ON THE BASIS OF THE VERY SAME MATERIAL, WHICH IS AGAINST THE RATIO LAID DOWN BY THE APEX COURT IN KELVINATOR INDIA LTD(320 ITR 561). THERE FORE, THE ACTION OF THE ASSESSING OFFICER IN INVOKING S.147 IS WITHOUT JURISDICTION AND THUS VITIATED IN LAW. ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 4 4.1. ON MERITS, THE ASSESSEE POINTED OUT BEFORE T HE CIT(A) THAT THE PAYMENT OF INTEREST WAS MADE TO ITS MEMBERS AND THEREFORE, THERE IS NO REQUIREMENT OF DEDUCTION OF TAX ON SUCH INTER EST PAYMENTS AND ALSO INTEREST PAYMENTS DID NOT EXCEED RS.10,000 IND IVIDUALLY TO EACH MEMBER AND THEREFORE, THERE WAS NO REQUIREMENT TO D EDUCT TAX AT SOURCE. THE ASSESSEE ALSO FURNISHED RELEVANT FORMS 15G/16H/60 IN APPROPRIATE CASES BEFORE THE CIT(A) AS ADDITIONAL E VIDENCE. 4.2 THE CIT(A) AFTER OBTAINING REMAND REPORT FROM THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT FOR T HE DEFAULT COMMITTED BY THE ASSESSEE IN OBTAINING FORM 15G/15 G/60, A DIFFERENT REMEDY IS AVAILABLE TO THE REVENUE. ACCORDINGLY, T HE LEARNED CIT(A) HELD THAT PROVISIONS OF S.40A(IA) CANNOT BE INVOKED UNDER THE CIRCUMSTANCES OR NON-DEDUCTION OF TDS. THE RELEVANT OPERATIVE PORTION OF THE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER- 5.3.4 I HAVE PERUSED THE SUBMISSIONS MADE IN THE REMAND REPORT. THE APPELLANT HAS FILED COPIES OF THE DESPA TCH REGISTERS OF ITS BRANCHES AS EVIDENCE OF THE FACT THAT FORMS 15G , 15H AND FORM 60 WERE BEING SUBMITTED TO THE INCOME TAX AUTHORITI ES. IN SOME BRANCHES, THE FORMS WERE SUBMITTED TO THE ACIT(CIB) WHILE IN OTHER CASES THE S E FORMS HAVE BEEN SUBMITTED TO THE O/O. CIT/ACIT, TIRUPATI . THE HON'BLE IT AT, MU M BAI IN KARWAT STEEL TRADERS VS. ITO (2013) (37 TAXMANN.COM 190) HAS HELD AS UND E R: ''SINCE SEPARATE PROVISIONS WERE PRESCRIBED ON DEFA ULT FOR NON-FILING OR DELAYED FILING OF FORM 15G/15H TO COMMISSIONER. NON FILING OF SUCH FORM WOULD NOT INVOKE DISALLOWAN CE UNDER SECTION 40(A)(IA) AND THAT WHERE PERSON RESPONSIBL E TO DEDUCT TDS RECEIVED DECLARATION IN FORM 15G/FORM 15 H NON- FILING OR DELAYED FILING OF SUCH FORM BEFORE COMMIS SIONER WOULD NOT RESULT IN DISALLOWANCE UNDER SECTION 40(A )(IA). F/ FURTHER, THE HON'BLE ITAT, JAIPUR IN SHYAM SUNDER K AILASH CH A ND VS. ITO (20 1 2) (19 TAXMANN.COM)(342(JP)(2011) 3 DJ 126 (JP), HAS HELD AS UNDER: ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 5 'WHERE FORM 15G RECEIVED BY THE APPELLANT FROM DEPO SITORS WAS SUBMITTED TO THE ASSESSING OFFICER LATE BY FEW DAYS BUT BEFORE FRAMING OF THE ASSESSMENT, INTEREST PAID BY THE APPELLANT TO THE DEPOSITORS WITHOUT DEDUCTION OF TA X AT SOURCE COULD NOT BE DISALLOWED SINCE SAID FORMS WERE AVAIL ABLE TO ASSESSING OFFICER WHILE FRAMING ASSESSMENT // 5.3 . 5 THE A.O., IN HIS REMAND REPORT HAS MADE A GENERAL STATEMENT THAT PAN HAS NOT BEEN QUOTED, WITHOUT POINTING OUT CASES WHERE PAN HAS BEEN AL L OTTED TO THE DEPOSITOR AND HAS NOT BEEN QUOTED. SIMILARLY, THE APPELLANT HAS POINTED OUT THAT VILLA GE ADRESSS DO NOT CONTAIN STREET NAMES OR DOOR NUMBERS AND HENCE THEY CANTO BE CALLED INCOMPLETE ADDRESSES. 5.3.6 BASED ON THE DECISIONS OF THE HON'BLE ITAT, M UMBAI AND THE HON'BLE ITAT, JAIPUR IN THE CASES CITED ABOVE, I AM OF THE OPINION THAT DISALLOWANCE U/S.40(A)(IA) IN THE CASE OF A COOPERA TIVE BANK ON THE GROUNDS THAT FORMS L5G AND 15H HAVE NOT BEEN PROPERLY FILLED IN OR THAT HAVE BEEN DELIVERED AT THE LOCAL INCOME TAX OFFICE AS AGAINST O/O.CIT(CIB), HYDERABAD OR ITO(CIB) TIRU PATI IS UNFAIR AND UNJUST UNDER LAW. THE APPELLANTS APPEAL ON THI S GROUND IS ALLOWED. 4.3 HOWEVER, AS REGARDS THE LEGAL GROUND CHALLENGI NG THE ASSUMPTION OF JURISDICTION UNDER S.147 BY THE ASSES SING OFFICER, THE CIT(A) REJECTED THE GROUNDS OF THE ASSESSEE. THE RE LEVANT OBSERVATIONS OF THE CIT(A) IN THIS REGARD ARE REPRO DUCED HEREUNDER- 4.3 . 2 I HAVE PERUSED THE SUBMISSIONS MADE BY THE APPELLANT. IN THE CASE OF KAL Y ANJI MAVJI & CO. VS. CIT (SC) 102 ITR 287, THE HON'BLE APEX COURT HAS HELD THAT THE EXPRESSION 'HAS REASON TO BELIEVE' IS WIDER THA N 'IS SATISFIED'. THE REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF BELIEF. THE INFORMATION BASED ON WHICH REOPENING IS DONE WOULD ALSO INCLUDE TRUE AND CORRE CT STATE OF LAW DERIVED FROM RELEVANT JUDICIAL DECISIO NS EITHER OF THE IT. AUTHORITIES OR COURTS OF LAW - WHETHER THE GROUND ON WHICH THE ORIGINAL ASSESSMENT IS BASE D IS HELD TO BE ERRONEOUS BY SUPREME COURT IN SOME OTHE R SENSE, THAT WILL ALSO AMOUNT TO A FRESH INFORMATION WH I CH COMES INTO EXISTENCE SUBSEQUENT TO THE ORIGINAL ASSESSMENT - TAX PAYER WOULD NOT BE ALLOWED TO TAKE ADVANTAGE OF AN OVERSIGHT TO MISTAKE COMMITTED BY T HE ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 6 TAXING AUTHORITY. IN THE CASE OF CIT VS. BAI NAVAJBAI N.GAMADIA (BOM), 35 ITR 793, IT WAS HELD THAT 'RETROSPECTIVE AMENDMENT OF IT. ACT MAKING CERTAIN RECEIPTS TAXABLE AS INCOME WHICH WAS NOT CHARGEABLE TO TAX EARLIER - IS INFORMATION FOR THE PURPOSE OF REOPENING'. MOREOVER, IN THE CASE OF SOM DUTT BUILDERS (P) LTD. VS DCIT (ITAT, KOL ) 98 ITD 78, IT HAS BEEN HELD THAT 'CHANGE OF OPINION COMES TO RESCUE OF ASSESSEE ONLY WHEN ASSESSING OFFICER HAS TAKEN ONE OF PERMISSIBLE VIEWS AT THE TIME OF ORIGINAL PROCEEDINGS - A WRONG APPLICATION OF LAW CANNOT BE HELD AS PERMISSIBLE VI EW AND THAT CAN ALWAYS BE CHANGED FOR APPRECIATING LAW'. FURTHER, IN THE CASE OF CRR VS. RINKU CHAKRABORTHY (KAR) 56 ITR 227, IT HAS BEEN HAD THAT ' WHEN AN INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT IN THE ORIGINAL ASSESSMENT PROCEEDINGS DUE TO OVERSIGHT AND INADVERTENCE OR A MISTAKE COMMITTED BY THE ITO, HE HAS JURISDICTION T O REOPEN THE ASSESSMENT. RE-ASSESSMENT IS PERMISSIBLE EVEN IF THE INFORMATION IS OBTAINED AFTER PROPER INVESTIGATION FROM THE MATERIALS ON RECORD OR FROM ANY ENQUIRY OR RESEARCH INTO FATS OR LAW. INFORMATION NEED NOT BE FROM EXTERNAL SOURCE. 4.3.3. THUS, MERELY BECAUSE CERTAIN INFORMATION WA S AVAILABLE IN THE RETURN OF INCOME, DOES NOT BAR THE ASSESSING OFFICER FROM REOPENING US.147. FURTHER, H AVING ISSUED NOTICE U/S. 148, THE ASSESSING OFFICER IS WI THIN HIS RIGHTS AND IS IN FACT, DUTY BOUND TO TAKE INTO ACCO UNT ANY ISSUE REGARDING ESCAPEMENT OF INCOME, WHICH COMES T O LIGHT DURING THE RE-ASSESSMENT PROCEEDINGS. IN THE CASES OF CIT VS., SUN ENGINEERING WORKS P. LIMITED (SC) 198 ITR 297, V.JAGANMOHAN RAO & ORS. V/S. CIT (SC) 75 I TR 373, ITO VS. MEWALAL DWARKA PRASAD(SC) 176 ITR 529, THE HONBLE SUPREME COURT HAS HELD THAT ITO CAN BRI NG TO TAX ANY INCOME WHICH ESCAPED ASSESSMENT AND NOT ONL Y ITEMS WHICH LED TO ISSUANCE OF NOTICE U/S. 148. TH US, THE APPELLANTS APPEAL IN RESPECT OF GROUND NO.1 IS DIS MISSED AND THE A.O.S ACTION IN REOPENING ASSESSMENT BY IS SUE OF NOTICE U/S. 148 IS UPHELD. 5. AGGRIEVED BY THE ORDER OF THE CIT(A) ON MERITS , REVENUE IS IN APPEAL BEFORE HE TRIBUNAL, WHEREAS ON THE ISSUE OF LEGALITY OF REOPENING OF THE ASSESSMENT UNDER S.14 7, ASSESSEE HAS PREFERRED THE CROSS-OBJECTIONS. ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 7 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR TH E REVENUE SUBMITTED THAT THE ASSESSEE HAS NOT FILED FORM 15G/ 15H/60, ETC. TOWARDS NON-DEDUCTION BEFORE THE APPROPRIATE AUTHOR ITY, I.E. COMMISSIONER OF INCOME-TAX. HE RELIED UPON THE PRO VISIONS OF S.194A AND SUBMITTED THAT THE ASSESSEE WAS UNDER LEGAL OBL IGATION TO DEDUCT TDS ON INTEREST PAYMENTS TO VARIOUS DEPOSITORS AS M ANDATED BY LAW. HE FINALLY RELIED UPON THE ORDER OF THE ASSESSING O FFICER AND SUBMITTED THAT THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN R ESORTING TO THE PROVISIONS OF S.40A(IA) FOR NON-DEDUCTION OF TAX AT SOURCE. 7. THE LEARNED AR FOR THE ASSESSEE, ON THE OTHER HAND, VEHEMENTLY EMPHASISED THAT THE ASSESSEE IS A COOPER ATIVE SOCIETY AND INTEREST WAS PAID TO ITS MEMBERS AND OTHER COOPERAT IVE SOCIETIES. THE ASSESSEE BEING A COOPERATIVE SOCIETY CARRYING ON BA NKING ACTIVITIES IS NOT OBLIGED TO DEDUCT TAX AT SOURCE ON INTEREST PA YMENTS TO ITS MEMBERS AND OTHER COOPERATIVE SOCIETIES IN VIEW OF S.194A(3)(V) OF THE ACT, AND THEREFORE, THE ASSESSING OFFICER WAS W HOLLY INCORRECT IN APPLYING THE PROVISIONS OF S.40A(IA) IN THE CASE OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE RELIANCE PLACED ON THE C BDT CIRCULAR NO.9 OF 2002 DATED 11.9.2002 BY THE ASSESSING OFFICER FOR D ENYING EXEMPTION UNDER S.194A(3)(V) OF THE ACT IS MISPLACED. HE POI NTED OUT THAT THE AFORESAID CBDT CIRCULAR HAS BEEN READ DOWN BY THE H ON'BLE BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT CENTRAL COOPERATIVE BANK LTD. AND ANR. V/S. UNION OF INDIA & ORS. (265 ITR 4 23)(BOM) WITH REGARD TO APPLICATION OF S.194A TO THE CO-OPERATIV E SOCIETIES. . 7.1 THE LEARNED AR ON FACTS SUBMITTED THAT THE PA YMENTS HAVE BEEN MADE TO OTHER MEMBERS OR TO OTHER COOPERATIVE SOCIETIES CARRYING ON BANKING ACTIVITIES. HE NEXT SUBMITTED THAT THE RELEVANT PRESCRIBED FORMS WERE HANDED BY THE CONCERNED DEPOSITORS AND T HE SAME WERE ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 8 SUBMITTED TO THE ASSESSING OFFICER. THEREFORE, THER E IS NO WARRANT FOR DISALLOWANCE OF INTEREST PAID BY THE ASSESSEE TO IT S DEPOSITORS. 8. LEARNED AR THEREAFTER ADVERTED TO THE CROSS OB JECTIONS FILED BY THE ASSESSEE AND SUBMITTED THAT THE ACTION OF THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF S.147 IS NOT SUSTAINABLE, SINCE SUCH ACTION IS BASED ON MERE REVIEW OF THE EXITING FACTS AND RECORDS AND MERELY OWING TO CHANGE OF OPINION THEREON. FOR THIS PROPOSITION, HE RELIED UPON THE DECISION OF THE APEX COURT IN TH E CASE OF KELVINATOR OF INDIA LTD.(SUPRA). 9. IN REJOINDER, THE LEARNED DEPARTMENTAL REPRESEN TATIVE, ON THE LEGALITY OF REOPENING OF THE ASSESSMENT BY THE ASSE SSING OFFICER, STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS, ORDERS OF THE AUTHORITIES BELOW AND CASE-LAW CITED. SUBSTA NTIVE ISSUE THAT ARISES FOR OUR CONSIDERATION IN THE APPEALS OF THE REVENUE IS APPLICABILITY OF PROVISIONS OF S.194A IN THE FACTS OF THE CASE. THE ASSESSEE IS A COOPERATIVE SOCIETY CARRYING ON BANKI NG ACTIVITIES AND STATED TO HAVE PAID INTEREST ON DEPOSITS RECEIVED F ROM ITS MEMBERS AND OTHER COOPERATIVE SOCIETIES CARRYING ON SIMILAR BANKING ACTIVITIES. 10.1. THE PROVISIONS OF S.194A OF THE ACT. 1961 D EALS WITH INTEREST OTHER THAN INTEREST ON SECURITIES. SUB-SEC TION (1) OF S.194A MANDATES DEDUCTION OF INCOME-TAX AT SOURCE IN RESPE CT OF PAYMENTS BY WAY OF INTEREST WHEREAS SUB-SECTION 3 OF S.194A PRO VIDES AN EXCEPTION TO THE APPLICABILITY OF THE PROVISIONS OF SUB-SECTI ON (1). S.194A(3)(V) GRANTS EXEMPTION FROM TDS TO SUCH PERSON WHO IS CR EDITED OR PAID INTEREST BY THE COOPERATIVE SOCIETY TO A MEMBER TH EREOF OR TO ANY ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 9 OTHER COOPERATIVE SOCIETY. IT IS THE CASE OF THE A SSESSEE THAT INTEREST WAS PAID TO ITS MEMBERS AND OTHER COOPERATIVE SOC IETIES AND THEREFORE, IT IS NOT OBLIGED TO DEDUCT TAX AT SOURC E ON IN THE PAYMENTS TO ITS MEMBERS AND OTHER COOPERATIVE SOCIETIES IN V IEW OF S.194A(3)(V) OF THE ACT. THEREFORE, S.40A(IA) DOES NOT COME IN TO PLAY AT ALL. IN THIS CONTEXT, WE TAKE NOTE OF CIRCULAR NO.9 OF 2002 DATE D 11 TH SEPTEMBER, 2002 RELIED UPON BY THE ASSESSING OFFICER WHICH RES TRICTS EXEMPTION UNDER S.194A(3)(V) ONLY TO SUCH MEMBERS, WHO HAVE JOINED IN APPLICATION FOR REGISTRATION OF THE COOPERATIVE SOC IETY AND THOSE WHO ARE ADMITTED TO THE MEMBERS FOR THE REGISTRATION IN ACCORDANCE WITH BYE LAWS AND RULES. WE FIND THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT CENTRAL COOPERATIVE BANK ( SUPRA) HAS QUASHED AND SET ASIDE THE BOARD CIRCULAR NO.9 OF 2002 RELIE D UPON BY THE ASSESSING OFFICER. THE RELEVANT PORTION OF THE HEAD -NOTE ON PAGE 424 OF THE REPORTS(265 ITR) AS FOLLOWS- THE CENTRAL BOARD OF DIRECT TAXES CANNOT ISSUE A C IRCULAR UNDER SECTION119 OF THE ACT WHICH WOULD OVERRIDE OR DETRA CT FORM THE PROVISIONS OF THE INCOME-TAX ACT. THE CENTRAL BOAR D OF DIRECT TAXES IS EMPOWERED TO ISSUE ONLY ADMINISTRATIVE INSTRUCTIONS TO ITS SUBORDINATE AUTHORITIES FOR THE PURPOSE OF PROPER A DMINISTRATION AND ENFORCEMENT OF THE PROVISIONS OF THE INCOME TAX AC T,1961. CIRCULAR NO.9 OF 2002 DATED SEPTEMBER 11, 2002, PROVIDES THA T THE EXEMPTION IS AVAILABLE ONLY TO SUCH MEMBERS WHO HAVE JOINED I N APPLICATION FOR THE REGISTRATION OF THE COOPERATIVE SOCIETY AND THO SE WHO ARE ADMITTED TO THE MEMBERSHIP AFTER REGISTRATION IN AC CORDANCE WITH THE BYE LAWS AND RULES; THAT THE MEMBERS ELIGIBLE FOR E XEMPTION UNDER SECTION 194A(3)(V)MUST HAVE SUBSCRIBED TO AND FULLY PAID FOR AT LEAST ONE SHARE OF THE COOPERATIVE BANK, MUST BE ENTITLED TO PARTICIPATE AND VOTE IN GENERAL BODY MEETINGS OR SPECIAL GENERAL BO DY MEETINGS OF THE CO-OPERATIVE BANK AND MUST BE ENTITLED TO RECEIVE SHARE FROM THE PROFITS OF THE COOPERATIVE BAN. THE CIRCULAR WHICH IS IN THE FORM OF A CLARIFICATION WITH REGARD TO THE RIGHTS AND PRIVILE GES OF A DULY REGISTERED MEMBER AND NOMINAL MEMBER IS OUTSIDE THE SCOPE OF SECTION 119. WHAT IS NOT CONTEMPLATED IN THE EXEMPT ION CLAUSE UNDER SECTION 194A(3)(V) OF THE ACT CANNOT BE IMPORTED TO DEPRIVE THE EXEMPTION GRANTED TO THE CO-OPERATIVE SOCIETY BY IS SUING THE IMPUGNED CIRCULAR. THE CIRCULAR IS NOT VALID AND IS LIABLE TO BE QUASHED. ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 10 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE BO MBAY HIGH COURT, WE HOLD THE RELIANCE OF THE ASSESSING OFFICER ON TH E ABOVE CIRCULAR OF THE BOARD AS MISPLACED. THE CIT(A) HAS GRANTED RE LIEF TO THE ASSESSEE ON THE GROUND THAT THE PRESCRIBED FORMS GIVEN BY TH E DEPOSITORS HAVE BEEN DULY FURNISHED BY THE ASSESSEE BEFORE THE ASSE SSING OFFICER ALBEIT WRONGLY INSTEAD OF CIT CONCERNED. WE DO NOT FIND A NY INFIRMITY IN THE CONCLUSION OF THE CIT(A) ON THIS REGARD. THUS, NO INTERFERENCE WITH THE ORDER OF CIT(A) IS CALLED FOR. 11. WE HAVE ALSO EXAMINED THE IMPUGNED ISSUE F ROM A DIFFERENT PERSPECTIVE, AS SOUGHT TO BE CANVASSED BY LEARNED AR. THE QUESTION IS WHETHER S.40A(IA) CAN BE INVOKED WH EN THE REQUISITE FORMS AS PRESCRIBED UNDER STATUTE FOR NON -DEDUCTION HAS BEEN OBTAINED FROM THE DEDUCTEE ALTHOUGH NOT FILED BEFORE PROPER AUTHORITY. THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS REPRODUCED HEREUNDER TO EXAMINE THIS ASPECT OF THE MATTER :- '40. AMOUNTS NOT DEDUCTIBLE NOTWITHSTANDING ANYTHIN G TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWING MOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARG E- ABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION ' ,- (A) IN THE CASE OF ANY ASSESSEE - (I) ....... (II) (IA) ANY INTEREST , COMMISSION OR BROKERAGE, RENT , ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT , OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR C ARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYI NG OUT ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 11 ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UND ER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED O R, AFTER DEDUCTION, [HAS NOT BEEN PAID.... (ONLY RELEVANT PORTION EXTRACTED). ' THE PROVISION NOTED ABOVE SPELLS OUT THAT THE AMOUNT CANNOT BE ALLOWED AS DEDUCTION ONLY IN THE EVENT WHEN TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BE EN DEDUCTED OR, AFTER DEDUCTION HAS NOT BEEN PAID. IN THE PRESENT CASE, IT IS THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX IN TERMS OF THE PROVISIONS O F SECTION 194A. WE NOTE THAT SECTION 194A IS FURTHER QUALIFIED BY S ECTION 197A(1A) WHICH IS A NON-OBSTANTE CLAUSE. SETION197A (1A) PROVIDES THAT LIABILITY TO DEDUCT TAX UNDER SECTION 194A CEASES WHEN A DECLARATION IN WRITING IN DUPLICATE IN PRESC RIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER RECEIVED BY A PER SON RESPONSIBLE FOR PAYING INCOME TO THE PAYEE. THE REM EDY TOWARDS DEFAULT FOR NON-FURNISHING OF THE DECLARATION TO TH E COMMISSIONER OF INCOME TAX AS PRESCRIBED HAS BEEN ADDRESSED UNDE R SECTION 272A(2)(F) OF THE ACT BY IMPOSING SUITABLE PENALTY THEREON. HOWEVER, ONCE FORM NO,15G/FORM 15H WERE RECEIVED BY THE PERSONS RESPONSIBLE FOR DEDUCTING TAX, THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE IN VIEW OF SECTION 194A R.W.S. 197 A. ONCE, IT IS HELD THAT TAX IS NOT DEDUCTIBLE AT SOURCE UND ER SECTION 194A ON RECEIPT OF PRESCRIBED FORM, THE MISCHIEF PROVIDE D UNDER SECTION 40(A)(IA) IS NOT ATTRACTED. 12. WE FIND THAT NO DEFAULT CAN BE SAID TO HAVE O CCURRED IN TERMS OF THE PHRASEOLOGY PROVIDED UNDER SECTION 40( A)(IA) OF THE ACT IN THE FACTS OF THE CASE. ACCORDINGLY, WE HOLD THAT THE CIT(A) RIGHTLY ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 12 CANCELLED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER UNDER SECTION 40(A)(IA) OF THE ACT DUE TO MERE NON-FILING OF IMPUGNED FORM NO.15G/15H ETC. WITH THE APPROPRIATE AUTHORITY. WE HAVE ALSO PERUSED DECISION OF THE ITAT IN THE CASE OF KARWAT STEEL TRADERS V/S. I TO (ITA NO.68322/MUM/2011 ORDER DATED 10.7.2013) RELIED UPO N BY THE CIT(A) IN THIS REGARD. WE FIND THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF KARWAT STEEL TRADERS WHEREIN THE TRIBUNAL HAS TAKEN A FAVOURABLE VIEW ON THE SIMILAR FACTS. RESPECTFULLY, FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, WE HOLD THAT TDS IS NOT DEDUCTIBLE ON RECEIPT OF FORM NO.15 G ETC., AND ACCORDINGLY, SECTION 40(A)(IA) OF THE ACT IS NOT AP PLICABLE IN THE FACTS OF THE CASE. THUS, ASSESSEE SUCCEEDS ON THIS SCORE ALSO. 13. ADVERTING TO THE CROSS OBJECTIONS FILED BY THE ASSESSEE CHALLENGING THE LEGALITY AND VALIDITY OF THE REOPEN ING UNDER S.147, WE FIND THAT THE LEARNED AR, EXCEPT FOR THE RELIANCE P LACED ON THE DECISION OF THE APEX COURT IN THE CASE OF KELVINATOR OF INDI A LTD. (SUPRA), HAS NOT BROUGHT ON RECORD ANY FACTUAL EVIDENCE OR PLEA TO SUPPORT THE CONTENTIONS RAISED IN THE CROSS-OBJECTIONS. NO EVID ENCE/MATERIAL HAS BEEN FURNISHED, BEFORE THE TRIBUNAL TO SUBSTANTIATE THE CONTENTIONS OF THE ASSESSEE. EVEN THE BASIC DOCUMENTS, SUCH AS RE ASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT AND ALSO THE ORIGINAL ASSESSMENT ORDER ARE NOT PLACED ON RECOR D. IN THE ABSENCE OF ANY MATERIAL OR EVIDENCE BROUGHT ON RECORD BY TH E LEARNED AR OF THE ASSESSEE THE GROUNDS ARE ONLY ABSTRACT IN NATURE. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE IMPUGNED ORDER OF T HE CIT(A) ON THIS ASPECT ALSO. WE ACCORDINGLY FIND NO MERIT IN THE CR OSS OBJECTIONS RAISED. ITA NO.1581-1582 /HYD/2014 & COS CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., CHITTOOR 13 14. IN THE RESULT, APPEALS OF THE REVENUE AS WELL AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 06.07 .2016 SD/- SD/- (D.MANMOHAN) (PRADIP KUMAR KEDIA) VICE PRESIDENT ACCOUNTANT MEMBER DT/- 06 TH JULY, 2016 COPY FORWARDED TO: 1. CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD., N O.2/1/63, OFFICERS LANE, KONGAREDDY PALLE, CHITTOOR TOWN CHITTOOR PIN 517 001 2. ASST . COMMISSIONER OF INCOME - TAX CIRCLE 1 ( 1 ), TIRUPATI 3. 4. COMMISSIONER OF INCOME-TAX(APPEALS), GUNTUR COMMISSIONER OF INCOME-TAX, TIRUPATI 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.