State Bank of India , Hospet V. The Assistant Commissioner of Income Tax TDS Circle , Bellary

ITA 1967/BANG/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4661 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 09-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Keywords: Recovery proceedings; Opportunity of being heard; Principle of natural justice
• Section: 201(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO. 1967 / BANG/201 7 ASSESSMENT YEAR : 20 1 2 - 1 3 M/S. STATE BANK OF INDIA, HOSPET CITY BRANCH, PVK COMMERCIAL COMPLEX, COLLEGE ROAD, HOSPET. PAN: BLRS23899B VS. THE COMMISSIONER OF INCOME TAX (APPEALS), GULBARGA. APPELLANT RESPONDENT APPELLANT BY : NONE RESPONDENT BY : DR. P.V. PRADEEP KUMAR, ADDL. CIT (DR) DATE OF HEARING : 23 .0 5 .2018 DATE OF PRONOUNCEMENT : 08 .0 6 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A), GULBARGA DATED 28.07.2017 FOR ASSESSMEN T YEAR 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. (1) THAT THE LEARNED RESPONDENT IS ERRED IN CONFIRM ING THE ORDER OF THE ASSESSING OFFICER WITHOUT CONSIDERING THE ORDER ALREADY PASSED BY THIS HON'BLE TRIBUNAL IN APPELLANT CASE IN ITA NO. 2 TO 5 (BANG)/2016 DATED 16-9-2016 FOR THE PREVIOUS ASSESSMENT YEARS 2 008-09 TO 2011- 12. (2) THAT THE LEARNED RESPONDENT IS ERRED IN CONFIRM ING THE DEMAND U/ S. 201(1) AND 201(1A) WITHOUT LAYING THE DUE EMPHAS IS ON THE CBDT CIRCULAR NO. 03/2010, DATED 2-3-2010 WHICH CLARIFIE S THE EXPLANATION TO 194A. (3) THE LEARNED RESPONDENT PASSED THE ORDER WITHOUT CONSIDERING THE BOARD'S CIRCULAR NO.3/2010 DATED 2-3-2010 AND WITHO UT LAYING DUE EMPHASIS ON THE CITATION IN CASE OF BANK OF MAHARAS HTRA V. ITO 38 SOT 432 AHMEDABAD BENCH OF ITAT WHICH CONSIDERED TH E BOARD'S ITA NO.1967/BANG/2017 PAGE 2 OF 6 CIRCULAR NO.3/2010 DATED 2-3-2010 AND HELD THAT INT EREST CREDITED AS PER NOTIONAL ENTRY WAS ONLY PROVISIONING THE ACCOUN TS FOR THE PURPOSES OF MACRO MONITORING AND IT WAS NOT ACTUAL CREDIT OR PAYMENT OF INTEREST TO DEPOSITORS AND THEREFORE, SECTION 194A IS NOT APPLICABLE. (4) THAT THE LEARNED RESPONDENT OUGHT TO HAVE CONSI DERED THE FOLLOWING FACTS: (A) THAT NO CONSTRUCTIVE CREDIT TO THE DEPOSITOR'S / PAYEE'S ACCOUNT TAKES PLACE WHILE CALCULATING INTEREST ON TIME DEPO SITS ON DAILY OR MONTHLY BASIS IN THE CBS SOFTWARE USED BY BANKS. (B) THAT BANKS USING CBS SOFTWARE AND INTEREST PAYA BLE ON TIME DEPOSITS IS CALCULATED GENERALLY ON DAILY BASIS OR MONTHLY BASIS AND IS SWEPT & PARKED ACCORDINGLY IN THE PROVISIONING ACCO UNT FOR THE PURPOSES OF MACRO-MONITORING ONLY. (C) THAT THE ORDER UNDER SECTION 201(1) & 201(1A) H AS BEEN PASSED BY THE ASSESSING OFFICER WITHOUT CONSIDERING THE CBDT CIRCULAR NO. 03/2010, DATED 2-3-2010. (D) THAT THE ORDER UNDER SECTION 201(1) & 201(1A) H AS BEEN PASSED WITHOUT CONSIDERING THE PRINCIPLES SETTLED BY THE H ONOURABLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT &ANR. V. INTE L TECH INDIA PVT. LTD. [2011] 55 DTR (KAR) 173. (E) THE ASSESSING OFFICER PASSED THE ORDER WITHOUT FIRST EXHAUSTING THE REMEDIES PROVIDED UNDER SECTION 191 OF THE IT ACT. THE LEARNED RESPONDENT FAILED TO APPRECIATE THAT THE ONUS IS ON THE REVENUE TO DEMONSTRATE THAT THE TAXES HAVE NOT BEEN RECOVERED FROM THE PERSON TO WHOM INTEREST IS CREDITED AND THEY ARE THE PRIMARIL Y LIABILITY TO PAY TAX. THERE IS NO MENTION OF STEP TAKEN BY THE DEPAR TMENT IN THE ORDER OF THE ASSESSING OFFICER FOR RECOVERY OF TAX FROM T HE PERSON/ S TO WHOM INTERESTED WAS CREDITED. (F) THAT THE LEARNED RESPONDENT OUGHT TO HAVE CONSI DER THE FACT THAT THE APPELLANT CANNOT BE TREATED AS AN ASSESSEE IN D EFAULT TILL IT IS FOUND THAT THE PERSON WHO RECEIVED THE INTEREST FROM THE APPELLANT HAS FAILED TO PAY TAX DIRECTLY. (G) THAT THE LEARNED RESPONDENT FAILED TO APPRECIAT E THE FACT THAT THE ASSESSING OFFICER FAILS TO PROVIDE SUFFICIENT AND A DEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLANT TO FURNISH CERTIFIC ATE FROM THE ACCOUNTANT AND HENCE VIOLATED THE PRINCIPLES OF NAT URAL JUSTICE. (H) THAT THE LEARNED RESPONDENT HAS FAILED TO APPRE CIATE THAT THE PROCEEDING UNDER SECTION 201(1) IS ALSO ASSESSMENT PROCEEDING. THE ORDER U/S 201(1) IS AKIN TO THE ASSESSMENT AND FOR RE-ASSESSMENT THE ASSESSING OFFICER SHOULD RECORD THE REASONS AND ISS UE NOTICE UNDER SECTION 148 OF THE IT ACT. THE REASONABLE TIME FOR INITIATING AND COMPLETING THE PROCEEDINGS UNDER SECTION 201(1) HAS TO BE AT PAR WITH ITA NO.1967/BANG/2017 PAGE 3 OF 6 THE TIME LIMIT AVAILABLE FOR INITIATING AND COMPLET ING THE REASSESSMENT AS THE ASSESSMENT INCLUDES REASSESSMENT. RELIANCE I S PLACED UPON THE DECISION IN CASE OF DIRECTOR OF INCOME TAX VS M/S M AHINDRA & MAHINDRA LIMITED, INCOME TAX APPEAL NO. 3480 OF 200 9, BOMBAY HIGH COURT, AND ALSO UPON THE DECISION IN CASE OF S TATE BANK OF INDIA KANPUR VS DEPARTMENT OF INCOME TAX ITAT, LUC KNOW BENCH ITA NOS.476 & 477/ LKW/ 2012. (5) THAT THE LEARNED RESPONDENT OUGHT TO HAVE CONSI DERED THE FACT THAT THE SO CALLED SHORT REMITTANCE HAS BEEN REVERTED BA CK TO THE PAYEE'S ACCOUNT AND SAME CANNOT CONSIDERED AS TAX DEDUCTION AT SOURCE. (6) THE LEARNED RESPONDENT ERRED IN PASSING AN ORDE R BY OVERLOOKING THE PROVISO TO SECTION 201(1) INSERTED BY THE FINAN CE ACT, 2012 WHICH PROVIDES FOR FURNISHING OF A CERTIFICATE FROM AN AC COUNTANT IN FORM 27BA FOR WHICH NO OPPORTUNITY IS GIVEN. THAT NO SUF FICIENT AND ADEQUATE OPPORTUNITY OF BEING HEARD WAS PROVIDED TO THE APPELLANT TO FURNISH CERTIFICATE FROM THE ACCOUNTANT AND HENCE V IOLATE THE PRINCIPLES OF NATURAL JUSTICE. (7) THE LEARNED RESPONDENT FAILED TO CONSIDER THE F ACT THAT DECLARATION IS MADE UNDER SECTION 197A BY PAYEE TO THE PAYER AN D THE PAYER HAS NO CHOICE EXCEPT TO DESIST FROM DEDUCTING TAX FROM THE PAYMENT. THE SUB-SECTION USES THE WORD 'SHALL' WHICH LEAVES NO C HOICE TO THE PAYER IN THE MATTER. (8) THE LEARNED RESPONDENT OUGHT TO HAVE CONSIDERED THE FACT THAT THE PAYER CANNOT BE BLAMED BECAUSE AT THE TIME OF PAYIN G THE AMOUNT, PAYER HAS TO RELY UPON THE DECLARATIONS FILED BY TH E PAYEE EVEN THOUGH IT IS INCOMPLETE AND EVEN THOUGH THE PAYER HAS FAIL ED TO SUBMIT THE COPY OF SAME TO THE CIT. THE PAYER IS NOT EXPECTED TO EMBARK UPON AN ENQUIRY AS TO WHETHER THE PAYEE IN REALITY HAVE NO TAXABLE INCOME ON WHICH TAX IS PAYABLE OR DIRECT TO FILL THE DATA IN ALL RESPECT. (9) THAT THE LEARNED RESPONDENT OUGHT TO HAVE CONSI DERED THE FACT THAT EVEN IF THE PAYEE HAS DELAYED THE FILING OF THE DEC LARATIONS WITH THE PAYER WITHIN THE TIME LIMIT, THE PAYER HAS NO POWER TO REJECT IT, INSTEAD IT NEEDS TO BE CONSIDERED BY THE PAYER IN REVERTING BACK THE TDS IF SAME IS NOT REMITTED TO THE CENTRAL GOVT. ACCOUNT. (10) THAT THE ORDER OF THE LEARNED RESPONDENT IS HI T BY ARTICLE 19(1)(G) OF THE CONSTITUTION. NO 'ASSESSEE' CAN BE CONSIDERED AS AN 'ASSESSEE IN DEFAULT' UNLESS A DEMAND NOTICE UNDER SECTION 156 HAD BEEN GIVEN TO HIM. ACCORDING TO SECTION 156 OF THE IT ACT DEMAND NOTICE CAN BE SERVED ONLY ON ACCOUNT OF TAX, INTERE ST, PENALTY FINE OR OTHER SUM PAYABLE IN CONSEQUENCE OF ANY ORDER PASSE D UNDER THE ACT. IN SUBSTANCE, TAX LIABILITY SHALL BE DETERMINED BY AN ORDER FOR ISSUING THE DEMAND NOTICE. BUT THE SECTION 201(1) DEEM THE ASSESSEE IN DEFAULT BEFORE MAKING ANY ORDER AND THEREFORE HIT BY ARTICL E 19(1)(G) OF THE CONSTITUTION. ITA NO.1967/BANG/2017 PAGE 4 OF 6 (11) THAT SUB-SECTION 6 AND 6A COVERS ALL SITUATION S AND CONTINGENCIES, AND MAKES THE LIABILITY ABSOLUTE, LI MITED ON DEDUCTOR. THE SUB-SECTION DOES NOT PROVIDE FOR ISSUE OF NOTIC ES, ASSESSMENT, COLLECTION OR ANYTHING CONNECTED WITH THE IMPOSITIO N, LEVY AND COLLECTION OF THE TAX. SECTION (4) OF THE INCOME TA X ACT IS THE CHARGING SECTION AND ACCORDING TO SAID SECTION, TAX IS LEVIE D UPON ASSESSEE DEPENDING UPON INCOME ACCRUED IN THE PREVIOUS YEAR AND NOT UPON THE INCOME EARNED BY OTHER PERSONS. INVOKING THE PROVIS IONS OF SECTION 201 AND (201(1A) IS ERRONEOUS AND OVERRIDES THE PRO VISIONS OF CHARGING SECTION. THAT THE LEARNED RESPONDENT HAS F AILED TO APPRECIATE THE FACT THAT THE PROVISIONS OF 201 IS O NLY 'MACHINERY PROVISIONS' AND HENCE DEMANDING THE TAX BY INVOKING THE PROVISIONS FROM THE PAYER OF INTEREST FOR FAILURE TO DEDUCT TH E TAX IS ERRONEOUS. 3. THIS APPEAL WAS FIXED FOR HEARING ON 20.03.2018 AND LD. AR OF ASSESSEE SOUGHT ADJOURNMENT BY ORAL REQUEST AND ON HIS REQUEST, THE HEARING WAS ADJOURNED TO 23.05.2018. ON THIS DATE, NONE APPEARED ON BEHALF OF THE ASSESSEE AND THERE IS NO REQUEST FOR ADJOURNMENT AND HENCE, THE APPEAL OF THE ASSESSEE WAS HEARD EX-PARTE QUA THE ASSESSEE. 4. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AU THORITIES BELOW. AT THIS JUNCTURE, IT WAS POINTED OUT BY THE BENCH THAT THER E IS WRITTEN SUBMISSION FILED BY THE ASSESSEE ON 12.03.2018 IN WHICH IT IS STATED THAT THE ISSUES INVOLVED IS COVERED BY THE TRIBUNAL ORDER IN ASSESSEES OWN CAS E FOR ASSESSMENT YEARS 2008-09 TO 2011-12 IN ITA NO. 2 TO 5(BANG)/2016 DAT ED 16.09.2016 AND COPY OF THIS TRIBUNAL ORDER IS ENCLOSED WITH THE SAID WRITT EN SUBMISSION. IT WAS POINTED OUT THAT AS PER THIS TRIBUNAL ORDER IN ASSESSEES O WN CASE FOR ASSESSMENT YEARS 2008-09 TO 2011-12, THE MATTER WAS RESTORED B ACK TO THE FILE OF AO FOR FRESH DECISION IN THE LIGHT OF TRIBUNAL ORDER RENDE RED IN THE CASE OF BANK OF MAHARASHTRA VS. ITO IN ITA NO. 2419/AHD/2007 DATED 16.03.2010. THE LD. DR OF REVENUE SUBMITTED THAT IN THE PRESENT CASE ALSO, THE ISSUE MAY BE DECIDED ON SIMILAR LINE AS PER THE TRIBUNAL ORDER IN ASSESS EES OWN CASE FOR ASSESSMENT YEARS 2008-09 TO 2011-12. 5. WE HAVE CONSIDERED THE WRITTEN SUBMISSION FILED BY THE ASSESSEE AND TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2 008-09 TO 2011-12 AND FOR THE SAKE OF READY REFERENCE, WE REPRODUCE PARA NOS. 6,7 AND 8 OF THE SAID TRIBUNAL ORDER. THESE PARAS READ AS UNDER. ITA NO.1967/BANG/2017 PAGE 5 OF 6 6. FIRST OF ALL, WE REPRODUCE PARA-7 OF THE TRIBUNA L ORDER RENDERED IN THE CASE OF BANK OF BANK OF MAHARASHTRA VS ITO (SUP RA) WHICH READS UNDER; 7. IN VIEW OF THE ABOVE CIRCULAR OF CBDT CLARIFYIN G TDS PROVISIONS BY BANKS USING CORE BANKING SOLUTIONS SOFTWARE (CBS), THE POSITION IS VERY CLEAR THAT WHILE DEDUCT ING TAX AT SOURCE FROM THE PAYMENTS OF INTEREST ON TIME DEPOSI TS BY BANK USING CBS SOFTWARE, INTEREST PAYABLE ON TIME DEPOSI TS USUALLY CALCULATED ON DAILY BASIS OR MONTHLY BASIS AND IS S WEPT AND PARKED IN PROVISIONING ACCOUNT FOR THE PURPOSES OF MACRO MONITORING. ACTUALLY, THE CREDIT IS GIVEN TO THE DE POSITORS ACCOUNT EITHER AT THE END OF FINANCIAL YEAR OR ON A FIXED PERIODIC INTERVALS AS PER PRACTICE OR RULES FRAMED FOR THE S AME, OR AS PER THE DEPOSITORS REQUIREMENT OR ON MATURITY OR ENCAS HMENT OF TIME DEPOSITS, AS THE CASE MAY BE. IN SUCH A SITUAT ION, THE TDS IS NOT POSSIBLE AT THE TIME OF CALCULATION OF INTEREST PAYABLE ON DAILY BASIS OR MONTHLY BASIS UNDER THE SCHEME OF SW EPT AND PARKED IN PROVISIONING ACCOUNT FOR THE PURPOSES OF MACRO- MONITORING. THE BOARD HAS CLEARLY CLARIFIED THE POS ITION AND THE FACTS ARE EXACTLY IDENTICAL IN THE PRESENT CASE THA T THE INTEREST CREDITED AS PER NOTIONAL ENTRY DATED 29-09-2001 IS ONLY PROVISIONING IN THE ACCOUNTS FOR THE PURPOSES OF MA CRO MONITORING AND IT IS NOT ACTUAL CREDIT OF PAYMENT O F INTEREST TO THE DEPOSITORS. THIS NOTIONAL PROVISION WAS MADE AN D AS IS EVIDENT FROM RECORD, WHICH WAS REVERSED ON NEXT WOR KING DAY, THE AMOUNT SO CREDITED AS NEVER ACCRUED TO THE PAYE E. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LOWER AUTH ORITIES I.E. THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS CAR RIED THE MATTER UNDER MISCONCEPTION AND WRONG PRESUMPTIONS. ACCORDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 7. AS PER THE ABOVE PARA REPRODUCED FROM THE ORDER OF THE TRIBUNAL, IT IS SEEN THAT IN THAT CASE, THE TRIBUNAL HAS GIVEN A FINDING THAT AS IS EVIDENT FROM THE RECORD, THE ENTRY WAS REVERSED ON THE NEXT WORKING DAY AND THEREFORE, THE AMOUNT SO CREDITED HAS NEVER ACCRUED TO THE PAYEE. IN THE PRESENT CASE, NO SUCH EVIDENCE HAS BE EN BROUGHT ON RECORD HAT INTEREST CREDITED AS PER THIS SOFTWARE W AS ONLY A NOTIONAL PROVISION AND THE SAME WAS REVERSED AFTERWARDS. BUT THIS IS ALSO AN UNDISPUTED FACT THAT THE BANK IS USING CBS SOFTWARE AS IN THAT CASE. HENCE, WE FEEL IT PROPER THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR A FRESH DECISION IN THE LIGHT OF THIS TRIBUNAL ORDER RENDERED IN THE CASE OF BANK OF MAHARASHTRA (SUPRA) AND IF THE ASSESSEE IS ABLE TO ESTABLISH THAT IT WAS ONLY A NO TIONAL PROVISION WHICH WAS REVERSED AFTERWARDS THEN NO TDS LIABILITY CAN BE IMPOSED ON THE ASSESSEE. WE ORDER ACCORDINGLY. 8. REGARDING THE TRIBUNAL ORDER RENDERED IN THE CAS E OF ITO VS STATE BANK OF INDIA (SUPRA), WE FIND THAT THIS TRIBUNAL O RDER IS NOT RENDERING ANY HELP TO THE ASSESSEE IN THE PRESENT C ASE BECAUSE IN THAT ITA NO.1967/BANG/2017 PAGE 6 OF 6 CASE, IT WAS HELD BY THE TRIBUNAL THAT THE AO SHOUL D PASS ORDER U/S 201(1) AND 201(1A) WITHIN A REASONABLE TIME I.E. WI THIN SIX YEARS AT THE END OF THE ASSESSMENT ORDER AND IN THAT CASE, T HE IMPUGNED ORDER WAS PASSED AFTER MORE THAN 10 YEARS AND THEREFORE, THE SAME WERE BARRED BY LIMITATION. IN THE PRESENT CASE, THE ORDE RS U/S 201(1) & 201(1A) OF THE IT ACT WERE PASSED BY THE AO ON 29-0 9-2014 AND THE EARLIEST ASSESSMENT YEAR INVOLVED IS 2008-09 AND TH EREFORE, IT IS SEEN THAT SIX YEARS FROM THE END OF THE RELEVANT ASSESSM ENT YEAR HAS NOT ELAPSED AT THE TIME OF PASSING THE IMPUGNED ORDERS AND THEREFORE, THIS TRIBUNAL ORDER IS NOT RENDERING ANY HELP TO THE ASS ESSEE IN THE FACTS OF THE PRESENT CASE. 6. FROM THE ABOVE PARAS REPRODUCED FROM THE TRIBUNA L ORDER IN EARLIER YEARS, IT IS SEEN THAT IN THOSE YEARS, THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION IN THE LIGHT OF THE TRIBUNAL ORDER RENDERED IN THE CASE OF BANK OF MAHARASHTRA VS. ITO (SUPRA) WITH THE DIRECT ION THAT IF ASSESSEE IS ABLE TO ESTABLISH THAT IT WAS ONLY A NOTIONAL PROVISION WHICH WAS REVERSED AFTERWARDS THEN NO TDS LIABILITY CAN BE IMPOSED ON THE ASSESSE E. IN THE PRESENT YEAR ALSO, WE SET ASIDE THE ORDER OF CIT (A) AND REMAND THE MATTER TO THE AO FOR FRESH DECISION WITH THE SAME DIRECTIONS AFTER PROVI DING REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 08 TH JUNE, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.