ACIT, Nagercoil V. M/s. Kanyakumari Nidhi Ltd., Nagercoil

ITA 3111/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4662 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 07-11-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Opportunity of being heard; Reasonable cause
• Section: 143(3); 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . , '# BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 3111/MDS/2016 / ASSESSMENT YEAR : 2012-13 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1, NAGERCOIL. VS. M/S. KANYAKUMARI NIDHI LTD., (FORMERLY KNOWN AS KANYAKUMARI BENEFIT FUND LTD.), 49A, VANCHIATHITHAN NEW STREET, VADASERY, NAGERCOIL 629 001. [PAN: AAACK 7922N] ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT )*%& / RESPONDENT BY : SHRI A.S. SRIRAMAN, ADVOCATE & /DATE OF HEARING : 16.03.2017 & /DATE OF PRONOUNCEMENT : 01.06.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3, MADURAI IN ITA NO. 0069A /2015-16 DATED 17.08.016 PASSED U/S. 143(3) AND 250 OF THE INCOME TAX ACT. :-2-: I.T.A. N0. 3111/MDS/2016 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2. THE CIT(A) OUGHT TO HAVE SEEN THE FACT THAT THE ASSESSEE HAS FAILED TO FURNISH THE FORM NO.15G/H BE FORE THE JURISDICTIONAL CIT WITHIN THE STIPULATED TIME AND H AS NOT COMPLIED WITH THE SECTION 197 OF LT. ACT 1961 AND R ULE 29C OF LT. RULES 1962. 3.1 THE CIT(A) OUGHT TO HAVE SEEN THAT AS PER SUB SECTION 2 OF SECTION 43 DEFINES THE WORD PAID MEAN S ACTUALLY PAID OR INCURRED ACCORDING TO THE METHOD OF ACCOUNT ING UPON THE BASIS OF WHICH THE PROFITS OR GAINS ARE COMPUTE D UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION.' 3.2 THE CIT(A) FAILED TO NOTE THE DEPARTMENT CIRCUL AR NO.10/DV/2013 DATED 18.12'.2013 WHICH CLEARLY STATE S THAT THE PROVISO OF SECTION 40A(IA) OF THE I.T. ACT 1961 WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST M ARCH OF A PREVIOUS YEAR BUT ALSO AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. 4.1 THE CIT(A) OUGHT TO HAVE CONSIDERED THE JUDGEMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIKANDARKHAN N TUNVAR REPORTED IN 33 TAXMAN.COML33 AND OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CRESCENT EXPORT SYNDICATE REPORTED IN 33 TAXMAN.COM256. WHEREIN IT WAS HELD THAT SUCH A DISALLOWANCE CAN BE MADE EVEN QUA THE S UM ALREADY PAID AND NOT ONLY THOSE REMAIN PAYABLE. 4.2 THE CIT(A) OUGHT TO HAVE NOTED THAT THE SLP FIL ED BEFORE THE HON'BLE SUPREME COURT IN CASE OF VECTOR SHIPPING SERVICES (P) LTD IS DISMISSAL SIMPLICITER AND IT HA S NO BINDING EFFECT. :-3-: I.T.A. N0. 3111/MDS/2016 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE IS A MUTUAL BENEFIT COMPANY AND DEALS ONLY WITH ITS MEMBERS AND THE COM PANY WAS DECLARED AS NIDHI COMPANY BY MINISTRY OF CORPORATE AFFAIRS, GOV ERNMENT OF INDIA AND FOLLOW THE DIRECTIONS ISSUED BY THE CORPORATE AFFAIRS. TH E MAIN BUSINESS OF THE ASSESSE COMPANY IS MAINTAINING SAVINGS BANK ACCOUNTS AND RE CURRING DEPOSITS FOR ITS MEMBERS AND ACCEPTING THE FIXED DEPOSITS. THE MEMBE RS OF THE COMPANY ARE ELIGIBLE FOR LOANS ON MORTGAGING JEWELS, FIXED DEPO SITS AND IMMOVABLE PROPERTIES. THE ASSESSE COMPANY FILED RETURN OF INCOME ELECTRON ICALLY FOR THE ASSESSMENT YEAR 2012-13 ON 26.09.2013 WITH TOTAL INCOME OF RS. 36,48,440/- AND THE RETURN OF INCOME WAS PROCESSED U/S. 143(1)OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S. 143(2) OF THE A CT WAS ISSUED. IN COMPLIANCE TO NOTICE, THE LD. AR APPEARED FROM TIME TO TIME AN D FURNISHED BOOKS OF ACCOUNTS, REGISTERS, BILLS, AND VOUCHERS FOR VERIFI CATION. 3.1 THE ASSESSING OFFICER ON PERUSAL OF THE FINANCI AL STATEMENTS FIND THAT THE ASSESSE HAS CLAIMED RS. 69,96,903/-AS INTEREST ON F IXED DEPOSITS AND IN CASES WERE THE INTEREST AMOUNT IS EXCEEDING RS. 5,000/- D URING THE FINANCIAL YEAR THE ASSESSE COMPANY HAS DEDUCTED TDS. THE ASSESSING OF FICER IS OF THE OPINION THAT THE PROVISIONS OF SECTION 194 A OF THE ACT ARE APPL ICABLE. AND OUT OF THE TOTAL INTEREST EXPENDITURE OF RS. 69,96,903/- AN AMOUNT O F INTEREST RS. 5,15,831/- PERTAINING TO THE MEMBERS WERE INTEREST IS BELOW RS . 5,000/- AND THE ASSESSE COMPANY HAS ACCEPTED FORM NO 15G AND FORM NO 15H FR OM ITS MEMBERS. THE LDAO ON VERIFICATION FOUND THAT THE ASSESSE HAS O BTAINED THE ABOVE SAID FORMS :-4-: I.T.A. N0. 3111/MDS/2016 TO THE EXTENT OF INTEREST RS. 56,79,533/- AND FOR T HE BALANCE AMOUNT OF RS. 8,01,539/- COULD NOT SUBSTANTIATE. FURTHER AFTER OB TAINING THE FORMS, THE ASSESSE COMPANY UNDER THE RULE 29C OF THE IT RULES SHALL FI LE THESE FORMS WITH THE COMMISSIONER OF INCOME TAX HAVING JURISDICTION ONE COPY OF THE DECLARATION ON OR BEFORE THE 7 TH DAY OF THE MONTH NEXT FOLLOWING THE MONTH IN WHICH THE DECLARATION IS FURNISHED. THE LD. AR SUBMITTED THA T THESE FORMS WERE SENT TO COMMISSIONER OF INCOME TAX BY ORDINARY POST AND IN THE ASSESSMENT PROCEEDINGS THE ASSESSE COMPANY COULD NOT PRODUCE A NY PROOF OF DELIVERING THE COPIES OF FORM 15G AND 15HTO THE COMMISSIONER OF IN COME TAX WITHIN THE STIPULATED PERIOD. THEREFORE, THE ASSESSING OFFICE R IS OF THE OPINION THAT THE FORMS CANNOT BE CONSIDERED AS THEY ARE WAS NOT FILE D WITHIN THE STIPULATED TIME AND APPLIED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND ASSESSED INCOME OF RS. 1,01,29,510/- AND PASSED ORDER U/S. 143(3) OF THE ACT DATED 30.03.2015. 4. AGGRIEVED BY THE ORDER, THE ASSESSE HAS FILED AN APPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS OF THE ASSESSMENT PROCEEDINGS AND PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT. THE LD. CIT(A) CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AND SUBMISSIONS MADE IN RESPECT OF INTEREST EXPENDITURE . THE LD. CIT(A) OBSERVED AT PARA 3.3 OF THE ORDER THAT THERE IS NO DISPUTE WIT H RESPECT TO OBTAINING THE FORM 15G AND 15H FROM THE PERSONS TO WHOM INTEREST PAYME NTS ARE MADE. THE ASSESSE HAS FILED THE DETAILS IN THE SUBSEQUENT HEA RING IN THE ASSESSMENT PROCEEDINGS, WHEREAS, THE ASSESSING OFFICER WITHOUT CONSIDERING THE FACTS HAS :-5-: I.T.A. N0. 3111/MDS/2016 MADE THE DISALLOWANCE AND NOT DISPUTED THE FACT OF OBTAINING OF FORM 15G AND 15H WITHIN THE STIPULATED PERIOD. THE LD. CIT(A) C ONSIDERED THE FACTS AND FOUND THAT DUE TO NON-SUBMISSION OF FORM 15G AND 15H TO T HE COMMISSIONER OF INCOME TAX MADURAI, THE ASSESSE COULD NOT BE PENAL ISED AS THERE ARE SEPARATE PROVISIONS FOR LEVY OF PENALTY AND DELETED THE ADDI TIONS AND OBSERVED AT PARA 3.3 OF THE ORDER WHICH READ AS UNDER: 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE REPR ESENTATIVE AND PERUSED THE IMPUGNED ORDER AND COPIES OF FORM-1 5G/15H SUBMITTED BEFORE THE ASSESSING OFFICER. I FIND THAT THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THE FACT THAT THE APPE LLANT HAD OBTAINED FORM 15G/15H FOR INTEREST PAYMENT OF RS.56,79,533/- . THUS THERE IS NO DISPUTE THAT THE APPELLANT DID NOT OBTAIN FORM 1 5G/15H FROM THE PERSONS TO WHOM INTEREST WAS PAID/CREDITED TO THE E XTENT OF RS.56,79,533/-. THE ASSESSING OFFICER ALSO DID NOT DOUBT THE FACT THAT THE APPELLANT OBTAINED FORM 15G/15H BEFORE CREDITIN G/PAYING INTEREST TO THE DEPOSITORS. IT IS EVIDENT FROM THE IMPUGNED ORDER THAT THE DISALLOWANCE WAS MADE ONLY ON THE GROUND THAT FORM- 15G /15H WERE NOT SUBMITTED TO THE CIT-1, MADURAI ON TIME. FOR TH E FAILURE OF THE APPELLANT TO SUBMIT COPIES OF FORM-15G WITH THE CON CERNED CIT, ONLY PENALTY PROCEEDINGS CAN BE INITIATED U/S.272A(2)(F) AND NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA). RECENTLY, T HE HON'BLE HYDERABAD TRIBUNAL HAD OCCASION TO CONSIDER THE VER Y SAME ISSUE IN THE CASE OF MALINENIBABULU (HUF) VS. ITO BY JUDGMEN T DATED 07.08.2015 IN WHICH IT WAS HELD THAT THE DEFAULT FO R NON-FURNISHING OF DECLARATION TO THE CIT AS PRESCRIBED MAY RESULT IN INVOKING PENALTY PROVISION U/S.272A(2)(F) FOR WHICH SEPARATE PROVISI ON 1 PROCEDURE WAS PRESCRIBED UNDER THE ACT AND HOWEVER, ONCE FORM-15G WAS RECEIVED :-6-: I.T.A. N0. 3111/MDS/2016 BY THE PERSON RESPONSIBLE FOR DEDUCTING TAX, THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE AND THEREBY DISALLOWANCE U/S 4 0(A)(IA) CAN MADE. FOLLOWING THE ABOVE DECISION, I HOLD THAT THE DISALLOWANCE OF RS.56,79,533/- WAS NOT JUSTIFIED AND THE SAME IS DE LETED. 3.3.1 REGARDING THE BALANCE AMOUNT OF RS. 8,01,539/ -, THE ASSESSING OFFICER HELD THAT THE APPELLANT HAD NOT O BTAINED FORM 15G/15H. HOWEVER, THE SUBMISSION OF THE APPELLANT I S THAT COPIES OF THE FORM 15G/15H WERE SUBSEQUENTLY FILED BEFORE THE ASSESSING OFFICER, BUT THE ASSESSING OFFICER OMITTED TO CONSI DER THE SAME AND RECORDED A INCORRECT FINDING THAT THE APPELLANT DID NOT FILE FORM15G/15H. THE RECORDS OF THE ASSESSING OFFICER W ERE VERIFIED AND IT WAS FOUND THAT THE COPIES OF FORM 15G/15H ARE AV AILABLE, WHICH WERE FILED IN THE SUBSEQUENT HEARING TO THE EXTENT OF RS.8,01,539/- APART FROM COPIES OF FORM 15G/15H FOR INTEREST AMOU NT OF RS.56,7993/- WHICH WERE FILED EARLIER. IN THE CIRCU MSTANCES, I ACCEPT THE PLEA OF THE REPRESENTATIVE THAT THE APPELLANT H AD OBTAINED FORM 15G/15H FOR THE REMAINING AMOUNT OF RS.8,01,539/- W HICH WERE SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE S UBSEQUENT HEARING, BUT THE ASSESSING OFFICER WITHOUT CONSIDER ING THE SAME OBSERVED IN THE ASSESSMENT ORDER THAT THE APPELLANT DID NOT OBTAIN FORM 15G/15H. IN THE CIRCUMSTANCE, THE BALANCE ADDI TION OF RS.8,01,539/- IS ALSO DELETED . 4. IN VIEW OF THE ABOVE, THE ENTIRE ADDITION OF RS . 64,81,072/- IS DELETED 5. IN THE RESULT THE APPEAL IS ALLOWED 5. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE HAS F ILED AN APPEAL BEFORE THE TRIBUNAL. BEFORE US, THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN NOT :-7-: I.T.A. N0. 3111/MDS/2016 CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING THE INTEREST FOR NON- DEDUCTION OF TDS UNDER THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT AND ALSO ASSESSE FAILED TO SUBMIT RELEVANT FORM 15G AND 15H WITH THE JURISDICTIONAL COMMISSIONER OF INCOME TAX WITHIN THE TIME AND RELI ED ON THE DECISIONS AND PRAYED FOR SETTING ASIDE THE ORDER OF CIT(A). CONT RA, THE LD. AR RELIED ON THE ORDERS OF THE CIT(A) AND SUPPORTED HIS ARGUMENTS WI TH THE JUDICIAL DECISIONS. 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE SOLE CRUX OF THE DISPUTED ISSUE BEING NON-DEDUCTION OF TDS ON INTEREST ON FIXED DEPOSITS BY THE ASSESSE C OMPANY IRRESPECTIVE OF THE FACT THAT THE ASSESSE HAS OBTAINED THE FORM 15G AND 15H FROM THE MEMBERS BUT HAS NOT FILED WITH THE JURISDICTIONAL COMMISSIONER OF INCOME TAX WITHIN THE SPECIFIED TIME. WE FIND THERE IS NO DISPUTE ON THE INTEREST COMPONENT AND OBTAINING ABOVE FORMS EXCEPT NOT FILING WITH THE JU RISDICTIONAL AUTHORITIES. THE LD. DR ALLEGED THAT THE ASSESSE COMPANY HAS FAILED TO FURNISH FORM 15G AND 15H WITH THE JURISDICTIONAL COMMISSIONER OF INCOME TAX AND ALSO NOT COMPLIED THE PROVISIONS OF SECTION 197 AND 29C OF IT RULES. WHER EAS THE LD CIT(A) HAS DEALT ON THE FACTS AND PROVISIONS OF LAW AND ALLOWED THE APPEAL RELYING ON THE TRIBUNAL DECISION OF HYDERABAD BENCH. THE LD. AR DREW OUR A TTENTION TO THE TRIBUNAL DECISION OF MUMBAI BENCH IN ITA NO. 6822/MUM/2011 K ARWAT STEEL TRADERS VS ITO AND GOKULDASVIRJIBHAI & CO VS ITO 139 ITD 0284, WHERE IT WAS HELD THAT :-8-: I.T.A. N0. 3111/MDS/2016 ONCE THE ASSESSE HAS OBTAINED THE FORM NO 15G FROM THE PAYEE, ASSESSE HAS NO LEGAL OBLIGATION TO DEDUCT TAX ON THE PAYMENT MADE TO PAYEE. 6.1 WE FIND SIMILAR ISSUE WAS CONSIDERED IN THE CAS E OF KARWAT STEEL TRADERS (SUPRA) AT PAGE 4 TO 8 WHICH READ AS UNDER: 4.1 AS CAN BE SEEN FROM ABOVE PROVISIONS, THE AMO UNT CANNOT BE ALLOWED AS DEDUCTION ONLY IN THE EVENT WH EN TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER-XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION HAS NOT BEEN AID. IN THIS CASE, THE ASSESSEE WAS TO DEDUCT TAX UNDER PROVISIONS OF SECT ION 194A. SECTION 194A IS FURTHER QUALIFIED BY THE PROVISIONS OF SECT ION 197A(1A) WHEREIN IF A PERSON FURNISHED A DECLARATION IN WRIT ING IN PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER TO THE E FFECT THAT TAX ON HIS ESTIMATED TOTAL INCOME IS TO BE INCLUDED IN COM PUTING HIS TOTAL INCOME WILL BE NIL, THERE IS NO NEED TO DEDUCT TAX. THE ASSESSEE HAS RECEIVED SUCH FORMS AS PRESCRIBED FROM THOSE PERSON S TO WHOM INTEREST WAS PAID/BEING PAID AND ACCORDINGLY NO DED UCTION OF TAX WAS TO BE MADE IN SUCH CASES. THE DEFAULT FOR NON-FURN ISHING OF THE DECLARATIONS TO THE CIT AS PRESCRIBED MAY RESULT IN INVOKING PENALTY PROVISIONS U/S. 272A(2)(F), FOR WHICH SEPARATE PRO VISION/ PROCEDURE WAS PRESCRIBED UNDER THE ACT. HOWEVER, ONCE FORM 15 G/FORM 15H WAS RECEIVED BY THE PERSON RESPONSIBLE FOR DEDUCTIN G TAX, THERE IS NO LIABILITY TO DEDUCT TAX. ONCE THERE IS NO LIABILITY TO DEDUCT TAX, IT CANNOT BE CONSIDERED THAT TAX IS DEDUCTIBLE AT SOURCE UNDE R CHAPTER XVII-B AS PRESCRIBED U/S. 40(A)(IA). THE PROVISIONS OF SEC TION 40(A)(IA) CAN ONLY BE INVOKED IN A CASE WHERE TAX IS DEDUCTIBLE A T SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NO T BEEN PAID. NO SUCH DEFAULT OCCURRED IN THIS CASE. ACCORDINGLY, WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT AP PLICABLE TO THE FACTS :-9-: I.T.A. N0. 3111/MDS/2016 OF THE CASE. BOTH THE ASSESSING OFFICER AND CIT(A) ERRED IN CONSIDERING THAT NON-FILING OF FORM ISH INVITES DIS ALLOWANCE U/S. 40(A)(IA). 4.2 SIMILAR ISSUE WAS CONSIDERED BY THE CO-ORDINAT E BENCH IN THE CASE OF VIPIN P. MEHTA VS. INCOME TAX OFFICER (2011 ) 11 TAXMANN.COM 342(MUM) WHERE IN IT WAS HELD: SECTION 194A, READ WITH SECTIONS 197A AND 40(A)(IA), OF THE INCOME TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - INTEREST ) OTHER THAN INTEREST ON SECURITI ES - ASSESSMENT YEAR 2006-07 - ASSESSEE WAS CARRYING ON BUSINESS OF MANUFACTURE AND PRINTING OF PACKAGING MATERIALS - HE MADE PAYMENT OF INTEREST TO 34 PARTI ES IN EXCESS OF RS. 5000 WITHOUT DEDUCTING TAX AT SOURCE - IN RESPONSE TO SHOW CAUSE NOTICE, ASSESSEE SUBMITTED T HAT ALL PAYEES TO WHOM INTEREST WAS PAID, HAD FURNISHED DECLARATIONS IN FORM NO. 15H/15G, AS THE CASE MAY B E, BEFORE DATE ON WHICH TAX OUGHT TO HAVE BEEN DEDUCTE D AND, THEREFORE, ASSESSEE WAS NOT LIABLE TO DEDUCT T AX - ASSESSEE ALSO SUBMITTED THAT BY OVERSIGHT HE DID NO T SUBMIT COPIES OF DECLARATIONS IN FORM NO. 15G/15H TO OFFIC E OF COMMISSIONER (TDS) -ASSESSING OFFICER TOOK A VIEW T HAT IT WAS ONLY WHEN HE PROPOSED DISALLOWANCE OF INTEREST BY INVOKING SECTION 40(A)(IA) THEN ASSESSEE FILED DECL ARATIONS CLAIMED TO HAVE BEEN SUBMITTED TO HIM BY PAYEES OF INTEREST, IN OFFICE OF COMMISSIONER (TDS) AS REQUIR ED BY SUB-SECTION (2) OF SECTION 197 A - ACCORDINGLY, ASS ESSING OFFICER INVOKED SECTION 40(A)(IA) AND DISALLOWED IN TEREST PAYMENTS - COMMISSIONER (APPEALS) CONFIRMED DISALLO WANCE MADE BY ASSESSING OFFICER - ON INSTANT APPEAL, IT W AS SEEN THAT APART FROM AFORESAID INFERENCE, THERE WAS NO O THER EVIDENCE IN POSSESSION OF REVENUE AUTHORITIES TO HO LD THAT :-10-: I.T.A. N0. 3111/MDS/2016 DECLARATIONS WERE NOT SUBMITTED BY PAYEES OF INTERE ST TO ASSESSEE AT TIME WHEN PAYMENTS WERE MADE - MOREOVER , ASSESSING OFFICER HAD NOT RECORDED ANY STATEMENTS F ROM PAYEES OF INTEREST TO EFFECT THAT THEY DID NOT FILE ANY DECLARATIONS WITH ASSESSEE AT APPROPRIATE TIME OR T O EFFECT THAT THEY FILED DECLARATIONS ONLY AT REQUEST OF ASS ESSEE - WHETHER IN ABSENCE OF ANY DIRECT EVIDENCE PRODUCED BY REVENUE AUTHORITIES, ASSESSEE'S CLAIM THAT HE HAD DECLARATIONS OF PAYEES IN PRESCRIBED FORM BEFORE HI M AT TIME WHEN INTEREST WAS PAID, AND, THUS, HE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194A, WAS TO BE ACCEPTED HELD, YES- WHETHER, CONSEQUENTLY, IMPUGNED DISALLOWANCE MADE BY AUTHORITIES BELOW WAS TO BE DE LETED - HELD, YES IN THE INSTANT CASE, THE CLAIM OF THE ASSESSEE WAS THAT AT THE TIME OF PAYING THE INTEREST TO THE 34 P ERSONS MENTIONED IN THE ASSESSMENT ORDER, HE HAD BEFORE HI M THE APPROPRIATE DECLARATIONS IN THE PRESCRIBED FORM FRO M THE PAYEES STATING THAT NO TAX WAS PAYABLE BY THEM IN R ESPECT OF THEIR TOTAL INCOME AND THEREFORE, TAX NEED NOT B E DEDUCTED FROM INTEREST UNDER SECTION 194A, AND IN T HE LIGHT OF THESE DECLARATIONS HE HAD NO OPTION BUT TO MAKE THE PAYMENT OF INTEREST WITHOUT ANY FAX DEDUCTION. IF T HE CLAIM WAS TRUE THEN THE CONTENTION MUST BE ACCEPTED BECAU SE UNDER SUB-SECTION (LA) OF SECTION 197 A, IF SUCH A DECLARATION IS FILED BY THE PAYEE OF INTEREST, NO D EDUCTION OF TAX BE MADE BY THE ASSESSEE. THE REVENUE AUTHORITIE S HAD DOUBTED THE ASSESSEE'S VERSION BECAUSE ACCORDING TO THEM IT WAS ONLY WHEN THE ASSESSING OFFICER PROPOSED THE DISALLOWANCE OF THE INTEREST BY INVOKING THE SECTIO N 40(A)(IA) IN THE COURSE OF THE ASSESSMENT PROCEEDIN GS THAT :-11-: I.T.A. N0. 3111/MDS/2016 THE ASSESSEE FILED THE DECLARATIONS CLAIMED TO HAVE BEEN SUBMITTED TO HIM BY THE PAYEES OF THE INTEREST, IN THE OFFICE OF THE COMMISSIONER (TDS) AS REQUIRED BY SUB-SECTIO N (2) OF SECTION 197 A. APART FROM THIS INFERENCE, THERE WAS NO OTHER EVIDENCE IN THEIR POSSESSION TO HOLD THAT THE DECLARATIONS WERE NOT SUBMITTED BY THE PAYEES OF TH E INTEREST TO THE ASSESSEE AT THE TIME WHEN THE PAYME NTS WERE MADE. WITHOUT DISPROVING THE ASSESSEE'S CLAIM ON THE BASIS OF OTHER EVIDENCE, EXCEPT BY WAY OF INFERENCE , IT WOULD NOT BE FAIR OR PROPER TO DISCARD THE CLAIM. T HE ASSESSING OFFICER HAD NOT RECORDED ANY STATEMENTS F ROM THE PAYEES OF THE INTEREST TO THE EFFECT THAT THEY DID NOT FILE ANY DECLARATIONS WITH THE ASSESSEE AT THE APPROPRIATE T IME OR TO THE EFFECT THAT THEY FILED THE DECLARATIONS ONLY AT THE REQUEST OF THE ASSESSEE IN SEPTEMBER/ OCTOBER, 2008 . IN THE ABSENCE OF ANY SUCH DIRECT EVIDENCE, THE ASSESS EE'S CLAIM COULD NOT BE REJECTED. THE ASSESSING OFFICER HAD STATED IN THE ASSESSMENT ORDER THAT HE FOUND THAT S OME OF THE LOAN CREDITORS WERE HAVING TAXABLE INCOME BUT S TILL THE ASSESSEE HAD SUBMITTED DECLARATIONS FROM THEM IN FO RM NO. 15G. UNLESS IT WAS PROVED THAT THESE FORMS WERE NOT IN FACT SUBMITTED BY THE LOAN CREDITORS, THE ASSESSEE COULD NOT BE BLAMED BECAUSE AT THE TIME OF PAYING THE INTEREST T O THE LOAN CREDITORS, HE HAD TO PERFORCE RELY UPON THE DECLARATIONS FILED BY THE LOAN CREDITORS AND HE WAS NOT EXPECTED TO EMBARK UPON AN ENQUIRY AS TO WHETHER TH E LOAN CREDITORS REALLY AND IN TRUTH HAD NO TAXABLE I NCOME ON WHICH TAX WAS PAYABLE. THAT WOULD BE PUTTING AN IMPOSSIBLE BURDEN ON THE ASSESSEE. THAT APART SECTI ON (LA) OF SECTION 197 A MERELY REQUIRES A DECLARATION TO B E FILED BY THE PAYEE OF THE INTEREST AND ONCE IT IS FILED THE PAYEE OF :-12-: I.T.A. N0. 3111/MDS/2016 THE INTEREST HAS NO CHOICE EXCEPT TO DESIST FROM DE DUCTING TAX FROM THE INTEREST. THE SUB-SECTION USES THE WOR D SHALL WHICH LEAVES NO CHOICE TO THE ASSESSEE IN THE MATTE R. THE SUB-SECTION DOES NOT IMPOSE ANY OBLIGATION ON THE P AYER TO FIND OUT THE TRUTH OF THE DECLARATIONS FILED BY THE PAYEE. EVEN IF THE ASSESSEE HAD DELAYED THE FILING OF THE DECLARATIONS WITH THE OFFICE OF THE COMMISSIONER / CHIEF COMMISSIONER (TDS) WITHIN THE TIME-LIMIT SPECIFIED IN SUB- SECTION (2) OF SECTION 197A, THAT WAS A DISTINCT OM ISSION OR DEFAULT FOR WHICH A PENALTY IS PRESCRIBED SECTION 2 73B PROVIDES THAT NO PENALTY SHALL BE IMPOSED UNDER ANY OF THE CLAUSES OF SUB-SECTION (2) OF SECTION 272A FOR THE DELAY, IF THE ASSESSEE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAME. FURTHER, UNDER SUB-SECTION (4) OF SECTION 272A, NO PENALTY CAN BE IMPOSED UNLESS THE ASSESSEE IS GI VEN AN OPPORTUNITY OF BEING HEARD. ALL THESE PROVISIONS IN DICATE THAT THE FAILURE ON THE PART OF THE ASSESSEE, WHO W AS THE PAYER OF THE INTEREST, TO FILE THE DECLARATIONS GIV EN TO HIM BY THE PAYEES OF THE INTEREST, WITHIN THE TIME-LIMI T SPECIFIED IN SUB-SECTION (2) TO SECTION 197 A WAS DISTINCT AN D SEPARATE AND MERELY BECAUSE THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO SUBMIT THE DECLARATIONS TO THE INCOME-TAX DEPARTMENT WITHIN THE TIME-LIMIT, IT COU LD NOT BE SAID THAT THE ASSESSEE DID NOT HAVE DECLARATIONS WI TH HIM AT THE TIME WHEN HE PAID THE INTEREST TO THE PAYEES. T HAT WOULD BE A SEPARATE MATTER AND SEPARATE PROOF AND EVIDENCE WAS REQUIRED TO SHOW THAT EVEN WHEN THE ASSESSEE PAID THE INTEREST, HE DID NOT HAVE THE DEC LARATIONS FROM THE PAYEES WITH HIM AND THEREFORE HE OUGHT TO HAVE DEDUCTED THE TAX FROM THE PAYMENT. NO SUCH EVIDENCE OR :-13-: I.T.A. N0. 3111/MDS/2016 PROOF HAD BEEN BROUGHT ON RECORD BY THE DEPARTMENT. [PARA 7] FOR THE AFORESAID REASONS, THE ASSESSEE'S CLAIM WAS TO BE ACCEPTED THAT SINCE HE HAD THE DECLARATIONS O F THE PAYEES IN THE PRESCRIBED FORM BEFORE HIM AT THE TIM E WHEN THE INTEREST WAS PAID, HE WAS NOT LIABLE TO DEDUCT TAX THERE FROM UNDER SECTION 194A. IF HE WAS NOT LIABLE TO DE DUCT TAX, SECTION 40(A)(IA) WAS NOT ATTRACTED. THERE WAS NO O THER GROUND TAKEN BY THE INCOME-TAX AUTHORITIES TO DISAL LOW THE INTEREST. THEREFORE, THE ASSESSEE'S APPEAL WAS TO B E ALLOWED AND THE DISALLOWANCE OF INTEREST WAS TO BE DELETED. (PARA 80) 4.3 SIMILAR FINDING WAS ALSO HELD IN OTHER CASES RE LIED UPON BY THE ASSESSEE, WHICH WE DO NOT INTEND TO EXTRACT HER E. SUFFICE TO SAY THAT ON THE FACTS OF THE CASE, THERE IS NO NEED TO DEDUCT TAX AT SOURCE IN THE ABOVE 17 CASES AND THUS, THERE IS NO DEFAULT COMMITTED BY THE ASSESSEE. ACCORDINGLY, DISALLOWANCE UNDER SECTION 4 0 (A)(IA) DOES NOT ARISE. NON FILING OR DELAYED FILING OF SUCH FORMS C AN NOT RESULT IN DISALLOWANCE U/S. 40(A)(IA). THE GROUNDS RAISED BY ASSESSEE ARE ALLOWED. AO IS DIRECTED TO MODIFY THE ORDER ACCORDI NGLY. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . APPLYING THE RATIO OF DECISIONS TO THE PRESENT CASE , WE FIND THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE. ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT(A) WHO HAS DEALT ON THE P ROVISIONS AND THE FACTS OF THE CASE VIS-A-VIS EXPLANATIONS OF THE ASSESSE AND DELE TED THE ADDITION. ACCORDINGLY WE UPHELD THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS OF THE REVENUE. :-14-: I.T.A. N0. 3111/MDS/2016 7. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 1 ST DAY OF JUNE, 2017 AT CHENNAI. SD/- ( . ) ( A. MOHAN ALANKAMONY ) # / ACCOUNTANT MEMBER SD/- ( . ) (G. PAVAN KUMAR) )# /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 1ST JUNE, 2017 JPV &)'2343 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3)'' /DR 6. 9 /GF