Sapthagiri Grameena Bank, Chittoor, Chittoor V. ACIT, Circle-1(1), Tirupathi, Tirupathi

ITA 815/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6589 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V HEMALATHA DEVI
• Assessee Lawyers: S SWAMINATHAN
• Keywords: Principle of natural justice; Additional evidence; Reasonable cause; Bad and doubtful debts
• Section: 142(1); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 815 & 1233/HYD/2015 ASSESSMENT YEAR: 2010-11 AND 2011-12 SAPTAGIRI GRAMEENA BANK, CHITTOOR. PAN AAAJS 0279D VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 1(1), TIRUPATHI. APPELLANT RESPONDENT ASSESSEE BY: SHRI S. SWAMINATHAN REVENUE BY: SMT. G.V. HEMALATHA DEVI DATE OF HEARING: 11/04/2016 DATE OF PRONOUNCEMENT: 06/05/2016 O R D E R PER S. RIFAUR RAHMAN, AM: BOTH THESE APPEALS ARE PREFERRED BY ASSESSEE AGAI NST THE ORDERS OF CIT(A), TIRUPATHI FOR AYS 2010-11 AN D 2011-12. SINCE IDENTICAL ISSUE IS INVOLVED IN BOTH THESE APP EALS, THEY WERE CLUBBED AND HEARD TOGETHER AND, THEREFORE, A C OMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY THE FACTS AS CULLED OUT FROM THE AY 2010 -11 ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY INVOLVED IN BANKING OPERATIONS E-FILED ITS RETURN OF INCOME FOR THE AY 2010-11 ON 27/09/2010 ADMITTING INCOME OF RS. 25,78,38,700/-, WHICH WAS PROCESSED U/S 143(1). SUBSEQUENTLY, THE CASE WAS SE LECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF T HE INCOME- TAX ACT, 1961 (IN SHORT ACT) WERE ISSUED FROM TIM E TO TIME POSTING THE CASE FOR HEARING ON VARIOUS DATES. IN R ESPONSE TO THE SAID NOTICES, THE AR OF THE ASSESSEE APPEARED A ND I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 2 PRODUCED BOOKS OF ACCOUNT AND ALSO FURNISHED THE IN FORMATION CALLED FOR VERIFICATION. 3. THE ASSESSING OFFICER NOTED THAT THE INFORMATION FILED VIZ., THE VOUCHERS FOR PURCHASES AND EXPENDITURE, STATUTO RY REGISTERS, LIST OF CASH EXPENDITURE OF RS.20,000/- AND ABOVE, DETAILS OF DEPOSITS AND LIST OF SUNDRY CREDITORS, D ETAILS OF OTHER PROVISIONS, DETAILS OF OTHER INCOMES, DETAILS OF RE NTS, DETAILS OF EXPENDITURE CLAIMED UNDER REPAIRS TO MACHINERY, SAL ARIES AND WAGES, ADVERTISEMENT, OTHER EXPENSES, BAD DEBTS ETC . HAD BEEN VERIFIED THOROUGHLY WITH REFERENCE TO THE BOOK S OF ACCOUNT. 4. DURING THE ASSESSMENT PROCEEDINGS, A SHOW CAUSE NOTICE DATED 06.03.2013 ISSUED TO THE ASSESSEE REQUESTING TO FURNISH THE DETAILS OF DEPOSIT HOLDERS EARNING INTEREST ON THEIR DEPOSITS EXCEEDING RS. 10,000/- AND ALSO INFORMED THAT, IN T HE CASE OF NON-SUBMISSION OF INFORMATION, IT IS PROPOSED TO MA KE AN ADDITION U/S.40(A)(IA) TO THE TUNE OF RS.73,39,05,0 00/- AS ADMITTED IN THE SCHEDULE 15 TOWARDS INTEREST ON DEP OSITS AS ON 31.03.2010. IN RESPONSE THERETO, THE ASSESSEE FI LED A LETTER DATED 16.03.2013 STATING THAT THEY HAVE EITHER DEDU CTED TAX AND REMITTED THE AMOUNT TO GOVERNMENT ACCOUNT OR OB TAINED 15G/15H AS THE CASE MAY BE AS PER TDS PROVISIONS AN D SUBMITTED THE DETAILS OF DEPOSIT ACCOUNTS ON WHICH INTEREST PAID/CREDITED DURING THE YEAR EXCEEDS RS.10,000/- A LONG WITH THE AMOUNT OF TDS AND REMITTED/FORM 15G/15H OBTAINE D. ON PERUSAL OF THE INFORMATION PRODUCED, AO NOTICED THA T OUT OF THE INTEREST PAID IN EXCESS OF RS.10,000/- FOR AN AMOUN T OF RS.6,73,55,000/- FORMS 15G/15H ARE NOT SUBMITTED TO THE JURISDICTIONAL COMMISSIONER AND PRODUCED NO EVIDENC E WHETHER 15G/15H FORMS WERE OBTAINED FOR THIS AMOUNT . THE ASSESSING OFFICER, THEREFORE, HELD THAT AS THE TDS WAS NOT I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 3 DEDUCTED FOR AN AMOUNT OF RS.6,73,55,000/- WHERE TH E INTEREST EXCEEDS RS. 10,000/- ATTRACTS PROVISIONS OF SEC.40( A)(IA) OF THE IT ACT AND WHEN THIS IS PUT TO THE ASSESSEE'S A R, HE COULD NOT OFFER ANY SATISFACTORY EXPLANATION. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.6,73, 55,000/- AND ADDED BACK TO THE INCOME RETURNED. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) DISCUSSED AND EXAMINED THE ISSUE ELABORATELY WITH CASE LAWS AND ALLOWED THE APPEAL PARTLY BY OBSERVIN G AS UNDER: 5.7 ON GOING THROUGH THE JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT, IT INDICATES THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE FACTS O F THE CASE WHERE THE ASSESSEE SHOWN TO HAVE OBTAINED FORM S 15G/15H, BUT ONLY FAILED TO FURNISH THE SAME BEFORE THE AUTHORITY CONCERNED I.E. JURISDICTIONAL CIT. THE DE CISIONS REFERRED ALSO SUPPORT AN ARGUMENT THAT THE FORMS FURNISHED IN INCOMPLETE FORMAT, ALSO DO NOT ATTRACT THE DISALLOWANCE U/S 40(A)(IA). THE UNDERLYING CONCEPT ON THIS ISSUE WAS THAT THERE ARE SEPARATE PROCEEDINGS FOR S UCH DEFAULTS AND APPLICATION OF 40(A)(IA) FOR SUCH DEFA ULTS IS NOT JUSTIFIED. THE OTHER ARGUMENT WAS THAT UNLESS T HERE IS AN EVIDENCE TO SHOW THAT ASSESSEE BEING THE DEDUCTO R FAILED TO OBTAIN THE FORMS 15G/15H FROM THE PAYEES, IT IS TO BE ACCEPTED AND DEEMED THAT THE ASSESSEE HAD OBTAINED THE SAID FORMS FROM THE PAYEES. ON SIMILAR LINES, THE ARGUMENT IN THIS CASE WAS THAT THE ASSES SING OFFICER DID NEITHER GIVE ENOUGH OPPORTUNITY TO FURN ISH SUCH DETAILS NOR PROVED THAT SUCH FORMS WERE NOT OB TAINED BY THE ASSESSEE. ON THESE GROUNDS, THE ARGUMENT OF THE APPELLANT ARE JUSTIFIED AND GET THE SUPPORT OF THE JUDICIAL DECISIONS REFERRED TO AND RELIED UPON BY APPELLANT TO THIS EXTENT, THE APPELLANT GETS RELIEF ON ACCOUNT OF VER IFICATION OF FORMS 15G/15H BY THE ASSESSING OFFICER DURING REMAND PROCEEDINGS. HOWEVER, IT IS RELEVANT TO REFE R TO THE FACT OF THE CASE THAT THE APPELLANT WAS REQUIRE D TO FURNISH BALANCE OF DETAILS, FOR WHICH, THE APPELLAN T FAILED I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 4 TO FURNISH THE DETAILS BY THE GIVEN DATE, IMPLYING THAT THE APPELLANT DO NOT HAVE ENOUGH EVIDENCE TO SHOW THAT FORM 15G/15H WERE OBTAINED BY THEM FROM ITS PAYEES FOR T HE AMOUNTS OF RS. RS.1,66,67,602/- TO EXPLAIN THE DEFA ULT OF NOT MAKING TDS ON THE SAID PAYMENTS. UNDER THE CIRCUMSTANCES, IT IS REASONABLE TO HOLD THAT THE AP PELLANT FAILED TO DEDUCT TAX AND ALSO FAILED TO EXPLAIN THE REASONS FOR SUCH DEFAULT, ON THE INTEREST AMOUNTS OF RS. 1,66,67,602/-, THEREBY ATTRACTING THE PROVISIONS OF SECTION 40(A)(IA) OF THE I.T. ACT. HENCE, IT IS HELD THAT T HE FACTS OF THE CASE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASES REFERRED BY ASSESSEE WITH THE HELP OF CASE LAWS. ACCORDINGLY, THE DISALLOWANCE U/S 40(A)(IA) TO THE EXTENT OF RS. 1,66,67,602/- IS HELD TO BE JUSTIFIED. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL: 1) ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ),TIRUPATI IS AGAINST NATURAL JUSTICE AND LAW. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS),TIRUPATI HAS NOT GIVEN AN OPPORTUNITY TO THE APPELLANTS TO PUT FORTH THEIR OBJECTIONS TO THE REM AND REPORT OF THE ASSESSING OFFICER AND HAS ERRED IN PA RTLY CONFIRMING THE DISALLOWANCE U/S 40(A)(IA) TO THE EX TENT OF RS. 1,66,67,702/-. 3) NEITHER THE ASSESSING OFFICER NOR THE COMMISSION ER OF INCOME TAX ( APPEALS) HAD CONSIDERED THE FACT THAT FORM 150/15H DECLARATIONS NEED NOT BE OBTAINED FOR THE INTEREST PAID OF RS. L,17,27,905/- AS THESE REPRESE NTED INTEREST PAID TO VARIOUS GOVT DEPARTMENTS ETC WHICH ARE OUTSIDE THE PURVIEW OF TDS. 4) APPELLANTS HAD OBTAINED THE FORM 15G/15H DECLARATIONS FOR THE BALANCE AMOUNT OF RS. 49,39,69 7/- BY ITS VARIOUS BRANCHES BUT THE SAME COULD NOT BE FURN ISHED BEFORE THE ASSESSING OFFICER DUE TO AFFIX OF TIME. 5) APPELLANTS PRAY THAT THIS HONORABLE TRIBUNAL TAK E NOTE OF THE FACT THAT THE BALANCE INTEREST OF RS. 1,66,6 7,602/- REPRESENTS BOTH THE INTEREST PAID TO VARIOUS GOVERN MENT AND INSTITUTIONAL DEPOSITORS ON WHICH TAX NEED NOT BE DEDUCTED AT SOURCE UNDER THE PROVISIONS OF THE SECT ION 194A AND ALSO ON WHICH THE APPELLANT BANK HAD OBTAI NED THE DECLARATION FORMS FROM THE DEPOSITORS. IT IS FU RTHER PRAYED THAT THIS HONORABLE TRIBUNAL BE PLEASED TO C ONSIDER AND GRANT NECESSARY RELIEF AS IT MAY DEEM FIT. I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 5 8. BEFORE US, THE LD. AR SUBMITTED THAT THE ASSESSE E BANK HAS MORE THAN 100 BRANCHES IN THE DISTRICTS OF CHIT TOOR AND KRISHNA AND SUBSTANTIALLY, ALL THE BRANCHES ARE IN RURAL AREAS INCLUDING SMALL VILLAGES, PANCHAYATS ETC. HE SUBMIT TED THAT THE BANK HAS PAID INTEREST OF RS. 73.39 CRORES DURING T HE ASSESSMENT YEAR 2010-11 AND HAD SUBMITTED BEFORE TH E ASSESSING AUTHORITY THAT THE TOTAL AMOUNT OF INTERE ST PAID, IN EXCESS OF RS.10,000/- PER DEPOSITOR WHICH IS THE TH RESHOLD LIMIT PRESCRIBED UNDER SECTION 194A, IS RS. 9,49,45 ,000/-. IT IS SUBMITTED THAT OF THE ABOVE, IN RESPECT OF RS. 2,75 ,90,000/- TAX HAS BEEN DEDUCTED AND REMITTED. THE BALANCE AMO UNT OF INTEREST AFTER THIS IS RS. 6,73,55,000/- AND THE AS SESSEE HAD SUBMITTED THAT IT HAD OBTAINED FORM 15G/15H FROM TH E VARIOUS PARTIES. THE ASSESSING AUTHORITY HAD, WHILE COMPLET ING THE ASSESSMENT, DISALLOWED THE ENTIRE AMOUNT OF RS. 6,7 3,55,000/- ON THE GROUND THAT FORMS 15G/15H ARE NOT SUBMITTED TO THE JURISDICTIONAL COMMISSIONER AND NO EVIDENCES WERE P RODUCED TO PROVE WHETHER SUCH FORMS HAVE BEEN OBTAINED. IT IS SUBMITTED THAT AGAINST THAT, THE ASSESSEE HAD FILED AN APPEAL BEFORE THE CIT(A), TIRUPATHI AND THE APPEAL WAS DIS POSED BY THE CIT(A), TIRUPATHI VIDE ORDER IN ITA NO. 0035/20 14- 15/CIT(A)/TPT, DATED 20 TH MARCH, 2015 WHEREIN THE CIT(A) AFTER CONSIDERING VARIOUS COPIES OF FORMS 15G/15H S UBMITTED BEFORE HIM AS ADDITIONAL EVIDENCES AND THE SAME WER E REFERRED TO THE ASSESSING AUTHORITY FOR NECESSARY V ERIFICATION AND REPORT. IN RESPONSE, THE ASSESSING OFFICER FURN ISHED THE REMAND REPORT ON 13 TH MARCH, 2015, A COPY OF WHICH WAS NOT PROVIDED TO THE ASSESSEE. 8.1 IT IS SUBMITTED THAT BASED ON SUCH REMAND REPOR T, THE COMMISSIONER OF INCOME TAX (APPEAL) PROCEEDED TO CO NFIRM THE DISALLOWANCE TO AN EXTENT OF RS.1,66,67,602/- A ND GRANTED I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 6 RELIEF TO THE EXTENT OF FORMS FURNISHED AGGREGATING TO RS.5,06,87,398/-. THE BREAK-UP OF THE INTEREST PAID BY THE ASSESSEE AND THE DISALLOWANCE EFFECTED BY THE ASSES SING OFFICER IS AS FOLLOWS: PARTICULARS AY 2010-2011 INTEREST PAID ON DEPOSITS DISALLOWED BY THE ASSESSING OFFICER (ACIT, TIRUPATHI) 6,73,55,000 OF WHICH AMOUNT NO. OF ACCOUNTS INTEREST PAID IN EXCESS OF RS. 10.00 LAKHS 16,17,431 1 ABOVE RS. 2.00 LAKHS & UP TO 10.00 LAKHS 78,65,551 12 ABOVE RS. 1.00 LAKH & UP TO 2.00 LAKHS 28,52,120 23 ABOVE RS. 50,000/- & UP TO RS. 1.00 LAKH 55,62,007 83 ABOVE RS. 20,000 & UP TO RS. 50,000/- 1,99,38,285 702 ABOVE RS. 10,000/- & UP TO RS. 20,000/- 2,95,19,496 2078 6,73,54,890 2899 8.2 FROM THE ABOVE, IT COULD BE SEEN THAT OUT OF TH E TOTAL NUMBER OF 2899 ACCOUNTS, 2078 ACCOUNTS ARE THE ACCO UNTS FOR WHICH THE INTEREST PAID IS MORE THAN RS.10,000/- BU T LESS THAN RS.20,000/- AND IN RESPECT OF 702 ACCOUNTS, THE INT EREST PAID IS MORE THAN RS.20,000/- BUT LESS THAN RS.50,000/-. FROM THIS, IT COULD BE SEEN THAT A SUBSTANTIAL PORTION OF THE PARTIES TO WHOM INTEREST HAS BEEN PAID ARE PARTIES RECEIVING I NTEREST WHICH IS LESS THAN RS.50,000/- AND PARTIES RESIDING IN VILLAGES AND PANCHAYATS. ASSESSEE IS A SPONSORED BANK OF IND IAN BANK AND IS USING THE SOFTWARE FOR COMPLIANCE WITH TAX DEDUCTION REQUIREMENTS. AS PER THE SOFTWARE SYSTEM, THE BRANCH MANAGERS ARE REQUIRED TO UPDATE THE DETAILS OF FORM 15G/15H AND ONLY THEN, THE INTEREST WOULD BE PAID W ITHOUT DEDUCTION OF TAXES WHEREVER THE INTEREST IS IN EXCE SS OF RS. 10,000/-. WHEN THE SYSTEM IS IN PLACE, IT WOULD NOT BE POSSIBLE I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 7 FOR THE BRANCH LEVEL OFFICIALS TO UPDATE THE INFOR MATION WITHOUT OBTAINING FORM 15G OR 15H. IT IS SUBMITTED THAT THE ASSESSEE HAD SUBMITTED BEFORE THE COMMISSIONER THAT TO THE E XTENT OF WHAT THEY COULD COLLECT, THEY HAD SUBMITTED THE FOR MS WHICH CONSTITUTE MORE THAN 75% OF THE INTEREST PAID IN EX CESS OF RS.10,000/-. THE SAMPLE PROVIDED BY THE BANK IS SUB STANTIALLY HIGHER AT 75% AND GENERALLY, IT COULD BE RELIED ON THE SYSTEM THAT HAS BEEN IN PLACE. 8.3 IT IS SUBMITTED, THE ASSESSEE HAD SUBSTANTIALLY DEMONSTRATED THAT IT HAS A PROPER SYSTEM IN PLACE F OR COLLECTING AND FILING FORM 15G AND 15H AND ONLY DUE TO PAUCITY OF TIME, IT COULD NOT FURNISH FORM 15G OR 1 5H FROM ALL THE PARTIES. WHEN MORE THAN 75% OF DEDUCTIONS HAVE BEEN ESTABLISHED, IT IS SUBMITTED THAT THE ASSESSEE HAD DEMONSTRATED THE EXISTENCE OF A REGULAR SYSTEM FOR DEDUCTION OF TAXES AND IN VIEW OF THIS, A VIEW BE KINDLY CONS IDERED THAT WHERE FORM 15G OR 15H HAVE BEEN CONFIRMED TO HAVE B EEN RECEIVED BY THE ASSESSEE, THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE AND THE DISALLOWANCES BE DELETED . 8.4 THE LD. AR SUBMITTED THAT BEING A REGIONAL RURA L BANK AND CONSIDERING THE FACT THAT THE BRANCHES ARE SPRE AD IN THE SMALL VILLAGES AND PANCHAYATS, COLLECTING OF ALL TH E FORMS WHICH WOULD RUN TO MORE THAN 2800 IN NUMBER FROM VA RIOUS BRANCHES AFTER A PERIOD OF TWO YEARS, THAT IS, AT T HE TIME OF FINALIZATION OF ASSESSMENT WOULD BE TOO STRENUOUS O N THE PART OF THE ASSESSEE TO COMPLY WITH. CONSIDERING THE FAC T THAT IT IS POSSIBLE THAT OLD FORMS HAVE BEEN LOST DUE TO VARIO US REASONS, ASSESSEE PRAYS THAT THERE ARE REASONABLE CAUSES WHY ASSESSEE COULD NOT FURNISH EACH AND EVERY FORM 15G AND 15H OBTAINED. I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 8 8.5 IT IS SUBMITTED THAT THE ASSESSEE COLLECTS FORM 15G AND 15H IN RESPECT OF ALL DEPOSIT HOLDERS HAVING AN INT EREST OF RS. 10,000/- OR MORE, AND THE FAILURE TO FURNISH COPIES OF FORM 15G/15H BEFORE THE ASSESSING AUTHORITY BE CONSIDERE D IN THE BACKGROUND OF THE DIFFICULTIES FACED BY ASSESSEE. F URTHER IT IS SUBMITTED THAT AS THE ASSESSEE HAD COLLECTED FORM 1 5G/15H, THE PROVISIONS OF SECTION40(A)(IA) HAS NO APPLICATI ON AS WAS HELD BY THIS HON'BLE TRIBUNAL IN THE CASE OF KUMAR ENTERPRISES IN ITA NO.1750/HYD/2013 FOLLOWING THE DECISION OF T HE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF COMMISSIONER O F INCOME TAX VS. VALIBHAI KHANBHAI MANKAD. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED ON THE ORDER OF CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL FACTS ON RECORD. ASSESSEE IS IN A BANK ING BUSINESS OPERATES AS REGIONAL RURAL BANK (RRB). MAI NLY OPERATES IN RURAL AREAS AND ITS MAIN CUSTOMERS ARE THE AGRICULTURISTS AND SMALL FARMERS. THE ASSESSEE HAD SUBMITTED A STATEMENT WITH THE BREAKUP OF INTEREST ON LOANS P AYMENT WITH ACCOUNT HOLDERS. THE MAJORITY OF INTEREST PAYMENTS WERE MADE TO IN THE RANGE OF RS. 20,000 50,000 702 ACCOUN TS AND BETWEEN RS. 10,000 20,000 ARE 2078 ACCOUNTS. IT C OMPRISES OF 96% OF THE TOTAL PAYMENT OF INTEREST. AS THE WHO LE PAYMENT OF INTEREST WAS DISALLOWED BY THE ASSESSING OFFICER , THE ASSESSEE HAS TAKEN EFFORTS TO SUBMIT THE FORM 15G/H WITH CIT(A), WHICH WAS CONFIRMED BY THE ASSESSING OFFICE R IN THE REMAND REPORT. THE REMAINING OF RS. 1.66 CRORES, WH ICH WAS DISALLOWED TO THE EXTENT FORM 15G/15H WERE NOT SUBM ITTED. ASSESSEE HAD SUBMITTED THAT IT HAS FULL PROOF SYSTE M OF COLLECTING 15G/15H FROM THE CUSTOMERS THROUGH THE S OFTWARE AVAILABLE TO THE ASSESSEE AS BEING THE SPONSORED BA NK OF I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 9 INDIAN BANK. HE SUBMITTED THAT BANK HAD COLLECTED A LL THE FORMS BUT DUE TO THE FACT THAT THE BRANCHES IN RURA L AREAS AND MORE THAN 100 BRANCHES ARE INVOLVED, IT HAD FACED D IFFICULTY IN COLLECTING THE SAME FROM THE BRANCHES DUE TO EFFLUX OF TIME. ASSESSEE HAD NOT SUBMITTED THE BREAK UP OF THE FORM S WHICH ARE NOT SUBMITTED. THE MAJORITY OF THE INTEREST PAY MENTS ARE IN THE SEGMENT OF RS. 10,000 20,000 AND RS. 20,000 50,000. IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS DEALIN G WITH SMALL FARMERS AND AGRICULTURIST. EVEN OTHERWISE CUSTOMERS (FARMERS- INCOME IS EXEMPT FOR INCOME TAX) ARE HAVING RECEIVE D THE INTEREST AT THE EXTREME LEVEL IN THIS GROUP SAY RS. 50,000/-, THE INCOME WILL BE EXEMPT AUTOMATICALLY DUE TO THE FACT THAT THE BASIC EXEMPTION LEVEL OF INCOME TAX AVAILABLE TO AY 2008-09 WAS RS. 1.50 LAKH. ASSESSEE HAD SUBMITTED THAT IT H AD COLLECTED THE FORM 15G/15H FROM ALL THE CUSTOMERS W HO ARE FARMERS. IT HAD NOT SUBMITTED BEFORE THE ASSESSING OFFICER WILL NOT BECOME AUTOMATICALLY ASSESSEE AT DEFAULT TO CAL L FOR THE DISALLOWANCE U/S 40(A)(IA). CONSIDERING THE BASIC E XEMPTION LIMITS, CATEGORY OF THE CUSTOMERS ARE FARMERS AND A SSESSEE HAD COLLECTED ABOVE 75% OF THE FORMS AND ALSO PERCE NTAGE OF FORMS NOT SUBMITTED COMPARED TO TOTAL INTEREST DISB URSAL IS 2.26% AND PERCENTAGE OF INTEREST PAID ON ABOVE RS. 10,000 IS 24.63%, WE ARE OF THE VIEW THAT THE ASSESSEE HAS CO MPLIED WITH THE PROVISIONS OF SECTION 197A. ASSESSEE ALSO SUBMITTED THAT IT HAS PLACED A SYSTEM OF COLLECTING THE FORMS FROM RURAL BRANCHES TO HO AND SUBMITTING THE SAME AT THE TIME OF ASSESSMENT. ASSESSEE ALSO SUBMITTED THAT IN THE SUB SEQUENT ASSESSMENTS, IT WAS PROPERLY SUBMITTED THE FORMS TO ASSESSING OFFICER. CONSIDERING THE ABOVE SUBMISSIO NS, IN OUR VIEW, ASSESSEE IS NOT AT DEFAULT AND ALSO AS HELD I N THE CASE OF KUMAR ENTERPRISES (SUPRA) AND HONBLE GUJARAT HI GH COURT IN THE CASE OF CIT VS. VALIBHAI KHANBHAI MANKAD, TH AT ONCE THE ASSESSEE OBTAINED FORM 15I FROM THE SUB-CONTRAC TORS I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 10 WHOSE CONTENTS ARE NOT DISPUTED OR WHOSE GENUINENES S IS NOT DOUBTED, THEN, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX FROM THE PAYMENT MADE TO SUB-CONTRACTOR. ONCE, ASSESSEE IS NOT LIABLE TO DEDUCT TAX U/S 194C THEN DISALLOWANCE U/S 40(A)(IA) CANNOT BE MADE. THE ASSESSEES BREACH OF THE REQUIR EMENT TO FURNISH DETAILS TO THE INCOME TAX AUTHORITY IN THE PRESCRIBED FORM WITHIN THE PRESCRIBED TIME MAY ATTRACT OTHER CONSEQUENCES BUT CANNOT RESULT IN A SECTION 40(A)(I A) DISALLOWANCES. HENCE, ADDITION MADE ON THIS COUNT I S DELETED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 12. AS THE FACTS AND ISSUES ARE INVOLVED IN AY 2011 -12 MATERIALLY IDENTICAL TO THAT OF AY 2010-11, FOLLOWI NG THE CONCLUSIONS DRAWN THEREIN, THE APPEAL IN AY 2011-12 IS ALLOWED. 13. TO SUM UP, BOTH THE APPEALS UNDER CONSIDERATION ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 6 TH MAY, 2016 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED 6 TH MAY, 2016 KV I.T.A. NOS. 815 & 1233/HYD/2015 SAPTAGIRI GRAMEENA BANK, CHITTOOR 11 COPY FORWARDED TO: 1. SAPTAGIRI GRAMEENA BANK, D. NO. 17, DURGA COMPLE X, NAIDU BUILDINGS, CHITTOOR 517 001 2. THE ACIT, CIRCLE 1 (1), TIRUPATHI 3. CIT(A), TIRUPATHI 4 CIT, TIRUPATHI 5 THE DR, ITAT, HYDERABAD