Ernakulam District Co-op Bank Ltd, Ernakulam V. ITO(TDS), Cochin

ITA 93/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77435 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 30-04-2014
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: RADHESH BHAT
• Keywords: Principle of natural justice
• Section: 206AA; 133A; 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKARAN, AM I.T.A. NOS. 92,93 &94/COCH/2014 ASSESSMENT YEARS : 2010-11 & 2011-12 1. ERNAKULAM DISTRICT CO-OP BANK LTD., MATTANCHERRY BRANCH, ERNAKULAM, KOCHI-682 002. [PAN: AABAT 4386L] A.Y. 2010-2011 & 2011-12 2. ERNAKULAM DISTRICT CO-OP BANK LTD., KALAMASSERY BRANCH, PATHADIPALAM, KALAMASSERY, KOCHI-683 503. [PAN: AABAT 4386L] A.Y. 2011-12 VS. THE INCOME-TAX OFFICER(TDS), KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI RADHESH BHAT, CA REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 30/04/2014 DATE OF PRONOUNCEMENT 09/05/2014 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THESE APPEALS FILED BY THE RESPECTIVE ASSESSEE S ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LD. CIT(A)-III, KOCHI AND THEY RELATE TO THE ASSESSMENT YEARS 2010-11 & 2011-12. ITA 92 94/COCH/2014 2 2. THE ISSUE URGED IN THESE APPEALS IS IDENTICAL IN NATURE, AND HENCE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 3. THE SOLITARY ISSUE URGED IN THESE APPEALS IS WHE THER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE DEMAND RAISED U/S. 201( 1) AND INTEREST U/S. 201(1A) OF THE ACT BY TREATING THESE ASSESSEES AS ASSESSEE IN DEFAULT FOR NON DEDUCTION OF TAX AT SOURCE ON THE INTEREST PAID TO THE DEPOSITOR S. 4. THE FACTS RELATING TO THE SAID ISSUE ARE ST ATED IN BRIEF. BOTH THESE ASSESSEES ARE BRANCHES OF ERNAKULAM DISTRICT CO-OP B ANK LTD. THE FIRST ONE IS MATTANCHERRY BRANCH AND THE OTHER ONE IS KALAMAS ERY BRANCH. THE DEPARTMENT CARRIED OUT A SURVEY OPERATION U/S. 133A OF THE ACT IN THE MAIN BRANCH OF THE BANK. DURING THE COURSE OF SURVEY OPE RATIONS, IT WAS NOTICED THAT THE BANK HAS FAILED TO DEDUCT TAX AT SOURCE U/S. 19 4A OF THE ACT ON THE INTEREST PAID/CREDITED TO VARIOUS DEPOSITORS. ACCORDINGLY, T HE INCOME TAX OFFICER (TDS) ISSUED SHOW CAUSE NOTICE TO THESE TWO BRANCHES OF T HE BANK REQUESTING THESE ASSESSEES TO EXPLAIN AS TO WHY THE BANK/MANAGER OF THE BRANCH SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT U/S. 201(1) OF THE A CT. IN RESPONSE THERETO, IT WAS SUBMITTED BY THE ASSESSEES THAT THEY DID NOT DEDUCT TAX AT SOURCE FROM THE INTEREST PAID TO THE DEPOSITORS, SINCE THE DEPOSITO RS HAVE FURNISHED DECLARATIONS ITA 92 94/COCH/2014 3 IN FORMS 15G/15H IN TERMS OF SEC. 197A(1A) OF THE A CT. THE INCOME TAX OFFICER (I.T.O) NOTICED THAT THE ASSESSEE IS REQUIRED TO FU RNISH A COPY OF THE ABOVE SAID DECLARATION TO THE CHIEF COMMISSIONER OR COMMISSION ER IN TERMS OF RULE 29C(3) OF THE INCOME TAX RULES ON OR BEFORE THE SEVENTH DA Y OF THE MONTH, NEXT FOLLOWING MONTH IN WHICH THE DECLARATION IS FURNISH ED BY THE DEPOSITORS TO THE ASSESSEE. HOWEVER, IT WAS NOTICED THAT THE ASSESSE E HAD FURNISHED THE COPIES OF THE FORMS TO THE COMMISSIONER BELATEDLY AND NOT WIT HIN THE STIPULATED TIME. THE INCOME TAX OFFICER ALSO OBSERVED THAT THE FORMS 15G /15H FILED WITH MATTANCHERY BRANCH, IN MOST OF THE CASES, WERE DEFECTIVE AS ALL THE COLUMNS WERE NOT FILLED UP. HENCE, THE INCOME TAX OFFICER HELD, IN THE HAN DS OF BOTH THE ASSESSEES, THAT THEY HAVE FAILED TO FULFILL THE CONDITIONS AS PROVIDED IN THE ACT/RULE AND ACCORDINGLY REJECTED CONTENTIONS OF THE ASSESSEE. IN THE HANDS OF BOTH THE ASSESSEES, THE I.T.O HELD THAT THEY HAVE FAILED TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF INTEREST AS PER THE PROVISIONS OF SEC. 1 94A OF THE ACT. IN THE CASE OF MATTANCHERY BRANCH, THE I.T.O. ALSO OBSERVED THAT T HE ASSESSEE HAS ALSO FAILED TO REMIT TDS AMOUNT. HENCE, THE INCOME TAX OFFICER TR EATED BOTH THE ASSESSEES AS ASSESSEE IN DEFAULT IN TERMS OF SEC. 201(1) OF THE ACT AND ACCORDINGLY, RAISED THE DEMAND U/S. 201(1) OF THE ACT AND ALSO CHARGED INTE REST U/S. 201(1A) OF THE ACT. ITA 92 94/COCH/2014 4 5. AGGRIEVED, THESE ASSESSEES FILED THE APPEALS BEF ORE THE LD. CIT(A). HOWEVER, THE FIRST APPELLATE AUTHORITY CONFIRMED TH E ORDERS PASSED BY THE INCOME TAX OFFICER. AGGRIEVED, THESE ASSESSEES HAV E FILED THESE APPEALS BEFORE US. 6. IN THE CASE OF MATTANCHERRY BRANCH OF ERNAKULAM D ISTRICT CO-OP BANK LTD., THE INCOME TAX OFFICER HAS NOTICED THAT THE ASSESSE E HAS FAILED TO REMIT THE TAX DEDUCTED AT SOURCE (TDS) FROM THE INTEREST. HOWEVE R, THE LD. A.R SUBMITTED THAT THERE IS NO SUCH CASE OF NON REMITTANCE OF TDS AMOUNTS. FURTHER, THE LD. AR SUBMITTED THAT THE ASSESSEE DID NOT DEDUCT TAX A T SOURCE U/S. 194A OF THE ACT SINCE THE CONCERNED DEPOSITORS HAVE FURNISHED DECLA RATIONS IN FORMS 15G/15H. HE FURTHER SUBMITTED THAT, AS PER THE PROVISIONS OF SEC. 197A(1A) OF THE ACT, NO DEDUCTION OF TAX SHALL BE MADE IN CASE OF A PERSON, IF SUCH PERSON FURNISHES A DECLARATION IN WRITING IN DUPLICATE IN THE PRESCRIB ED FORM AND VERIFIED IN THE PRESCRIBED MANNER TO THE EFFECT THAT THE TAX ON THE ESTIMATED TOTAL INCOME OF THE PREVIOUS YEAR IN WHICH THE SAID INCOME IS TO BE INC LUDED IN COMPUTING THE TOTAL INCOME WOULD BE NIL. HE SUBMITTED THAT THE FORM 1 5H AND FORM 15G ARE THE TWO FORMS FOR FURNISHING THE DECLARATION THAT ARE P RESCRIBED U/S 197A(1A) OF THE ACT AND ACCORDINGLY THE DEPOSITORS HAVE FURNISHED T HOSE FORMS TO THE ASSESSEE. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSEE, UND ER THE PROVISIONS OF SEC. 197A(1A), IS PROHIBITED FROM DEDUCTING TAX AT SOURC E, IF THE RECIPIENT OF INTEREST ITA 92 94/COCH/2014 5 FURNISHES THE ABOVE SAID FORMS. ACCORDINGLY HE SUB MITTED THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE AS PER THE MANDATE OF THE PROVISIONS OF SECTION 197A(1A) OF THE ACT IN THE CASE OF PERSONS WHO FURN ISHED THE PRESCRIBED FORMS. IN THIS REGARD, THE LD. AR PLACED RELIANCE ON THE D ECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT-I VS. VALIBHAI KHANBH AI MANKAD (TAX APPEAL NO. 1182 OF 2011 DATED 01/10/2012) WHEREIN THE HONBLE GUJARAT HIGH COURT HAD OBSERVED AS UNDER: 7. THE EXCLUSION PROVIDED IN SUB-SECTION (3) OF SE CTION 194C FROM THE LIABILITY TO DEDUCT TAX AT SOURCE UNDER SUB-SECTION (2) WOULD THUS BE COMPLETE THE MOMENT THE REQUIREMENTS CONTAINED THER EIN ARE SATISFIED. SUCH REQUIREMENTS, PRINCIPALLY, ARE THAT THE SUB-CO NTRACTOR, RECIPIENT OF THE PAYMENT PRODUCES A NECESSARY DECLARATION IN THE PRESCRIBE FORMAT AND FURTHER THAT SUCH SUB-CONTRACTOR DOES NOT OWN MORE THAN TWO GOODS CARRIAGES DURING THE ENTIRE PREVIOUS YEAR. THE MOM ENT SUCH REQUIREMENTS ARE FULFILLED, THE LIABILITY OF THE ASSESSEE TO DED UCT TAX ON THE PAYMENTS MADE OR TO BE MADE TO SUCH SUB-CONTRACTORS WOULD CE ASE. IN FACT HE WOULD HAVE NO AUTHORITY TO MAKE ANY SUCH DEDUCTION. ACCORDINGLY, THE LD A.R SUBMITTED THAT THERE WAS NO REQUIREMENT FOR THE ASSESSEES TO DEDUCT TAX AT SOURCE FROM THE INTEREST PAYMENTS U/S 194A OF THE ACT AND HENCE THE AO WAS NOT JUSTIFIED IN TREATING THESE ASSESSEES AS ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. 7. THE LD. AR FURTHER SUBMITTED THAT IT IS A FA CT THAT BOTH THE ASSESSEES HAVE FILED COPIES OF FORMS 15G/15H TO THE COMMISSIONER O F INCOME-TAX BELATEDLY. THE LD. AR FURTHER SUBMITTED THAT THE INCOME TAX ACT HA S PRESCRIBED SEPARATE ITA 92 94/COCH/2014 6 CONSEQUENCES FOR NOT FILING THE FORM 15H AND FORM 1 5G WITHIN THE DUE DATE PRESCRIBED UNDER RULE 29C(3) OF THE IT RULES. HE F URTHER SUBMITTED THAT THE PROVISIONS OF SEC. 201 DO NOT MAKE ANY REFERENCE TO SUCH RULES RELATING TO FILING OF DUPLICATE COPIES OF FORM 15H AND FORM 15G WITH T HE CIT. ACCORDINGLY HE CONTENDED THAT THE INCOME TAX OFFICER (TDS) WAS NOT RIGHT IN LAW IN CONSIDERING THE VIOLATION OR RULE 29C(3) FOR TREATING THESE ASS ESSEES AS ASSESSEE IN DEFAULT IN TERMS OF SECTION 201(1) OF THE ACT. 8. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE A SSESSEE HAS CONTRAVENED THE PROVISIONS OF RULE 29C(3) OF THE INCOME TAX RUL ES BY NOT FURNISHING THE FORMS 15G/15H WITHIN THE DUE TIME PRESCRIBED IN THE RULE. IN VIEW OF SUCH VIOLATION, THE INCOME TAX OFFICER DID NOT RECOGNIZE THE CLAIM OF THE RECEIPT OF FORMS 15G/15H OF THE ACT. THE LD. DR ALSO POINTED O UT THAT MOST OF THE FORMS SUBMITTED BY THE DEPOSITORS WERE FOUND TO BE DEFECT IVE BY THE AO, SINCE ALL THE COLUMNS OF THE FORMS WERE NOT FOUND DULY FILLED UP. THE LD. DR ALSO SUBMITTED THAT THE FINANCE (NO. 2) ACT, 2009 HAS INSERTED A N EW SECTION, NAMELY 206AA IN THE INCOME TAX ACT. ACCORDING TO SUB-SECTION (2) O F THE ABOVE SAID SECTION, THE DECLARATION FILED IN FORM 15G/15H FILED IN TERMS OF SEC. 197A SHALL NOT BE VALID, UNLESS THE PERSON FURNISHES HIS PERMANENT ACCOUNT N O. IN SUCH DECLARATION. THE LD. DR FURTHER SUBMITTED THAT THE DEFECT NOTICED BY THE INCOME TAX OFFICER MAY ALSO RELATE TO THE DEFECT OF NON FURNISHING OF PERM ANENT ACCOUNT NO. ACCORDINGLY ITA 92 94/COCH/2014 7 HE SUBMITTED THAT THE VALIDITY OF FORM 15H AND FORM 15G RECEIVED BY THESE ASSESSEES ALSO REQUIRE VERIFICATION. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFU LLY PERUSED THE RECORD. AS SUBMITTED BY LD D.R, THE ITO HAS OBSERVED IN THE CA SE OF MATTANCHERRY BRANCH THAT MOST OF THE FORMS FURNISHED BY THE DEPOSITORS WERE FOUND TO BE DEFECTIVE. WE NOTICE THAT THE ASSESSEES ARE REQUIRED TO FILE C OPIES OF DECLARATIONS FURNISHED BY THE DEPOSITORS WITH THE CHIEF COMMISSIONER OR CO MMISSIONER IN TERMS OF RULE 29C(3) OF THE INCOME TAX RULES. IF THE COPIES OF D ECLARATIONS ARE FURNISHED TO THE CHIEF COMMISSIONER OR COMMISSIONER, IT IS NOT U NDERSTANDABLE AS TO HOW THE ASSESSING OFFICER CAME TO BE SEIZED OF THOSE FORMS THAT WERE FILED WITH THE COMMISSIONER OF INCOME TAX. NOTHING IS AVAILABLE O N RECORD TO SHOW THAT THE CIT DID MAKE ANY COMMENT ABOUT THE DEFICIENCY, IF A NY, FOUND IN THE DECLARATIONS FILED IN FORM 15G/15H. ANOTHER QUEST ION THAT ARISES AT THIS STAGE IS WHETHER THE INCOME TAX OFFICER IS AUTHORIZED TO S CRUTINIZE DOCUMENTS THAT WERE FILED BEFORE THE CIT AND MAKE COMMENTS THEREON , THAT TOO WITHOUT THE AUTHORITY OBTAINED FROM THE COMMISSIONER OF INCOME TAX?. FURTHER, AS SUBMITTED BY LD A.R, THE I.T.O HAS MADE VAGUE OBSER VATIONS ABOUT THE DEFECTS WITHOUT POINTING OUT THE ACTUAL DEFECTS. ACCORDING TO LD A.R, THE I.T.O SHOULD HAVE GIVEN AN OPPORTUNITY TO THE ASSESSEE TO RECTIF Y THE DEFECTS, IF ANY, IN THE INTEREST OF NATURAL JUSTICE, INSTEAD OF REJECTING T HEM ACROSS THE TABLE. ITA 92 94/COCH/2014 8 10. BE THAT AS IT MAY, WE NOTICE THAT THE ASSES SING OFFICER HAS OBSERVED IN THE CASE OF MATTANCHERRY BRANCH THAT THE SAID ASSESSEE HAS FAILED TO REMIT THE TDS AMOUNT. HOWEVER, THE ORDER IS SILENT ABOUT THE QUA NTUM OF AMOUNT THAT WAS FAILED TO BE REMITTED TO THE ACCOUNT OF THE GOVERNM ENT. THE ORDER SIMPLY LISTS OUT THE DETAILS OF DEPOSITORS, INTEREST PAID TO THE M, DATES OF PAYMENT, THE TAX DUE AND THE INTEREST CHARGED U/S 201(1A) OF THE ACT . THE CONTENTION OF THE LD A.R IS THAT THERE WAS NO FAILURE ON THE PART OF THE SAID ASSESSEE TO REMIT ANY OF THE TDS AMOUNT. THUS, THERE IS CONTRADICTION BETWE EN THE ORDER PASSED BY THE ITO AND THE SUBMISSIONS MADE BEFORE US. 11. THE DISCUSSIONS MADE IN THE PRECEDING PARAGRA PHS WOULD SHOW THAT THE INCOME TAX OFFICER (TDS) HAS MADE GENERALIZED OBSER VATIONS WITHOUT BRINGING SUPPORTING MATERIALS ON RECORD. 12. FURTHER WE NOTICE THAT THE CONTENTIONS OF TH E ASSESSEE ABOUT THE MANDATE PROVIDED IN SEC. 197A(1A) OF THE ACT WERE NOT DULY ADDRESSED BY THE TAX AUTHORITIES. THE PROVISIONS OF SEC. 197A(1A) READS AS UNDER:- 197A(1A) NOTWITHSTANDING ANYTHING CONTAINED IN SE CTION 193 OR SECTION 194A OR SECTION 194K, NO DEDUCTION OF TAX SHALL BE MADE UNDER ANY OF THE SAID SECTIONS IN THE CASE OF A PERSON (NOT BEING A COMPANY OR A FIRM), IF SUCH PERSON FURNISHES TO THE PERSON RESPONSIBLE FOR PAYING ANY INCOME OF THE NATURE REFERRED TO IN SECTION 193 OR SECTION 19 4A OR SECTION 194K, AS THE CASE MAY BE, A DECLARATION IN WRITING IN DUPLIC ATE IN THE PRESCRIBED ITA 92 94/COCH/2014 9 FORM AND VERIFIED IN THE PRESCRIBED MANNER TO THE E FFECT THAT THE TAX ON HIS ESTIMATED TOTAL INCOME OF THE PREVIOUS YEAR IN WHICH SUCH INCOME IS TO BE INCLUDED IN COMPUTING HIS TOTAL INCOME WILL BE NIL. A PLAIN READING OR SECTION 197A(1A) SHOWS THAT THE SAID PROVISION OVERRIDES THE PROVISIONS OF SEC. 194A IF THE MODALITIES PRESCRIBE D IN SECTION 197A(1A) ARE COMPLIED WITH. THE SECTION FURTHER STATES THAT THE PERSON RESPONSIBLE FOR PAYING ANY INCOME OF THE NATURE REFERRED TO IN SEC. 194 OR SEC. 194A OR SEC. 194K SHALL NOT DEDUCT TAX UNDER ANY OF THE ABOVE SAID SECTIONS IN THE CA SE OF A PERSON, IF SUCH PERSON FURNISHES A DECLARATION IN WRITING IN D UPLICATE IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER. HENCE, IT WAS CONTENDED BY LD A.R THAT THE ASSESSEE CANNOT DEDUCT TAX AT SOURCE, IF THE RE CIPIENT OF THE INTEREST AMOUNT FURNISHES DECLARATION IN THE PRESCRIBED FORM. 13. IT WAS FURTHER CONTENDED THAT THE INCOME TAX ACT PRESCRIBES SEPARATE CONSEQUENCES FOR NOT FILING THE DECLARATIONS BEFORE THE COMMISSIONER OF INCOME TAX WITHIN THE TIME SPECIFIED UNDER RULE 29C(3) OF THE INCOME TAX RULES. IT IS FURTHER CONTENDED THAT THE PROVISIONS OF SEC. 197A( 1A) OR SEC. 201(1) DO NOT RECOGNIZE THE VIOLATIONS OF RULE 29C(3) OF THE IT R ULES. ACCORDINGLY IT WAS CONTENDED THAT THE AO WAS NOT JUSTIFIED IN REJECTIN G THE CLAIM OF COMPLIANCE OF SEC. 197A(1A). WE HAVE ALREADY NOTICED THAT THE DU PLICATE COPIES OF DECLARATIONS FURNISHED BY THE DEPOSITORS IN FORM NO.15H/15G ARE REQUIRED TO BE FILED WITH THE CHIEF COMMISSIONER OR COMMISSIONER. UNDER THESE CI RCUMSTANCES, IT IS NOT CLEAR ITA 92 94/COCH/2014 10 AS TO HOW THE INCOME TAX OFFICER (TDS) CAN REJECT T HOSE DECLARATIONS FURNISHED BY THE DEPOSITORS. WE NOTICE THAT THE TAX AUTHORIT IES HAVE NOT ADDRESSED THESE CONTENTIONS ALSO. 14. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE INCOME TAX OFFICER (TDS) HAS PASSED THE IMPUGNED ORDERS WI THOUT PROPERLY ADDRESSING THE VARIOUS CONTENTIONS OF THE ASSESSEE. ACCORDING LY, WE ARE OF THE VIEW THAT THIS MATTER REQUIRES FRESH EXAMINATION AT THE END O F THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDERS PASSED BY THE LD CIT(A) IN THE HANDS OF BOTH THE ASSESSEES AND RESTORE ALL THE MATTERS TO T HE FILE OF THE INCOME TAX OFFICER (TDS) WITH THE DIRECTION TO EXAMINE ALL THE ISSUES AFRESH BY DULY CONSIDERING VARIOUS CONTENTIONS URGED BY THE ASSESS EE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 15. IN THE RESULT, THE APPEALS FILED BY BOTH THE AS SESSEES ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 09-0 5-2014. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 9TH MAY, 2014 GJ ITA 92 94/COCH/2014 11 COPY TO: 1. 1. ERNAKULAM DISTRICT CO-OP BANK LTD., MATTANCHER RY BRANCH, ERNAKULAM, KOCHI-682 002. 2. ERNAKULAM DISTRICT CO-OP BANK LTD., KALAMASSERY B RANCH, PATHADIPALAM, KALAMASSERY, KOCHI-683 503. 3. THE INCOME TAX OFFICER (TDS), KOCHI. 4. THE COMMISSIONER OF INCOME-TAX(APPEALS)-III, KOC HI. 5. THE COMMISSIONER OF INCOME-TAX, KOCHI. 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN