STATE BANK OF INDIA (EARLIER KNOWN AS SBBJ),AJMER V. INCOME TAX OFFICER(TDS), AJMER, AJMER

ITA 173/JPR/2025

AI Insights

The case involves the State Bank of India appealing against the order of the CIT (A), Ajmer, which was passed under section 250(6) of the I.T. Act, 1961, for the assessment year 2017-18. The primary contention of the bank was the initiation of assessment proceedings against a non-existent entity (SBBJ, which had merged with SBI) and the conduct of these proceedings by a non-jurisdictional AO. The bank also challenged the validity of the assessment order passed during the pendency of a Supreme Court stay on similar matters. The ITAT found merit in the bank's arguments regarding the need for adherence to procedural norms and the principles of natural justice, leading to the remand of the case for a fresh hearing.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397065 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: Collector, Land Acquisition v. Mst. Katiji & Ors., N. Balakrishnan v. M. Krishnamurthy, Pr. Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd., Teleperformance Global Services Vs. ACIT & Ors., CIT Vs. Spice Enfotainment Ltd., Spice Infotainment Ltd. Vs. CIT-15, Sky Light Hospitality LLP Vs. Assistant Commissioner of Income-tax, Hindustan Coca Cola Beverage Pvt. Ltd. v. CIT, Nestle India Ltd. v. CIT, Larsen & Toubro Ltd. v. CIT, Rashmikant Kundalia v. Union of India, Tata Medical Centre Trust v. PCIT(E), Mahindra and Mahindra Ltd. v. DCIT, Jigna Chetan Mehta v. Assistant Commissioner of Income Tax, Circle-33, Kolkata, Sh. Manoj Kumar Vs. ACIT, Circle-62(1), New Delhi, State Bank of India, Nehru Place Vs. The JCIT, TDS, Jaipur, State Bank of India, Nehru Place Vs. The ACIT/DCIT TDS, Jaipur
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: APEKSHA KALRA
• Keywords: Condonation of delay; Set aside; Bonafide belief; Period of limitation; Principle of natural justice; TDS; Assessment record; Time period of passing order; Recovery proceedings
• Section: 148; 144; 143(3); 142(1); 132; 153A; 133(6); 201(1); 37(1); 260A

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 173/JPR/2025 fu/kZkj.k o\"kZ@Assessment Years : 2017-18 State Bank of India (Earlier known as SBBJ) Shastri Nagar, Ajmer. cuke Vs. Income Tax Officer (TDS) Ajmer. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: JDHS03287E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assesseeby : Mrs. Apeksha Kalra, Advocate. jktLo dh vksj ls@Revenue by :Shri Gautam Singh Choudhary, Addl. CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 02/04/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 27/05/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Ajmer dated 11.06.2019 passed under section 250(6) of the I.T. Act, 1961, for the assessment year 2017-18. The assessee has raised the following grounds of appeal :- “1. Under the facts and circumstances the ld. AO has grossly erred in initiating the assessment proceedings against the SBBJ (A non-existent). The action of the ld. AO is illegal and therefore deserves to be quashed or set aside. 2 ITA No. 173/JPR/2025 State Bank of India, Ajmer. 2. Without prejudice to the GOA-1, under the facts and circumstances of the case, the ld. ITO, TDS Ajmer erred in conducting the proceedings u/s 201/201(1A) and thereby passing the order dated 20.11.2018. The issuance of the notice and the passing of the order u/s 201(1)/201(1A) was issued by the non-jurisdictional AO whereas it must be issued by the jurisdictional AO (ACIT/JCIT-TDS) only. The assessment proceedings concluded by the non-jurisdictional AO was illegal and non-curable u/s 292BB of the Income Tax Act, 1961 and therefore deserves to be quashed or set aside. 3. Without prejudice to the GOA-1 to 2, the ld. AO passed the order on 20.11.2018. The proceedings were initiated u/s 142 and order was passed u/s 201(1)/201(1A) which are inconsistent with each other, rendering the assessment order invalid. The action of the ld. AO was illegal and therefore deserves to be quashed or set aside. 4. Without prejudice to Grounds of Appeal Nos. 1 to 3, under the facts and circumstances of the case, the ld. Assessing Officer (AO) has grossly erred in passing the assessment order dated 20.11.2018 under sections 201 and 201(1A) of the Income Tax Act, 1961, during the pendency of SLP No. 16734/2023 before the Hon’ble Supreme Court and the subsisting stay order dated 28.08.2023. The stay order explicitly restrains the assessee bank from making any recoveries from its employees. Any action taken by the bank during the pendency of the matter would amount to contempt of court. However, the department was under no such restraint and could have issued notices to the employees who actually enjoyed the benefit of Leave Travel Concession (LTC). Initiating proceedings solely against the assessee-bank is in start violation of the principles of natural justice. Consequently, the assessment order is vitiated and deserves to be quashed and set aside. 5. The appellant reserves his right to add, alter, modify, or delete any grounds of appeal.” 2. We find that the appeal filed by the assessee bank is delayed by 1988 days. The assessee bank has filed an application along with an Affidavit for condonation of delay, which are being reproduced hereunder :- “ Application for condonation of delay u/s 253(5) of the I.T. Act, 1961 read with section 5 of the Limitation Act, 1963. Most Respectfully Showeth : 1. That the appellant is filing the present appeal against the order dated 11.06.2019 passed by the Hon’ble CIT (A) in connection with the demand 3 ITA No. 173/JPR/2025 State Bank of India, Ajmer. raised under section 201(1)/201(1A) of the Income-tax Act, 1961 for AY 2017-18. 2. That the said appeal is stated to be time-barred by 1988 days. The delay in filing the appeal was not deliberate but occurred due to reasons beyond the control of the appellant, as explained herein: FACTUAL BACKGROUND LEADING TO DELAY 3. The proceedings against the bank originated from a letter dated 02.02.2018 from the CBDT, New Delhi, regarding reimbursements for LTC/LFC claimed by employees. Pursuant to the said communication, the learned Assessing Officer (Ld.AO) passed an order under section 201(1)/201(1A) of the Act on 20.11.2018, treating the appellant as an assessee-in-default and raising a demand of Rs. 1,22,731/-. 4. The appellant duly filed an appeal before the Hon’ble CIT (A) on 04.12.2018. However, the said appeal was dismissed on 11.06.2019. 5. It is pertinent to mention that the appellant was unaware of the dismissal order dated 11.06.2019 as no communication or intimation was received from the office of the Hon’ble CIT (A). The appellant only came to know of the dismissal of the appeal on 13.01.2025, upon receiving a letter dated 06.01.2025 from the Income Tax Department regarding the recovery of the outstanding demand. 6. Immediately upon receiving the recovery notice, the appellant approached the Ld. ITO for a copy of the order, which was provided on 31.01.2025. It was at this juncture that the appellant became aware of the adverse order passed by the CIT (A) on 11.06.2019. 7. Without any delay, the appellant promptly filed the present appeal before the Hon’ble ITAT on 08.02.2025, i.e., within 8 days from the date of receipt of the copy of the appellate order. REASONS FOR DELAY – GENUINE AND BONAFIDE 8. The delay in filing the appeal is solely attributable to the non-receipt of the appellate order and the lack of knowledge of the dismissal of the appeal by the Hon’ble CIT (A). The appellant has acted diligently and without any undue delay upon receiving the order. 9. The delay is neither willful nor deliberate but genuine and bonafide, arising due to communication lapses beyond the appellant’s control. LEGAL PRECEDENTS IN FAVOUR OF CONDONATION OF DELAY 10. It is a settled principle that technicalities should not defeat substantial justice. The Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji& Ors. [1987] 167 ITR 471 (SC) held that courts should adopt a liberal approach in condoning delays, particularly when the delay is due to 4 ITA No. 173/JPR/2025 State Bank of India, Ajmer. procedural or administrative reasons and not attributable to negligence or inaction. 11. Further, in N. Balakrishnan v. M. Krishnamurthy (19980 7 scc 123), The Hon’ble Supreme Court emphasized that a meritorious matter should not be defeated by technical grounds of limitation. PRESENT LITIGATION STATUS AND PENDING PROCEEDINGS 12. The issue of LTC reimbursement is still sub-judice before the Hon’ble Supreme Court under SLP No. 16734/2023, where the Hon’ble Apex Court, vide its order dated 28.08.2023, has granted a stay on the operation of the judgment of the madras High Court in W.A. No. 1653/2022, directing the bank not to recover any amount from its employees during the pendency of the SLP. 13. The said issue pertains to a broader dispute concerning the taxability of LTC involving various public sector banks and their employees, and is presently under judicial scrutiny before the highest court of the land. PRAYER In view of the foregoing facts and submissions, the appellant most respectfully prays that this Hon’ble Tribunal may be pleased to : - Condone the delay of 1988 days in filing the present appeal, as the delay is due to genuine and bonafide reasons beyond the appellant’s control. - Admit and hear the appeal on merits, as it involves substantial questions of law and fact, which are still pending adjudication before the Hon’ble Supreme Court. - Pass any other order(s) as this Hon’ble Tribunal may deem fit and proper in the interest of justice and lequity AND FOR THIS ACT OF KINDNESS, THE APPELLANT AS IN DUTY BOUND SHALL EVER PRAY. Place : Jaipur Date : 18.02.2025 Sd/- State Bank of India (Earlier known as SBBJ)” “AFFIDAVIT 5 ITA No. 173/JPR/2025 State Bank of India, Ajmer. That, I, Madhukala, Branch Manager of SBI, Shastri Nagar, Ajmer do hereby take oath and solemnly affirms as under :- 1. That on 13.01.2025, on bank’s mail id, a letter dated 06.01.2025 was received regarding the recovery of the outstanding demand pertaining to TAN: JDHS03287E, from the Income Tax Department. 2. That immediately upon receiving the recovery notice, I approached the ld. ITO for a copy of the order, which was provided on 31.01.2025. 3. That on receiving the copy of Order dated 20.11.2018 passed u/s 201/201(1A) of the Income-tax Act, 1961 for A.Y. 2017-18, I contacted to tax professional and on enquiring by him, it came to my knowledge that an appeal was already preferred on 04.12.2018 in pursuance of the aforesaid order, and the appeal was dismissed by the Hon’ble CIT (A) on 11.06.2019. 4. That it is pertinent to mention that the bank was unaware of the dismissal order dated 11.06.2019 as no communication or intimation was received from the office of the Hon’ble CIT (A). 5. That on receiving the dismissal of appeal, without any delay, promptly the present appeal is filed before the Hon’ble ITAT on 08.02.2025, i.e. within 8 days from the date of receipt of the copy of the appellate order. 6. That the delay in filing the appeal is solely attributable to the non-receipt of the appellate order and the lack of knowledge of the dismissal of the appeal by the Hon’ble CIT (A). It is pertinent to mention here that the bank as acted diligently and without any undue delay upon receiving the order. Sd/- Madhukala Verification That, I, Madhukala, Branch Manager of SBI, Shastri Nagar, Ajmer hereby submits that the aforesaid facts stated herein above are true and correct to the best of my knowledge. Sd/- Madhukala” 3. Considering the reasons mentioned in the said application accompanied by an Affidavit of the Branch Manager, Branch Manager, State Bank of India, Shastri Nagar, Ajmer, we feel that the reasons mentioned in the Affidavit constitute 6 ITA No. 173/JPR/2025 State Bank of India, Ajmer. sufficient cause for not filing the appeal within the time before us. Therefore, taking a lenient view and considering the principles laid down in the case of Collector, Land Acquisition vs. Mst. Katiji, 1987 AIR 1353 (SC), we condone the delay of 1988 days in filing the appeal before us. 4. The brief facts of the case are that the assessee is a branch of public sector bank. A letter no. ITO(TDS)/AJM/2017-18/1297 dated 27.02.2018 was issued by the Income-tax Department calling for the information under section 201 in respect of foreign LTC benefits availed by the employees during the F.Y. 2016-17. In response to the same, Regional Manager, State Bank of India, Vaishali Nagar, Ajmer vide letter No. AO-S/RBO-4/Staff/2017-18/2008 dated 28.02.2018 has submitted the details of cost of reimbursement of foreign travel to their employees during the FY 2016-17 visited on circuitous route. A show cause notice u/s 201/201(1A) for the AY 2016-17 and 2017-18 has been issued to the Regional Manager, State Bank of India, Vaishali Nagar, Ajmer and fixed for hearing to the case on 15.03.2018. In response to the said show cause notice, the bank has filed written submission. He has further submitted that the bank is not deducting TDS in view of the interim order of Hon’ble High Court of Judicature at Madras dated 16.02.2015 and if the said order is vacated and/or the writ petition in which the 7 ITA No. 173/JPR/2025 State Bank of India, Ajmer. said order is passed or dismissed, bank will be entitled to recover the amount of income tax (TDS) on the bill amount paid. 4.1 Keeping in view the information provided by the Bank regarding non deduction of tax on reimbursement of foreign travel visit by their employees during the FY 16-17, a show cause notice u/s 201(1)/201(1A) vide letter No. 1613 dated 27.03.2018 was issued and served upon Branch Manager, SBBJ, Shastri Nagar, Ajmer which has reimbursed the cost of foreign travel to their employees fixing the case for hearing on 16.04.2018 as to why you may not be treated as assessee in default under section 201(1) of the IT Act, 1961. No compliance was made by the assessee bank to this show cause notice. Notice under section 142(1) was issued on 31.05.2018 to the Bank Manager, Shastri Nagar, Ajmer fixing the date of hearing of the case on 13.06.2018. In compliance to the said notice, neither the assessee filed any written reply nor any Authorized Representative of the assessee attended in this office. Again notice under section 142(1) was issued on 24.07.2018 fixing the date of hearing on 20.09.2018. On this date the Authorized Representative of the assessee bank attended and requested for some time to furnish the details/documents in this case and case was fixed for next hearing on 02.11.2018. On this date, the Authorized Representative of the assessee bank attended and filed written submission. The AO considered the submissions of the assessee bank but could not find it acceptable on the reason that the decision 8 ITA No. 173/JPR/2025 State Bank of India, Ajmer. referred by the assessee bank is not our jurisdictional High Court decision and is not applicable in this case, and further held that decision of the ITAT Jaipur Bench in appeal no. ITA No. 342/JP/2017 dated 04.10.2017 for the AY 2014-15 in the case of Branch Manager, State Bank of India, SME Branch, 602, Dadabari Ext., Kota vs. ITO (TDS) Kota, is applicable in the case of the assess bank. Thereafter, the AO discussing the legal position of Rule 2B of the Income Tax Rules and Section 10(5) of the IT Act, 1961, treated the assessee bank to be an assessee in default within the meaning of section 201 of the IT Act, 1961 and raised a total demand of Rs. 1,22,731/- (Rs. 96,133/- and Rs. 26,598/-) under section 201(1)/201(1A) of the IT Act, 1961 on the assesseedeductor bank, vide his order dated 20.11.2018. Aggrieved by the order of the AO, the assessee preferred appeal to the ld. CIT (A). During the appellate proceedings, the ld. CIT (A) fixed the case for hearing on 06.05.2019, 20.05.2019, 28.05.2019 and lastly on 11.06.2019 but no one attended the hearing nor submitted any written submissions. The ld. CIT (A), vide his order dated 11.06.2019, decided the appeal of the assessee ex-parte by observing in para 4.3 of his order as under :- “ 4.3 I have gone through the order, statement of facts and grounds of appeal carefully. It is seen that there is no dispute about the fact that the appellant had committed default of non deduction/short deduction of tax at source while making payment of LTC/LFC to its employees. The appellant was required to deduct tax at source u/s 192 while making payment of LTC/LFC to its employees. Therefore, the demand of Rs. 96,133/- and Rs. 26,598/- raised by the AO u/s 201(1) and 201(1A) by treating the appellant as assessee in default is hereby confirmed.” 9 ITA No. 173/JPR/2025 State Bank of India, Ajmer. Now the assessee bank is in appeal before the Tribunal on the grounds mentioned herein above. 5. Before us, the ld. AR of the assessee submitted his written submissions which are being reproduced hereunder : “Now, the humble assessee wants to submit that: 1. Under the facts and circumstances the Ld. AO has grossly erred in initiating the assessment proceedings against the SBBJ (A non-existent). The action of the Ld.A.O. is illegal and therefore deserves to be quashed or set aside. In reference to this GOA, it is hereby submitted that i.e. TAN: JDHS03287E which belongs to the SBBJ. The same had been surrendered at the time of merger with SBI on 31.03.2017. The proceedings initiated on the non-existing entity are substantive illegal and is in violation of law.Considering the legal position and various landmark judgments proceedings done on non- existent entity is void ab initio. The Hon’ble Supreme Court in the judgment of Pr. Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. decided on 25th July, 2019- upheld the decision of Hon’ble Delhi High Court. The relevant part is as under “the Tribunal set aside the final assessment order on the ground that it was void ab initio, having been passed in the name of a non- existent entity by the assessing officer. The decision of the Tribunal was affirmed in an appeal under Section 260A by the Delhi High Court on 9 January 2018”. In another judgment of the Hon’ble Bombay High Court titled as Teleperformance Global Services Vs. ACIT & Ors. Dated 09th April, 2021, “It is concluded that the proceedings initiated in the name of non- existing entity is a substantive illegality and would not be procedural violation of Section 292 (b) of the Act.” The decision of Delhi High Court in the case of CIT Vs. Spice Enfotainment Ltd. (2018) 12 ITR-OL 134 observed that in its decision 10 ITA No. 173/JPR/2025 State Bank of India, Ajmer. Delhi high court had held that assessment order passed against non- existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B. The Supreme Court in Spice Infotainment Ltd. Vs. CIT-15 found that there is no reason to interfere with the impugned judgment of Delhi high court and it found no merits in the appeal and special leave petition and were dismissed accordingly. Another decision of Delhi High Court in Sky Light Hospitality LLP Vs. Assistant Commissioner of Income-tax on similar issue was decided in favour of the assessee and that it had been affirmed by the Supreme Court. Hence, considering the facts and cases cited above, the assessment proceedings deserve to be quashed and set aside. 2. Without prejudice to the GOA-1, under the facts and circumstances of the case, the Ld. ITO, TDS-Ajmer, erred in conducting the proceedings u/s- 201/201(1A) and thereby passing the order dated 20.11.2018. The issuance of the notice and the passing of the order u/s-201(1)/201(1A) was issued by the non-jurisdictional A.O. whereas it must be issued by the jurisdictional AO(ACIT/JCIT-TDS) only. The assessment proceedings concluded by the non-jurisdictional AO is illegal and non- curable u/s-292BB of the Income Tax Act, 1961 and therefore deserves to be quashed or set aside. In respect of the GOA, the proceedings-initiated u/s-201/201(1A) was by the Ld. ITO, TDS-Ajmer and thereafter the order was also passed by him. Considering the jurisdictional limit of TDS, in this case, the same deserves to be initiated and conducted by the jurisdictional AO i.e. Ld. ACIT/JCIT- TDS. However, the same was conducted by non-jurisdictional AO and there was no transfer order u/s 127. In accordance to the settled law, the proceedings will be initiated by jurisdictional AO only. The action of the Ld. AO was beyond the relief available u/s 124(3). The relevant para as mentioned u/s 124(3) is as under: (3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer— (a) where he has made a return under sub-section (1) of section 115WD or under sub-section (1) of section 139, after the expiry of one month from the date on which 11 ITA No. 173/JPR/2025 State Bank of India, Ajmer. he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 115WE or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier; (b) where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier; (c) where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under sub- section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier. Thus, the notice issued by the Ld. AO and the proceedings concluded thereafter was illegaland non-curable u/s-292BB of the Income Tax Act, 1961 as 124(3) do not validate the order issued u/s 201(1)/201(1A). Hence, considering the facts and cases cited above, the assessment proceedings deserve to be quashed and set aside. In reference to the jurisdictional issue the following other judgments are relevant: CIT Vs. M/s MT Builders Pvt. Ltd., (2012) 349 ITR 271 (All.) It was held by the Hon’ble Allahabad High Court that the notice issued by an Officer who had no valid jurisdiction for the assessee is invalid. The Hon’ble Kolkata ITAT in the case of Shivam Dhatu Udyog Limited Vs. DCIT, Circle-3(1), Kolkata (ITA No. 2456/Kol/2019) held ON 10.03.2021 in para 11 and 12 that: 11. We have heard rival submissions and gone through the facts and circumstances of the case. The admitted position is that the assessee is a company and its registered office is at Kolkata (State of West Bengal). For the assessment year (AY 2012-13) a notice u/s. 143(2) of the Act has been issued by DCIT, Circle-2, Gorakhpur (State of U.P.). Thus, we note that the DCIT, Circle2, Gorakhpur did not enjoy the territorial jurisdiction u/s 124 or by virtue of section 120 of the Act or by transfer as per Section 127 of the Act. It is not disputed that the AO (DCIT, Circle-3(1), Kolkata) who passed the assessment order u/s. 143(3) of the Act had the jurisdiction and he has not issued fresh notice u/s. 143(2) of the Act before framing the assessment u/s. 143(3) of the Act. Now only the legal issue is whether the AO (DCIT, Circle-3(1), Kolkata) would have framed the assessment u/s. 143(3) of 12 ITA No. 173/JPR/2025 State Bank of India, Ajmer. the Act without issuing and serving Notice u/s. 143(2) of the Act on the assessee. This legal issue is no longer resintegra. The issuance of notice u/s. 143(2) is mandatory for framing scrutiny notice u/s. 143(3) of the Act as held by the Hon’ble Supreme Court in the case of CIT V Hotel Blue Moon (2010) 321 ITR 362 (S.C) wherein the Hon’ble Supreme Court has held that issue of a legally valid notice u/s. 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment u/s. 143(3) of the Act and in the absence of a valid notice u/s 143(2) the scrutiny assessment u/s 143(3) cannot be framed and omission to issue notice u/s 143(2) of the Act is not a curable defect. 12. Since the assessee has been able to demonstrate before us that there has been no notice issued u/s. 143(2) of the Act by the AO (DCIT Circle-3(1), Kolkata before he framed to scrutiny assessment u/s. 143(3) of the Act dated 17.03.2015, the assessment order is null in the eyes of law and the assessee succeeds on the legal issue raised before us. Since the AO (DCIT, Circle-3(1), Kolkata did not issue the mandatory notice u/s 143(2) of the Act, he did not enjoy the jurisdiction to frame the assessment u/s. 143(3) of the Act. Therefore, the order passed by the AO (DCIT, Circle-3(1), Kolkata is null in the eyes of law and it has to be quashed. We order accordingly. The Hon’ble ITAT Delhi Bench-C in the case of Sh. Manoj Kumar Vs. ACIT, Circle-62(1), New Delhi (ITA No. 1627/Del./2016) A.Y. 2010-11 held in para 3.10 to 3.12 as under: 3.10 The contention of the Revenue is that the assessee did not bring the fact of correct jurisdiction before the expiry of the limitation period and, therefore, this mistake is curable under section 292BB of the Act. We do not agree with the contention of the Revenue, because, the fault of mistake of issue notice on 01/09/2011 by the non-jurisdictional officer lied with the Department. There is no law, which requires the assessee to intimate the correct jurisdiction to the Income Tax Department and it is the responsibility of the Department to ensure that notice has been issued in accordance with the law. This responsibility cannot be shifted to the assessee although the assessee intimated as soon as the show cause notice was received at address at Gurgaon. As far as section 292BB is concerned, objection as to service of notice (not served upon the assessee, not served upon the assessee in time or served upon the assessee in improper manner) stands waived if the assessee has participated in the assessment proceeding. But in the instant case, as per the proviso to section 143(2) of the Act, no notice could have been served on the assessee after the expiry of the six months from the end of the financial year in which return is filed. 13 ITA No. 173/JPR/2025 State Bank of India, Ajmer. The relevant provision is reproduced as under: “Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.” 3.11 The learned Counsel of the assessee before us has relied on the decision of the Hon’ble Delhi High Court in the case of Sunworldinfrastructure (P) Ltd. Vs ITO, Ward 24(3) New Delhi (2015) 64 raxmann.com 471(Delhi). The fact of the said case reproduced in para 3 of the decision of the Hon’ble Delhi High Court are reproduced as under: 3. The learned counsel for the respondent submitted that the impugned notice was not time-barred inasmuch as it was in continuation of an earlier notice under Section 143(2) issued by the Income Tax Officer, Ward-12(2), Bangalore on 10.09.2013. But, in our view, this does not save the impugned notice under Section143(2). The reason for this is that the purported notice dated 10.09.2013 issued under Section 143(2) by the Assessing Officer at Bangalore was without jurisdiction inasmuch as the Assessing Officer at New Delhi had jurisdiction over the case. This fact was immediately pointed out by the assessee/petitioner by virtue of its letter dated 17.09.2013 where it had clearly indicated that it was regularly filing returns in Delhi and that the jurisdiction of the case was in Delhi. On this basis, it was requested that the said notice issued by the Bangalore office be withdrawn. Thereafter, the Income lax Officer, Ward-6(1), Bangalore wrote to the Income Tax Officer, Ward-24(3). New' Delhi on the subject of transfer of scrutiny assessment records in the case of the petitioner. The said letter reads as under: \"OFFICE OF THE INCOME TAX OFFICER WARD-691)(1), No. 14/3. 4th Floor. Rastrothana Bhavan (Opp. RBI) Nrupatunga Road, Bangalore- 560 001 F. No.TRF/ITO-W-6(1)(1)/2014-15 Dated: 16/12/2014 Income Tax Officer, (Compan 14 ITA No. 173/JPR/2025 State Bank of India, Ajmer. y Ward- 2493), Central Revenue Building, IP Estate, New Delhi-110002 Madam/sir, Sub: Transfer of scrutiny assessment records in the case of M/s Sunworld Infrastructure Pvt. Ltd-reg. ** ** The above mentioned case was selected for scrutiny under CASS for A.Y. 2012- 13 & 2013-14 notices u/s. 143(2) was issued at the address available as per PAN data. On verification it is noticed that the jurisdiction of the vests with your office. Accordingly, case record is transferred herewith for necessary action at your end. Yours faithfully, (LOKESH A) Income-tax Officer. Ward-6( 1)(1), Bangalore\" 3.12 In the facts of the case, the Hon’ble High Court held that the purported notice under section 143(2) dated 10/09/2003 was without jurisdiction. The relevant finding of the Hon’ble Delhi High Court is reproduced as under: “4. It is evident from the aforesaid letter that it is only the records of the case which were transferred and the case itself had been transferred, the same would have to be directed under Section 127 of the s id Act. No such order of transfer has been made and the above letter dated 16.12.2014 is indicative of the fact that the Bangalore Office of the Income Tax Department did not have junction in this case . 5. That being the position, the purported notice under Section 143(2) issued on 10.09.2013 was one without jurisdiction and cannot be regarded as a valid notice. The first notice, therefore, which was issued by an Officer having jurisdiction was on 24.12.2014. This was issued clearly beyond the period of limitation which has been prescribed, i.e., beyond 30.09.2013 in this case. As 15 ITA No. 173/JPR/2025 State Bank of India, Ajmer. such, the impugned notice dated 24.12.2014 issued under Section 143(2) of said Act is barred by time. The same is quashed.” 3.13Thus, respectfully following the finding of the Hon’ble Delhi High Court, we hold that the notice dated 01/09/2011 issued by the CIT, Circle - 37(1) was without jurisdiction and, thus, it wasinvalid and the notice dated 30/08/2012 issued by the ITO, Ward 38(2), New Delhi issued by the correct Jurisdiction Officer, was beyond the period of limitation and therefore, this was also invalid. Thus, assessment order passed without acquiring the correct jurisdiction for a scrutiny by way of notice under section143(2) is void ab initio and thus we quash the same. As we have already quashed, the assessment order we are not adjudicating on the issue raised on merit of the addition under section143(2) is void ab initio and thus we quash the same. As we have already quashed, the assessment order we are not adjudicating on the issue raised on merit of the addition. The Hon’ble Delhi ITAT in the case of Nirmal Gupta v. Pr. CIT-9, 2021 SCC OnLine ITAT 345, decided on 22.06.2021] the first notice under Section 143(2) was issued on 01.08.2016 which by the non-jurisdictional Assessing Officer and jurisdictional Assessing Officer issued the notice on 10.03.2017 which is beyond the limitation period as per the statutory provisions of the Act. Thus, the notice is time-barred and hence, the assessment itself becomes void- ab-initio. the proper jurisdiction of the Assessing Officer in the present case is that of DCIT, Circle 25(2) as the assessment for A.Y. 2014-15 has proceeded before the said Assessing Officer in Assessee’s case. Thus, on the point of jurisdiction relating to the issuance of notice also makes the notice under Section 143(2) void-ab- initio.” [2021] 128 taxmann.com 347 (Kolkata - Trib.)[30-04-2021] Where case of assessee was transferred by ITO, Ward- 4 to ITO, Ward-5, impugned order under section 143(3) passed by ITO, Ward-5 without issuing notice under section 143(2) and only in pursuance with notice issued by ITO, Ward- 4, who did not enjoy jurisdiction over assessee, was null and void. The Hon’ble ITAT, Kolkata the case of Jigna Chetan Mehta v. Assistant Commissioner of Income Tax, Circle-33, Kolkata decided on 23.06.2023 concluded that “We thus, unhesitatingly hold that ACIT, Circle-31, Kolkata had no valid jurisdiction over the assessee on the date of issuing notice u/s. 143(2) of the Act. Revenue has not controverted this fact by placing any other contrary material on record to indicate otherwise. Since a valid notice 16 ITA No. 173/JPR/2025 State Bank of India, Ajmer. u/s. 143(2) has not been issued, the assessment proceedings carried thereafter deserves to be quashed. We, therefore, respectfully following the ratio laid down by ITA No.616/Kol/2022 Jigna Chetan Mehta, AY: 2012-13 Hon’ble jurisdictional High Court in the case of PCIT Vs. Shree Shoppers Ltd. (supra), allow the additional grounds raised by the assessee and quash the assessment proceedings completed u/s. 143(3) r.w.s 147 of the Act. Since we have quashed the assessment proceedings, the grounds relating to the merits of the case are rendered mere academic in nature and are, therefore, not adjudicated upon. Accordingly, the appeal of the assessee is allowed.” Thus, considering the aforesaid judgments and facts of the case the Ld. AO was not the jurisdictional AO and the same was not a curable defect u/s 124(3) and therefore, the order dated 27.01.2025 is without jurisdiction and illegal therefore the same deserves to be quashed and set aside. 3. Without prejudice to the GOA-1 to 2, the Ld. A.O. passed the order on 20.11.2018. The proceedings were initiated u/s 142 and order was passed u/s 201(1)/201(1A) which are inconsistent with each other, rendering the assessment order invalid. The action of the Ld. A.O. was illegal and therefore deserves to be quashed or set aside. In respect of this GOA, it is hereby submitted that the assessee- deductor is a branch of a public sector bank. A letter No. ITO (TDS)/AJM/2017-18/1297 dated 27.2.2018 was issued calling the information in respect of foreign LTC benefits availed by the employees during F.Y. 2016-17. In response to the same, the assessee filed the reply on 28.02.2018. During the assessment proceedings, the Ld. AO issued the notices u/s-142(1) of the Act requiring the information despite the fact that the provisions of the section-142(1) doesn’t apply with reference to the assessment u/s 201(1)/201(1A). Section 201 of the Act provides that if any person, who is required to deduct tax at source under the Act, fails to do so or fails to deposit the tax deducted, such person shall be deemed to be an assessee-in-default and shall be liable for interest under Section 201(1A).However, it is important to note that: Section 201 is a charging provision for TDS defaults; it does not grant the 17 ITA No. 173/JPR/2025 State Bank of India, Ajmer. Assessing Officer any independent power to collect information or conduct an inquiry. The power to call for information and conduct an inquiry is specifically provided under Section 133(6) of the Act. Before holding an assessee as \"assessee-in- default\" under Section 201, the AO must conduct an inquiry to ascertain the correctness of the default. Section 201 read with Section 191 of the Act the liability of the tax, which was required to be deducted at source, cannot be fastened on the deductor and in the event the tax has not been deducted the primary liability to pay such tax is on the assessee and the assessment order framing assessment of tax on the petitioner was beyond the jurisdiction and was outside the provisions of Section 201 of the Act. In the context of proceedings under Section 201 of the Income Tax Act, 1961, it is imperative for the Assessing Officer (AO) to conduct a thorough inquiry to ascertain whether the deductee has discharged their tax liability before treating the deductor as an assessee-in-default. This principle has been upheld in various judicial pronouncements. Key Judicial Precedents: CIT v. Eli Lilly & Co. (India) Pvt. Ltd. (2009) 312 ITR 225 (SC): Facts: The AO initiated proceedings under Section 201 against the deductor without verifying if the deductees had paid taxes on the income received. Held: The Supreme Court emphasized that the liability of the deductor under Section 201(1) is not automatic. The AO must verify whether taxes have been paid by the deductees. If the deductees have paid the taxes due, the deductor cannot be treated as an assessee-in-default. Jagran Prakashan Ltd. v. DCIT (TDS) (2012) 21 taxmann.com 489 (All HC): Facts: The AO passed an order under Section 201 without conducting an inquiry to determine if the deductees had paid their taxes. Held: The Allahabad High Court ruled that before declaring a deductor as an assessee-in-default, the AO is duty-bound to ascertain whether the deductees have paid taxes on the income. Failure to conduct such an inquiry renders the order under Section 201 invalid. 18 ITA No. 173/JPR/2025 State Bank of India, Ajmer. DCIT v. Infosys BPO Ltd. (2014) 45 taxmann.com 352 (Bang ITAT): Facts: The AO initiated proceedings under Section 201 without verifying the tax payment status of the deductees. Held: The Bangalore ITAT held that the AO must establish that the deductees have not paid taxes on the income before treating the deductor as an assessee-in- default. An order under Section 201 without such verification is unsustainable. Therefore, the proceedings were initiated u/s 142 and order passed u/s 201(1)/201(1A) are inconsistent with each other, and consequentially the assessment proceedings & its order is invalid and the same deserves to be quashed & set aside. 4. Without prejudice to the GOA-1 to 3, under the facts and circumstances of the case, the Ld. AO has grossly erred in passing the assessment order dated 20.11.2018 under Sections 201 and 201(1A) of the Income Tax Act, 1961, during the pendency of SLP No. 16734/2023 before the Hon'ble Supreme Court and the subsisting stay order dated 28.08.2023. The stay order explicitly restrains the assessee bank from making any recoveries from its employees. Any action taken by the bank during the pendency of the matter would amount to contempt of court. However, the department was under no such restraint and could have issued notices to the employees who actually enjoyed the benefit of Leave Travel Concession (LTC). Initiating proceedings solely against the assessee bank is in stark violation of the principles of natural justice. Consequently, the assessment order is vitiated and deserves to be quashed and set aside. The humble assessee in this ground of appeal wants to submit that the Ld. AO. failed to appreciate that: i. There was and even today there is stay of Hon’ble courts therefore the amount cannot be recovered from the assessee/beneficiary. The recovery of interest would tantamount to contempt of the court. The sequence of events in the appeal filed by All India State Bank Officers' Federation and All India Bank Officers' Confederation is as under: ii. 1. State Bank of India ('the Bank') provides the benefit of Leave Travel Concession (LTC) to its employees in line with the State Bank of India Officers Service Rules, 1992 and while deducting the TDS from the Salary of the employees LTC was considered exempted u/s 10(5) and Rule 2(B). 19 ITA No. 173/JPR/2025 State Bank of India, Ajmer. 2. Indian Banks Association [IBA] by a Circular dated: 07.04.2014 advised that Officers/employees of member Banks shall not be entitled to visit overseas countries as part of LTC/HTC. 3. Furthermore, the Ministry of Finance, Department of Financial Services [DFS] vide letter dated 30/04/2014 addressed to the Chairmen and Managing Directors of the Public Sector Banks and Financial Institutions informed that pursuant to the direction of the Chief Vigilance Commissioner in his letter dated 08.10.2013, the matter had been examined and it was decided that Public Sector Banks and Financial Institutions may be advised to formulate LTC/LTA schemes based on the principles of the Government of India Scheme, which in particular should cover that travel to foreign destinations (including travel via foreign destinations while availing LTC facility) may not be allowed. 4. In compliance of the above directives, the Bank by a circular dated 15.04.2014 communicated that an Officer shall not be entitled to visit overseas countries as part of LTC/HTC and that the revised instructions will come into force with immediate effect. 5. This decision of the Bank, circular dated 15.04.2014, was challenged in the Hon’ble High Court of Madras by All India State Bank Officers' Federation and All India Bank Officers' Confederation (Petitioners) by a Writ Petition (11991/2014). 6. The Bank on 02.09.2014 filed a detailed counter affidavit in the petition setting out inter-alia the above facts shows that the petitioners were not entitled to any relief and prayed for dismissal of the same. 7. The Hon'ble High Court vide its Order dated: 25.04.2014, issued an interim stay on the Bank's instructions keeping in view the undertaking given by the petitioners and ruled as under: \"The petitioners hereby give an undertaking that if an interim stay is granted and later the writ petition is dismissed, the amount paid towards LTC to cover foreign/overseas travel to our member-officers will be refunded by the individual officers concerned. 8. On 16.02.2015, the interim stay order of the court was extended till the disposal of the writ petition and the court also directed that: \"The interim order granted by this Court is explained to the effect that any amount paid to the petitioner towards LFC or reimbursement of LFC pursuant to the impugned order would not amount to income so as to enable the Bank to deduct tax at source. It is made clear that If the Writ Petition is dismissed, the employees are liable to pay tax on the amount paid by the Bank. \"It was also mentioned by the Court that, the modified Interim Order would continue till the disposal of the Writ Petition 9. The above factual matrix was also advised by the Bank to the Under Secretary Government of India, Ministry of Finance by a letter CDO/PM/16/SPL/1019, 20 ITA No. 173/JPR/2025 State Bank of India, Ajmer. dated: 25.08.2014.On 29.04.2015, the Bank filed an affidavit-in-reply in the petition in which the Bank at para 7 stated that since the Order dated:2.2015 of the Hon'ble High Court directly affects the provisions of the Income Tax Act/Rules and Circulars issued by the Income Tax department, the Ministry of Finance, the Central Board of Direct Taxes [CBDT] & the Commissioner of Income Tax are proper and necessary parties for adjudication of the matter. It was also added that it was incumbent upon the Petitioners to have impleaded the said authorities as Respondents in this petition as in the absence of the same, the order restraining deduction of tax at source causes difficulties in implementation and renders the same unworkable apart from creating complications in satisfying requirements prescribed in Income Tax enactments. It was thus prayed that the interim order dated 16.02.2015 be vacated. 10. Following the above order, the Bank issued circular instructions (e-Circular P&HRD dated Friday, May 09,2014) clarifying that visit to foreign destinations under LTC/HTC may be undertaken by an official till the interim stay order is in force. However, in the event of dismissal of the petition, the concerned official will have to refund the entire amount paid/ reimbursed towards journey undertaken in foreign land in terms of the undertaking submitted by the petitioners. 11. On 24.06.2022 (i.e., much after the date of reimbursement of LFC for the year under consideration), the writ petitions filed before the Hon'ble High Court of Madras were dismissed. 12. On 08.08.2022, the following order was passed by the Division bench of the Hon'ble High Court of Madras in Writ Appeal 1653/2022 filed against the judgment dated: 24/06/2022: “7. Consequently, it is ordered that, the appellant Federation / officers are protected to the extent that, during-pendency of this appeal, no recovery shall be affected from their salary and also those consequential coercive proceedings shall be instituted by any of the authorities against them.” 13. By the judgement dated 08.06.2023, the Hon'ble Division Bench of the Madras High Court allowed the W.A No. 1653/2022 quashed the Circulars dated 07.04.2014 issued by IBA and the letter dated 15.04.2014 issued by the Bank regarding the revised LTC/HTC instructions and further remanded the matter to the authorities for fresh consideration after granting opportunities to the WritPetitioners. 14. The Bank had challenged the said Order before the Supreme Court under SLP No. 16734/2023 where in Commissioner of Income Tax (TDS), Greams Road, Thousand Lights, Chennai 600001 is also one of the party as Respondent No.5. In the said SLP, Apex Court vide its Order 28.08.2023 has stayed the 21 ITA No. 173/JPR/2025 State Bank of India, Ajmer. operation of the judgement of the Madras High Court in W.A No. 1653 /2022 and the Bank is directed not to make any recoveries from its employees during the pendency of the SLP. ii. No proceedings were taken by the department against the beneficiary. There was stay on the bank but there was no stay on the ITD for initiating any proceeding against the beneficiary/assessee. The action of the Ld. A.O. was illegal, biased and against the principal of natural justice. It is relevant to note that the bank has not deducted any TDS due to bonafide belief and various judicial citation favouring on this. There was stay of the Hon’ble courts and the picture only get cleared by the decision of the Hon’ble Apex Court. The assessee further submits the provisions of the Act to clarify the difference in relation to payable income tax in respect of “assessee-in-default” and the “assessee”. The definition of the assessee as per the Act is an under:- 2(7) \"assessee\" means a person by whom any tax or any other sum ofmoney is payable under this Act, and includes— (a) every person in respect of whom any proceeding under this Act hasbeen taken for the assessment of his income or assessment of fringebenefits or of the income of any other person in respect of which he isassessable, or of the loss sustained by him or by such other person, or ofthe amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision ofthis Act; The definition of assesse in default is given under the Section- 2(7)subclause(c) “(c) every person who is deemed to be an assessee in default under anyprovision of this Act;” Thus, it is clear that the deeming fiction is applicable only in case of default under any provision of this Act. Chapter-17 Relating to collection and recovery of tax states that:- Deduction at source and advance payment. 190. (1) Notwithstanding that the regular assessment in respect of anyincome is to be made in a later assessment year, the tax on such incomeshall be payable by deduction or collection at source or by advancepayment or by 22 ITA No. 173/JPR/2025 State Bank of India, Ajmer. payment under sub-section (1A) ofsection 192, as the casemay be, in accordance with the provisions of this Chapter. (2) Nothing in this section shall prejudice the charge of tax on such incomeunder the provisions of sub-section (1) ofsection 4. Charge of income-tax. 4. (1) Where any Central Act enacts that income-tax shall be charged forany assessment year at any rate or rates, income-tax at that rate or thoserates shall be charged for that year in accordance with, and subject to theprovisions (including provisions for the levy of additional income-tax) of,this Act in respect of the total income of the previous year of every person: Section:191. Direct payment (1) In the case of income in respect of which provision is not made underthis Chapter for deducting income-tax at the time of payment, and in anycase where income-tax has not been deducted in accordance with theprovisions of this Chapter, income-tax shall be payable by the assesseedirect. Explanation.—For the removal of doubts, it is hereby declared that if any person including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or after so deducting fails to pay, or does not pay, the whole or any part of the tax, as required by or under this Act, and where the assessee has also failed to pay such tax directly, then, such person shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default within the meaning of sub-section (1) of section 201, in respect of such tax. A bare perusal of above sections-190 r.w.s 4(1) and section-191 clearly specifies that the ultimate tax liability i.e. charge on income is to be borne by the assesse only. In the present case, it is amply clear that the litigations were going on the issue and the assessee-bank did not deduct the TDS in compliance of the orders passed by the Hon’ble Court & further the provisions & explanation of the section the assessee-employee is also liable to pay tax. The assessee in respect of this submits that as regards foreign LTC, litigations were going on and there was stay of Hon’ble Madras High Court with reference to writ petition filed by the All India State bank Officers’ Federation and All India Bank Officers’ Confederation. The aforesaid writ petition was 23 ITA No. 173/JPR/2025 State Bank of India, Ajmer. filed in the year of 2014. (W.P. No. 11991/2014) and stay was granted in the matter. The said writ petition was dismissed by the Hon’ble High Court of Madras on 24.06.2022 and against this an appeal was filed before the DB. The Hon’ble High Court vide order dated 08.08.2022 admitted the appeal and issued the interim order/relief. The humble assessee was unable to take any action on account of judicial verdict/ stay order. In such circumstances how the bank can be regarded as “Assessee in default” because there is another sword/ issue of contempt of Hon’ble Court. The Hon’ble Court even restricted to the departmental authorities for taking any action during this period. The decisions of Hon’ble Apex Court came on 04.11.2022 and in that they just discussed about taxability issue. How the recovery is to be done from the assessee/beneficiary is not discussed. It is relevant to note that the tax is payable by the person who enjoyed the income. Section 4 is the charging section. Under section 4(1), the total income for the previous year is chargeable to tax. Section 4(2), inter alia, provides that in respect of income chargeable under sub-section (1), income-tax shall be deducted at source where it is so deductible under any provision of the 1961 Act which, inter alia, brings in the TDS provisions contained in Chapter XVII- B. In fact, the scheme of tax deduction at source provides that the primary responsibility for payment of the tax is on the recipient of the income. This obligation is cast under the provisions of chapter XVII-B of the Act on the remitter/payer of income, to deduct tax at source out of the payment made to the recipient. In case of any failure on the part of the remitter to deduct tax at source in accordance with the provisions of the said Chapter, the recipient of income is not absolved from the liability of paying tax on the income so chargeable under the provisions of the Act. The various sections in Chapter XVII-B, viz., sections 192 to 194LA require deduction of tax at source by the payer at the time of making payment to the recipient or at the time of credit of income, whichever is earlier. With the above background of TDS provisions, if we see the scheme of section 201, then, it is a defaulting provision which can be invoked in the case of failure by the deductor in not deducting TDS or deducting the amount but not depositing the TDS. Consequences of failure to deduct or pay. 24 ITA No. 173/JPR/2025 State Bank of India, Ajmer. 201. 13[(1) Where any person, including the principal officer of a company,— (a)who is required to deduct any sum in accordance with the provisions of this Act; or (b)referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: 13a[Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident— (i)has furnished his return of income under section 139; (ii)has taken into account such sum for computing income in such return of income; and (iii)has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:] Section 201(1) states that where the person responsible for paying any sum chargeable to tax under the provisions of this Act fails to deduct or after deducting fails to pay the tax as per the provisions of this Act, he shall be deemed to be an assessee in-default in respect of the tax. On going through the Explanation to section 191 to section 201(1), it is divulged that the person responsible for deducting who has failed to deduct or has failed to deposit tax deducted at source is to be deemed to be an assessee-in-default only if the payee of income has also failed to pay such tax directly. To sum up, the liability of the person responsible is dependent upon the deductee failing or otherwise to pay such tax directly. Thus, the actionunder section 201(1) is dependent on the outcome of the assessment of the payee and the time-limit for passing an order under section 201(1) has to be viewed in the light of the fate of the assessment in the hands of the recipient. 25 ITA No. 173/JPR/2025 State Bank of India, Ajmer. Logically, the person responsible for paying sums chargeable to tax can be treated as the assessee-in-default at any time prior to the assessment of the payee or at the time available for the making of the assessment of the payee. If the person responsible is deemed to be an assessee-in-default after the assessment of the payee or the time available for making assessment has expired, then such amount of tax will be incapable of adjustment against tax liability of the payee and would be returned to such person who has been treated as an assessee-in- default. Thus, both, the initiation of proceedings under section 201(1) as well as the completion of such proceedings by passing an order have to be prior to the time-limit within which the tax can be determined in the hands of the payee. It cannot be beyond such a period. (Mahindra and Mahindra Ltd, [2009] 30 SOT 374 (Mumbai) (SB)) The special bench in the case of Mahindra & Mahindra Ltd. vs DCIT, 30 SOT 374 (Mumbai) (SB) held that the very idea of passing an order under section 201(1) stands on the foundation of the presumption that there is a default in deducting the whole or any part of tax or that after deduction there is a failure to pay such tax as required by or under this Act. So, the pre-condition for having jurisdiction under this section is that there should be a default as referred to in section 201(1) by which the person responsible is treated as an assessee-in- default. It is relevant to note that the Ld. A.O. has not issued any notice or do the needful for issuing notice to the assessee who were the recipients of income in his view despite the time available u/s 143/147. In his opinion they were not liable to pay tax? If yes, When the amount is not payable by the assessee how it is payable under deeming fiction of law. How this can be the natural justice that when a person who is enjoying the benefit is excluded to pay any tax liability but the person who has done the payment is liable to pay even when no demand is raised by the department against the beneficiary even when comes under the jurisdiction of the department. Therefore, in the present proceedings, the assessee-bank cannot be treated as assessee-in-default as the bank is bound by the orders of Hon’ble Madras Court, however on the other side not even a single notice was ever issued to the persons (assessee) who were liable to pay tax to the ex-chequer. As the Ld. AO was not ever restricted to initiate any proceedings against the assessee’s. However, just after the order passed by Hon’ble Supreme Court, the department initiated the proceedings 26 ITA No. 173/JPR/2025 State Bank of India, Ajmer. against the assessee bank which is unjustified, as the liability to pay tax is on the employee and not on the bank. The Hon’ble Supreme Court in Hindustan Coca Cola Beverage Pvt. Ltd. v. CIT (2007) 293 ITR 226 (SC) has categorically held that when the deductee has already paid taxes on the income, the deductor cannot be held liable for TDS defaults. The Apex Court emphasized that tax authorities must verify the deductee’s tax payments before declaring the deductor as an assessee-in-default. The Hon’ble Delhi High Court in CIT v. Nestle India Ltd. (2008) 296 ITR 682 (Del HC) further reinforced this principle, ruling that an order under Section 201 must be preceded by an inquiry into the tax liability of the deductee. If the deductee has already paid taxes, then treating the deductor as an assessee- in-default is unjustified. Moreover, the impugned order suffers from a gross violation of the principles of natural justice. The Hon’ble Supreme Court in CIT v. Larsen & Toubro Ltd. (2015) 365 ITR 1 (SC) held that the principles of natural justice must be strictly adhered to in assessment proceedings, and any violation renders the proceedings void. The Ld. AO not only failed to issue notice to the employees but also did not provide the appellant with a fair opportunity to explain its position before passing the order. The Hon’ble Bombay High Court in RashmikantKundalia v. Union of India (2015) 373 ITR 268 (Bom HC) emphasized that before treating any person as an assessee-in-default, they must be provided with an opportunity to present their case, and failure to do so vitiates the proceedings. Additionally, the impugned order lacks any reasoning or calculation regarding the alleged TDS shortfall. The Ld. AO has not provided any tax computation to justify the demand raised, making the entire assessment arbitrary. The Hon’ble Delhi High Court in PCIT(E) v. Tata Medical Centre Trust (ITA/202/2023, Decided on 26.09.2023) held that any assessment order that lacks a clear tax computation and reasoning is arbitrary and liable to be struck down. Similarly, the Hon’ble Bombay High Court in Ashok Commercial Enterprises v. ACIT (WP No. 2595/2021, Decided on 04.09.2023) ruled that an order that does not specify the basis of tax demand is in violation of the principles of natural justice and must be quashed. Furthermore, the Ld. AO’s failure to adhere to the mandatory procedural requirements under Section 201 cannot be cured by invoking Section 292BB of the Act. Section 292BB only cures defects in service of notice and does not rectify jurisdictional errors. The Hon’ble Supreme Court in Kiran Singh v. Chaman Paswan (1954) AIR 340 (SC) held that a defect of jurisdiction strikes at the root of the proceedings and cannot be cured. The Hon’ble Delhi High Court in CIT v. ITAT (2017) 394 ITR 133 (Del HC) 27 ITA No. 173/JPR/2025 State Bank of India, Ajmer. reiterated that an order passed without jurisdiction is null and void, and Section 292BB does not validate such an order. In view of the foregoing, the order passed by the Ld. AO under Section 201 is legally unsustainable due to (i) failure to issue notice to the employees before declaring the bank as an assessee-in-default, (iii) violation of the principles of natural justice, (iv) absence of any tax calculation or reasoning in the order, and (v) lack of jurisdiction under Section 201. As per settled judicial precedents, the order is void ab initio and liable to be quashed. Therefore, it is respectfully prayed that the assessment order dated 20.11.2018 under Section 201/201(1A) be declared invalid, non-est, and void ab initio, and the entire assessment proceedings be quashed or set aside. It is pertinent to mention here that the Honorable JurisdictionalITAT Jaipur Bench on the similar issue allowed the appeals in the favour of the bank. The details of the cases are as under: State Bank of India, Nehru Place Vs. The JCIT, TDS, Jaipur (ITA No. 1391/ JPR/2024) dated 13.03.2025 The Hon’ble Bench in para 5.1. and 5.2 summarised the position as under: 7. The scheme of the assessment proceedings can’t be equated with the scheme as envisaged in section 201(1) and 201(1A) of the Act. The liability of the deductor u/s. 201(1) of the Act is not automatic, the department must verify and bring on record, whether action against the beneficiary has been initiated and due taxes by them have been paid or not. If the deductee had paid taxes, this will automatically absolve the deductor and if not still, the deductee is liable to pay asper section 4 of the Act. 8. Without being prejudice to the above factual and legal observation, it isalso brought to our notice (Before the Ld. CIT (A) also) that the SLP (C) No.16734/2023 is pending before the Hon’ble Apex Court, wherein the Hon’ble ApexCourt has restrained the deductor Bank from making any recovery from itsbeneficiary employees during the pendency of the SLP mentioned (supra). In thisSLP Ld. Commissioner of Income Tax (TDS), Chennai is also a party as respondentno. 5. There was a stay on the bank from recovering amount from its employeesbut there is no restriction as such on the Revenue to proceed against thebeneficiary employees. How it can be justified that the beneficiary who enjoyedthe perks is nowhere in picture and facing no heat, where as the employer is being dragged for his tax of recovery. In view of this discussion and observationof the bench Ground Nos. 2, 3, 4 and 5 are allowed and the order of the AO(TDS) is quashed alongwith the confirmatory order of the Ld. CIT (A). 28 ITA No. 173/JPR/2025 State Bank of India, Ajmer. State Bank of India, Nehru Place Vs. The ACIT/DCIT TDS, Jaipur (ITA No. 728/ JPR/2024) The Hon’ble Bench in para 5.1. and 5.2 summarised the position as under: 5.1. From perusal of the record, we further noted from the copy of the judgmentof the Hon’ble Supreme Court in SLP No. 16734/2023 dated 28.08.2023 furnishedby the ld. A/R, the Hon’ble Supreme Court has till further orders, stayed theoperation of the impugned judgment, and the Assessee shall not make anyrecoveries from its employees during the pendency of the present petition. 5.2. We, therefore considering the above legal aspects of the matter andrespectfully following the judgment of Hon’ble Supreme Court, the order passedby the ld. Addl./JCIT (A)-1 is against law and the same is set aside. Ground No. 1allowed. 5.The appellant reserves his right to add, alter, modify, or delete any grounds of appeal. PRAYER Inlightoftheaforesaidfactsandlegalarguments,itismostrespectfullyprayedthat the impugned assessment order dated 20.10.2018, passed under Section 201/201(1A) of the Income-tax Act, 1961, be declared invalid, non-est, and void ab initio for failure to adhere to the mandatory provisions of law, as theentireproceedingsinitiatedbytheLd.AssessingOfficerunderSection201bequashed or set aside, as they suffer from a fundamental lack of jurisdiction and violation of the principles of natural justice, including the failure to issue a notice to the actual taxpayers (employees) and provide any other relief, which the Hon’ble Tribunal may deem just and proper, in the facts and circumstances of the case, may kindly be granted in the interest of justice.” 6. On the other hand, the ld. DR supported the orders of the revenue authorities. 7. We have heard the rival submissions, perused the material on record and gone through the orders of the lower authorities. We have noted that the ld. CIT (A) has passed the order in ex parte manner without hearing the assessee due to 29 ITA No. 173/JPR/2025 State Bank of India, Ajmer. failure of the assessee in responding to notices fixing the hearing for 06.05.2019, 20.05.2019, 28.05.2019 and 11.06.2019. Considering the principles of natural justice, we are of the view that one more opportunity should be given to the assessee to present its case before the ld. CIT (A). We, therefore, deem it fit to send back the matter to the ld. CIT (A) for fresh adjudication in the matter. The CIT (A) is directed to provide fresh opportunity to the appellant for submitting its explanations in the matter and the appellant is directed to submit its submissions on date as may be fixed by ld. CIT (A). Our decision is also guided by the pendency of SLP (C) No.16734/2023 before the Hon`ble Supreme Court of India, wherein the Hon`ble Supreme Court has also stayed recovery of tax amount from the employees. 8. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 27/05/2025. Sd/- Sd/- ¼ jkBkSM+ deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 27/05/2025 *Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- State Bank of India, (earlier known as SBBJ), Ajmer. 2. izR;FkhZ@ The Respondent- ITO (TDS), Ajmer. 30 ITA No. 173/JPR/2025 State Bank of India, Ajmer. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 173/JPRR/2025} vkns'kkuqlkj@By order, lgk;d iathdkj@Asst. Registrar "