In absence of mala fide intention bank should not be treated as assessee in default for late deduction and deposit of TDS – ITAT
In a recent judgment, ITAT has held that in absence of mala fide intention bank should not be treated as assessee in default for late deduction and deposit of TDS
AABCAUS Case Law Citation:
ABCAUS 3993 (2024) (05) ITAT
Important Case Laws relied upon:
Hindustan Coco Cola Beverages Pvt Ltd 293 ITR 226
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming demand u/s 201(1) and interest u/s 201(1A) of the Income Tax Act, 1961 (the Act) and treating the assessee as ‘assessee in default’.
The appellant assessee was a Public Sector Bank having deposits in the form of FDRs/TDR/RD/Saving Account of the deductee company. There was an amendment in the Finance Bill 2015 w.e.f. 1.4.2015 wherein, it was made mandatory to deduct TDS on payment of interest to an organization whose income is exempted u/s 10(23C)(iiiab) of the Act.
A survey u/s 133A of the Act was carried at the office premises / branch of the bank and on examination of records, it was noticed that the duductor bank had credited interest to an entity exempt u/s u/s 10(23C)(iiiab) of the Act.
The Assessee deductor had failed to deduct TDS u/s 194A of the Act and had failed to deposit the TDS amount in the Central Government account within the time prescribed u/s 200 of the Act read with Rule 30 of the I.T. Rules, 1962.
It was also found that the deductor had not filed its TDS return in Form No. 26Q for second, third and fourth quarter within the stipulated time period u/s 200(3) read with Rule 31A of the I.T. Rules.
On the basis of this fact, the Assessing Officer treated the Assessee bank as ‘assessee in default’. These findings of the ITO (TDS) were accepted and confirmed by the CIT(A),
Before the Tribunal the assessee reiterated that the deductor was not aware of any such amendment in Finance Bill 2015 w.e.f. 1.4.2015 because it was the very first year of this amendment. It was also contended that there was no mala fide intention on the part of the Assessee deductor bank as it was a Public Sector Bank and had no personal interest in any such non-deduction / under deduction of TDS. In fact, the deductor bank was under this bona fide belief that the said deductee company was exempt u/s 10(23C) (iiiab) of the Act in relevant financial year also like earlier years before the amendment in Finance Bill 2015.
The Tribunal observed that here was no denying the fact that there is some delay on the part
of the Assessee bank in deducting TDS and depositing it in the Government account but at the same time it had also been accepted that the Assessee bank was a Public Sector Bank and no mala fide intention can be ascribed to it for late deducting TDS and late deposit of the same in the Government account.
The Tribunal opined that since these provisions were amended w.e.f. 1.4.2015 only and there was very possibility that the Assessee bank might be under the bona fide belief that TDS was not to be deducted from Assessee’s income as in earlier years.
The Tribunal observed that it was important to note that in this case, the Assessee bank had deducted TDS and deposited it in the Government account and filed a Certificate of the same before both the Assessing Officer and CIT(A), therefore, although because of delay in deducting TDS and depositing it in the Government account is delayed, so technically speaking the Assessee bank branch for that limited period may be called ‘assessee in default’. But as the entire TDS amount along with penal interest had already been deposited in the Government account later on so, there was no loss to Revenue in any manner.
As it was the first year after the amendment in the Finance Bill / Act w.e.f. 1.4.2015, and it had not been proved beyond doubt the mala fide intention of the bank which was a Public Sector Bank) for late deduction of TDS and its deposit in the Government account, so, the Assessee bank should not be treated as ‘assessee in default’, however, the Assessee bank had to pay the interest and any other amount leviable under the provisions of the Act.
Accordingly, the appeal was allowed.
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