No default due to Non Deduction of TDS on Interest where Form 15G is Submitted

Bank of India Vs. JCIT (ITAT Jaipur)

The issue under consideration is whether assessee is considered as assessee in default u/s 201(1) and 201(1A) for non-deduction of TDS?

In the present case, the assessee bank has paid interest on fixed deposits placed with it by one of its customers, Jaipur School Samiti on which no TDS was deducted on account of submission of Form 15G by the said Samiti. However, the Assessing Officer passed the order under section 201(1) read with 201(1A) holding the assessee bank to be in default for non-deduction of TDS on interest on FDR.

ITAT states that, the Assessing officer u/s 201(1) read with 201(1A) holding the assessee to be in default for non-deduction of TDS has been held as null and void and has attained finality and thus, in effect, there is no order where the assessee has been held guilty of non-deduction of TDS. Even in the penalty order so passed by the Add. CIT(TDS), he has relied on the findings of the AO in the order passed u/s 201(1) read with 201(1A) while levy the penalty. Further, we find that the assessee has relied on Form 15G filed by the Jaipur School Samiti and basis the same, has not deducted the TDS. In light of the aforesaid facts and circumstances of the present case, we therefore find that there was reasonable cause for non-deduction of TDS and the levy of penalty u/s 271C deserves to be set aside. ITAT accordingly set aside the penalty u/s 271C of the Act and appeal decided in favour of the assessee.

FULL TEXT OF THE ITAT JUDGEMENT

This is an appeal filed by the assessee against the order of ld. CIT(A)-3, Jaipur dated 28.01.2019 wherein the assessee has taken the following grounds of appeal:-

“1. That the CIT(A)-III has grossly erred in dismissing the appeal when assessee had already filed appeal against order u/s 201 before the CIT (A)-III, Jaipur and the same is pending for disposal before the appellate authority.

2. That addl. CIT has not levied penalty u/s 271C within the prescribed time limit. ”

2. During the course of hearing, the ld. AR submitted that the assessee bank has paid interest of Rs. 1,79,252/- on fixed deposits placed with it by one of its customers, Jaipur School Samiti on which no TDS was deducted on account of submission of Form 15G by the said Samiti. However, the Assessing Officer passed the order u/s 201(1) read with 201(1A) dated 17.03.2017 holding the assessee bank to be in default for non deduction of TDS on interest on FDR amounting to Rs. 1,79,252/-. It was further submitted that the assessee moved an appeal against the said order before the ld. CIT(A) who has since decided the matter in favour of the assessee and has allowed the appeal so filed by the assessee. It was accordingly submitted that where the order passed u/s 201(1) read with 201(1A) has been held null and void being barred by limitation by the ld CIT(A), the consequent levy of penalty u/s 271C deserves to be set aside.

3. Per contra, the ld. DR is heard who has relied on the order of the lower authorities.

4. We have heard the rival contentions and perused the material available on record. In this case, the Assessing Officer passed the order u/s 201(1) read with 201(1A) dated 17.03.2017 holding the assessee to be in default for non-deduction of TDS on interest paid to Jaipur School Samiti. The said order has been challenged by the assessee before the ld. CIT(A) who has decided the matter vide order dated 01.04.2019 holding that the order so passed by the Assessing Officer is time barred and therefore, null and void and the appeal of the assessee has been allowed. The relevant findings of the ld. CIT(A)-3, Jaipur read as under:-

“4.3 I have carefully considered the observation made by the Assessing Officer and submission filed by the A/R of the appellant. Therefore in view of the submission filed by the A/R o f the appellant this order is time barred. Accordingly, I treat this order is null and void. This additional ground is allowed.

5. There is no need to adjudicate the other grounds because the order has been treated as null and void. ”

5. Apparently, the ld CIT(A) has confirmed the levy of penalty u/s 271C vide the impugned order dated 28.01.2019 and didn’t have the benefit of order passed in the appellate proceedings u/s 201(1) read with 201(1A) which has been disposed off subsequently on 01.04.2019.

6. In view of the above, we find that the order of the Assessing officer u/s 201(1) read with 201(1A) holding the assessee to be in default for non-deduction of TDS has been held as null and void and has attained finality and thus, in effect, there is no order where the assessee has been held guilty of non-deduction of TDS. Even in the penalty order so passed by the Add. CIT(TDS), he has relied on the findings of the AO in the order passed u/s 201(1) read with 201(1A) while levy the penalty. Further, we find that the assessee has relied on Form 15G filed by the Jaipur School Samiti and basis the same, has not deducted the TDS. In light of the aforesaid facts and circumstances of the present case, we therefore find that there was reasonable cause for non-deduction of TDS and the levy of penalty u/s 271C deserves to be set aside. We accordingly set aside the penalty u/s 271C of the Act and Ground No. 1 is decided in favour of the assessee.

7. Ground No. 2 is dismissed as not pressed by the assessee.

In the result, appeal of the assessee is allowed.