Delay interest not leviable as TDS deposited on time but bank failed to remit immediately to department

National Insurance Co. Ltd Vs ACIT (ITAT Kolkata)

ITAT Kolkata held that interest u/s 201(1A) of the Income Tax Act for late deposit of TDS amount is not leviable as TDS amount was duly deposited within the due date, however, due to technical glitch the bank could not remit the amount immediately to the account of the department.

Facts- The brief facts of the case as taken from the impugned order of the CIT(A) are that the appellant was served with an Intimation dated 02/06/2019 issued u/s 200A for the Financial Year 2018 19 (relevant for the Assessment Year 2019 20) wherein a Demand of Rs.1,10,43,080 was raised. It was observed that the demand of Rs. 1,10,43,080 was raised on the basis of levying of interest of Rs. 1,10,43,076 u/s 201(1A) for alleged late payment of TDS by the appellant.

Conclusion- The facts in this case are apparent that the assessee had deposited the amount with the authorized bank within the due date, however, due to technical glitch the bank could not remit the amount immediately to the account of the department and there occurred a delay of one day because of which the assessee cannot be burdened with levy of interest u/s 201(1A) of the Act. The assessee cannot be burdened because of not doing an act which was beyond his control. Even otherwise, as observed above, the Bank has accepted the payment being agent of the Income Tax Department, and the assessee has deposited the payment with the bank before the due date. In view of this, the impugned levy of interest by the lower authorities is set aside.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

The present appeal has been preferred by the assessee against the order dated 25.03.2022 of the National Faceless Appeal Centre (hereinafter referred to as the ‘CIT(A)’) passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The assessee in this appeal has taken the following grounds of appeal:

“1. That the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi was wrong in dismissing the Appeal filed by the Appellant against the Intimation dated 02/06/2019 issued u/s 200A for the Financial Year 2018-19 (relevant for the Assessment Year 2019- 20).

2. That without prejudice to the contention raised in Ground No. 1 above, the Commissioner of Income-tax (Appeals), NFAC, was wrong in stating in the Appellate Order that the Appeal of the appellant had allegedly related to levy of Fee u/s 234E since the Appeal had actually been against the levying of Interest of Rs.1,10,43,076 u/s 201 (1A).

3. That without prejudice to the contentions raised in Grounds Nos. 1 and 2 above, the Ld. Commissioner of Income-tax (Appeals), NFAC erred in not taking into account the written submissions furnished by the appellant in response to the Notices dated 13/01/2021 and 02/03/2022 issued u/s 250 by the NFAC.

4. That the appellant craves leave to add, alter or withdraw any ground or grounds of appeal before or at the time of Hearing of the appeal.”

2. The brief facts of the case as taken from the impugned order of the CIT(A) are that the appellant was served with an Intimation dated 02/06/2019 issued u/s 200A for the Financial Year 2018 19 (relevant for the Assessment Year 2019 20) wherein a Demand of Rs.1,10,43,080 was raised. It was observed that the demand of Rs. 1,10,43,080 was raised on the basis of levying of interest of Rs. 1,10,43,076 u/s 201(1A) for alleged late payment of TDS by the appellant.

During the month of March, 2019 the appellant had deducted taxes at source u/s 195 from the credited/paid to Non resident/Foreign Companies and the concerned TDS amounts were tendered by the appellant at the Authorized Bank and in turn the said Bank deposited to the credit of the Central Government as under:

The Authorized Bank, viz., Bank of Baroda informed the appellant subsequent to its actual tender of the TDS, that due to technical issues at the Bank, the TDS amounts could not be remitted by the Bank on or before 30/04/2019, but only on 02/05/2019 (01/05/2019 being a Holiday) they remitted the same. The concerned Authorized Bank issued 4 (four) separate certificates all dated 21/05/2019 certifying the fact of its inability to deposit the TDS amounts by the due date 30/04/2019 and it also certified that the remittance had been made on 02/05/2019. Thereafter, the appellant received an Intimation u/s 200A dated 02/06/2019 issued by the Asstt. Commissioner of Income tax, Centralized Processing Cell TDS (ACIT, CPC TDS) wherein, a Demand of Rs. 1,10,43,080/- was raised after levying Interest u/s 201(1A). The appellant brought the fact of the issue of the demand of interest by the CPC for alleged delay of payment of TDS to the attention of the authorized Bank i.e. Bank of Baroda and it also took up the matter with the ACIT, CPC, TDS vide its e mail dated 17/06/20 19. The appellant submitted that there being no fault on its part in the matter of one day’s delay occurred in depositing the TDS, the demand of interest of Rs. 1,10,43,080/- should be waived after necessary modification in the concerned Challans. In response, the CPC, TDS advised the appellant to contact its Jurisdictional Assessing Officer, TDS. As advised by the CPC, the appellant visited its jurisdictional TDS Assessing Officer i.e., Income tax Officer, TDS, Ward 2(2). Kolkata (ITO TDS) and even the Authorized Bank’s Representative accompanied the appellant. On the basis of the advice given by the ITO TDS, the Authorized Bank sent a letter dated 24/06/2019 to the ACIT, CPC, TDS, Gaziabad explaining the facts of the case and submitted that as there had been only one day’s delay which had occurred due to technical problem faced by the Bank, the interest levied of Rs.1,10,43,080 should be waived.

3. However, since the Assessing Officer/ACIT, CPC, TDS did not take any action on the above submission of the appellant, the assessee preferred appeal before the CIT(A) submitting that since there had not been any default on the part of the appellant in depositing the TDS into the authorised collecting bank and that the one day’s delay had occurred only been because of technical problem faced by the authorised collecting bank in remitting the amount to Income Tax Department, therefore, the demand of interest u/s 201(1A) r.w. section 206C(7) of the Act should be recalled. However, the ld. CIT(A) vide impugned order has dismissed the appeal of the assessee, therefore, the assessee/appellant has come in appeal before us.

4. At the outset, the ld. counsel for the assessee has brought our attention to the concluding part of the impugned order of the CIT(A) to submit that the findings of the ld. CIT(A) are totally irrelevant to the facts of the case. The ld. CIT(A) wrongly taken it as a case of default in furnishing the TDS statement and thereby held that the levy of fee u/s 234E of the Act was justified, whereas, the present case was that of levy of interest u/s 201 (1A) of the Act. The relevant part of the order of the CIT(A), for the sake of ready reference, is reproduced as under:

“5.1 Ground No 1 to 4 are related to levy of fee u/s 234E of the Act. These grounds are inextricably linked to ground 1,2 & 3, hence they are decided altogether. The appellant has challenged levy of fee u/s 234E in the order u/s 200A. I have carefully considered the grounds raised by the appellant and the submission of the appellant. I have also gone through the order u/s 200A passed by the ACIT CPC CELL TDS, Ghaziabad. The provisions of Section 200(A)(1)(c) was amended by the Finance Act, 2015 w.e.f. 01.06.2015. From the reading of the provisions of the Act, it is clear that the provision of fee is mandatory in nature levied on processing of the late filing of e-TDS statement(s) under Section 200A(1)(c) of the Act after amendment w.e.f. 01.06.2015 by the Finance Act, 2015. It is evident that there is no dispute on the fact that the assessee deduct or has filed TDS statement delayed and the same was processed with default of delay with levy of fee u/s 234E which was communicated to the assessee within the prescribed time as provided under the proviso to Section 200A(1)(c) of the Act. It is also evident that after Section 234E w.e.f. 01.07.2012, the assessee deduct or who fails to deliver or cause to be delivered a TDS statement(s) within the time prescribed in the provisions of Section 200(3)/206C(3) of the Act, shall be liable to pay, by way of fee, a sum of Rs. 200/- for everyday during which the failure continues. It is also evident that aggrieved by the provision of Section 234E, the constitutional validity and applicability of the Section has been challenged before the various Hon’ble High Courts and finally before the Hon’ble Supreme Court who have held the provisions of Section 234E as constitutionally valid and applicable for the late filing of TDS statement(s).

5.2 As per the provisions of the Act, the assessee deduct or was required to pay fee for late filing of e TDS statement computed in terms of Section 234E along with filing of e TDS statement and the fee levied for the failure of the assessee deduct or on this account as communicated on processing of the e TDS statement is constitutionally valid. This view is further supported by the judgment in the case of (i) M/s Dundlod Shikshan Sansthan & others v/s UOI & others (D.B. Civil Writ Petition No. 8672/2014) vide order dated 28.07.2015 of the Hon’ble Rajasthan High Court, Jaipur and in the case of Rashmikant Kundalia and another v/s UOI (Writ Petition No. 771/2014) vide order dated 06.02.2015 of Hon’ble Bombay High Court and further the Hon’ble Supreme Court of India held the application of fee u/s 234E as constitutional valid and accordingly writ petition were dismissed.

5.3 In view of the above facts and circumstances of the case and the law and further relying upon above judgments, I agree with the action of the A. O. The grounds of appeal are, therefore, dismissed.”

5. A perusal of the above order of the ld. CIT(A) reveals that the ld. CIT(A) has totally mistaken himself about the real facts of the case and proceeded to decide the case totally on wrong footing and wrong facts and even gave finding on an issue which was not a issue at all in the present appeal. The order of the CIT(A) is, therefore, not sustained at all.

6. However, now coming to the facts of this case, there is allegedly one day’s default in depositing of TDS amount into the account of the Income Tax Authorities. The case of the assessee is that it has deposited the TDS amount in the authorized collecting bank within the due date but it was the authorized collecting bank which due to some technical glitch could not remit the same to the account of the Income Tax Department. The concerned authorised bank has also issued a letter in this respect, the contents of which, for the sake of ready reference, are reproduced as under:

BOB/INDIAE/2019/

Bank of Baroda
24-06-2019

The Assistant Commissioner of Income Tax,
Centralized Processing Cell, TDS,
TDS, CPC, Aaykar Bhavan, Sector -3,
Vaishali, Ghaziabad, UP – 201 010.

Dear Sir/ Madam,

Re: Remittance of TDS on account of M/s National Insurance Co Ltd for Q4 March 19- Delay in Remittance Penalty Levied by Income Tax Office.

We refer to above and inform that M/s National Insurance Co Ltd is having Corporate Account with our branch and in order to remit the TDS the company has submitted the following cheques as under:

Sir, We submit that although M/s National Insurance Co has deposited cheques as above the amounts could not be remitted due to technical issue at our end. The GBM module(Govt Business) through which we remit taxes was not picking up the Education Cess which is part of the tax amount as total tax is to be bifurcated before remittance. The issue was resolved subsequently and accordingly the tax amount was remitted on 02-05-2019 ( as ^1st May is Holiday) which has resulted in delay of 1 day.

Sir, We inform that the delay in remittance was not intentional and was on account of Technical Issue only. We as collection agent of Tax Authorities fully aware that delay of remittance of funds is not appreciable however as the transaction is on account of technical issue we request you to kindly condone the delay and the interest payment of Rs.1,10,43,080/- be waived as advised vide TDS/1819/27Q/D/100033716735 to M/s NIC Ltd.

We sincerely regret the delay. Yours faithfully,

(V Sri Hari)

Asst. General Manager

7. It is to be noted here that the Income Tax Department has authorized certain banks to collect TDS on their behalf. The Bank of Baroda being one of the authorized banks, thus, has acted as an agent of the Income Tax Department. In our view, the moment, the assessee deposited the TDS with the bank, the bank being an agent of the Income Tax Department, the amount is deemed to have been received by the principal i.e. Income Tax Department. The bank has issued letter in this respect that the amount was duly deposited by the assessee before the due date and that there was no default on the part of the assessee.

Moreover, though the Income Tax Department and other Government Organizations have shifted to the online system, however, the said system is in the developing stage and often there are technical glitches faced due to which certain acts of uploading of forms etc. and as in the present case, the remittance of the amount by the bank to the account of the department are being faced, which are beyond the control of the concerned assessee or the person who is supposed to upload such information, form or to remit the amount, as the case may be. This type of technical glitches is beyond the control of concerned assessee/person for which the concerned assessee cannot be penalized. The facts in this case are apparent that the assessee had deposited the amount with the authorized bank within the due date, however, due to technical glitch the bank could not remit the amount immediately to the account of the department and there occurred a delay of one day because of which the assessee cannot be burdened with levy of interest u/s 201(1A) of the Act. The assessee cannot be burdened because of not doing an act which was beyond his control. Even otherwise, as observed above, the Bank has accepted the payment being agent of the Income Tax Department, and the assessee has deposited the payment with the bank before the due date. In view of this, the impugned levy of interest by the lower authorities is set aside.

9. In the result, the appeal of the assessee stands allowed.