Case Law Details
Case Name : Oil & Natural Gas Corporation Ltd. Vs DCIT CPC-TDS (ITAT Ahmedabad)
Appeal Number : ITA No. 1984-1986/AHM/2015
Date of Judgement/Order : 23/11/2015
Related Assessment Year : 2014-15
Brief of the case:
In the case of Oil & Natural Gas Corporation Ltd. Vs. DCIT CPC-TDS, assessee was required to deduct tax and has deducted TDS @ 2% of sum paid/credited to GETCO Ltd. but due to filing of wrong PAN of deductee it has been deemed as assessee in default and accordingly 18% of remaining TDS (20% (-) 2%) has been demanded from the assessee. ITAT admitted contention of the assessee as per proviso to sub-section (1) of section 201 (A) and it was held that an opportunity as per proviso should be provided to the assessee.
Facts of the case:
- Assessee is a PSU and has been calculating, deducting and depositing income deducted at source as per the provisions of Income-tax Act.
- During quarters 1, 2 & 3 of FY 2013-14 assessee deducted tax at source from one of the contractors namely Gujarat Energy Transmission Corporation Ltd. i.e. GETCO Ltd. and the assessee was required to deduct 2% from the sum paid/credited to the deductee.
- Assessee duly deducted and deposited the tax and filed the quarterly TDS return in form 26Q as per Income-tax Rules.
- Inadvertently the assessee mentioned wrong PAN of the deductee in Form 26Q due to which Centralized Processing Cell –TDS treated wrong PAN as no PAN and accordingly created demand for all the three quarters by imposing a burden of 18% as difference of low TDS deducted.
- Assessee tried to rectify the mistake by filing correction statement but the same was rejected for the very reason that the system only allows the change of 4 characters subject to maximum of two numerical characters and two alfa characters.
- Whereas in the wrong PAN quoted by the deductor there were more than 4 changes and, therefore, correction statement was not accepted.
Contention of the revenue:
- As per the provisions of section 206AA of the Act in the cases when any sum is paid to deductee who does not furnish PAN, the deductor is liable to deduct TDS at rate specified in the relevant provisions of the Act or at the rates in force or @ 20%, whichever is higher calculated on the sum paid/credited to the deductee.
Contention of the assessee:
- Deductor i.e. Assessee is a Government of India Undertaking and the deductee i.e. GETCO Ltd. is a Government of Gujarat Undertaking and deductor has been regularly deducting and depositing the tax deducted at source and filing its TDS returns regularly.
- Looking to the size of appellant’s business there are thousands of deductees of whom the assessee is deducting tax and depositing the same to the Government.
- The rate of tax prescribed for deduction from payments to contractor i.e. GETCO Ltd. was 2% and the same was duly deducted and deposited but in the TDS return PAN of GETCO Ltd. was inadvertently mentioned as wrong and due to this small clerical mistake which was done on the part of assessee, differential TDS of 18% was imposed.
- The correction statement was filed to make the correction in the PAN detail but to its surprise due to the internal policy of the Centralized Processing Cell which are not available in the Act and the Rules, the revised PAN details were not accepted.
- Reliance was placed on the decision of Hon’ble Punjab & Haryana High Court in the case of CIT (TDS) vs. Superintendent of Policy [(2013) 31 taxmann.com 32 (Punjab & Haryana)] in ITA No.124 of 2012, wherein penalty under section 272B was imposed for invalid PAN of 196 deductees and thereafter assessee rectified mistake by furnishing correct PAN as soon as it came to its notice and thus the order of Tribunal was upheld which set aside the penalty order.
- Assessee submitted that proviso to sub-section (1) of section 201 inserted by the Finance Act 2012 w.e.f. 1.7.2012 is applicable to the facts of assessee’s case as deductee is a Government of Gujarat Undertaking and regularly filing its return of income.
- There is no loss to the Revenue as the deductee has duly paid its tax liability for the relevant AY including the sum paid by the deductor in its total income.
Held by CIT (A):
- CIT (A) put reliance on section 206AA of the Act which talks about deduction of TDS in cases when a deductee does not furnish PAN to deductor or furnishes incorrect PAN.
- CIT(A) has also appreciated the instructions made by Centralized Processing Cell in regard to correction of two alfa & two numerical characters to permit the genuine typing mistake and thereafter confirmed the demand.
Held by ITAT:
- The argument of the assessee was heard in two folds, Firstly, on account of error in system as it can rectify only four characters in PAN. Secondly, on account of proviso of sub-section (1) of section 201A.
- There was not any intention on the part of the deductor or deductee to furnish wrong PAN details.
- The system is erroneous to the extent if it restricts the deductor to revise its TDS return/statement within some corners.
- Correction statement filed by the assessee needs to be accepted after ascertaining the correctness of the correct PAN furnished by the deductor.
- The order of CIT(A) is quashed and assessee’s ground of appeal is allowed with reference to the first fold of contention made by the assessee.
- If an opportunity had been provided to the assessee as per proviso of sub-section (1) of section 201 then there is a possibility that assessee can file requite details regarding incorrect PAN.
- On the basis of argument of assessee in second fold the matter may be restored back to the file of CIT(A) with the direction to decide the matter after providing reasonable opportunity of hearing to the assessee so that it can furnish relevant details/information as required by the above said proviso to sec.201(1) of the Act.