A division bench of the Bengaluru ITAT in The Karur Vysya Bank Ltd v. ACIT, held that the assesse-Bank cannot be treated as assesse-in-default for a mere reason that it had not submitted Form 15G/15H since it amounts to mere technical breach.
In the instant case, the Assessing Officer noted that the assesse-Bank has not deducted on interest earned on FDRs to its customers. It noted that the reason for non-deduction of tax at source was due to non-submission of Form 15G/15H by the customers. Consequently, the Assessee was held to be in default under sections 201(1) & 201(1A) of the Income Tax Act, 1961.
Before the Tribunal, the assesse contended that non-submission of Form 15G/15H to the department is only a technical breach assesse-Bank cannot be construed as an assessee in default merely on this ground.
Based on a plethora of decisions, the division bench held that wherever there is any irregularity in the submission of Forms for non-deduction of tax at source, the assessee cannot be held to be in default. The decisions indicated that rather the AO should verify the correctness of the Forms and if the Forms are found to be correct, the assessee cannot be held to be in default and no demand can be raised u/s. 201(1) & 201(1A) of the Act.
Diving deeply into the facts of the case, the bench observed that undisputedly assesse has submitted the Forms 15G/15H before the AO, but it was not considered on account of its non-submission in time before passing the impugned order.
“The assessee again filed the said Forms before the CIT(Appeals), but he did not take cognizance of the same and confirmed the order of AO. Since the assessee has filed the Forms 15G/15H on account of which TDS was not deducted, the lower authorities should have examined the same. Since the assessee has already filed the Forms 15G/15H before the lower authorities, we are of the view that the said Forms be examined by the AO and if the said Forms are found to be correct on verification, the assesse cannot be held to be in default and no demand should be raised u/s. 201(1) & 201(1A) of the Act. Otherwise, the AO may act in accordance with the law.”
Read the full text of the Order below.
