Assessee cannot be held to be 'Assessee in Default', No Interest leviable u/s. 201(1A) for Non-Deduction of TDS: ITAT [Read Order]

The Banglore Bench of Income Tax Appellate Tribunal (ITAT) has held that Assessee cannot be held to be “assessee in default”, no interest leviable under section 201(1A)  for non-deduction of TDS. 

The petition was filed by assessee seeking rectification of typographic mistakes in order passed by this Tribunal in the above referred appeals.

Tn the conclusion, this Tribunal referred to the provisions of section 271(c) r.w.s. 273B in order to hold that assessee cannot be construed as “assessee in default”. However, the present appeal has been filed by assessee against interest levied u/s. 201(1) of the Act. 

In the present facts of the case, the provision created at the end of the accounting year has not been credited to the relevant parties to whom the payments has to be made for the reason that it was unquantifiable. Further, assessee has suo moto disallowed the said sum under section 40(a)(ia) for non-deduction of TDS. Therefore there is a sufficient and reasonable cause for not deducting TDS on the year-end provision. It is also observed that assessee consistently follows this kind of accounting system for year-end provisions which is subsequently reversed in the subsequent year, as and when the bills are received, and the payment is made to the payee by deducting TDS. Further, admittedly, assessee has paid interest under section 201(1A) which further demonstrates there was no malafide intention. In our considered view, the provisions of TDS are not applicable where there is no claim of expenditure made by assessee and the assessee has made suo moto disallowance u/s 40(a)(ia) of the Act. 

The coram of Accountant Member Chandra Poojari and Judicial Member Beena Pillai said, “assessee already made suo moto disallowance at the time of filing of return of income on which taxes are paid without any expenditure being claimed and also that has paid interest u/s. 201(1A), then assessee cannot be held to be “assessee in default”. Once assessee is treated to be “assessee in default” u/s. 201(1A), no interest is leviable for non-deduction of TDS.”

“The facts for A.Y. 2014-15 are identical and interest u/s. 201(1A) has been levied by the Ld.AO. The above view therefore is applied mutatis mutandis for A.Y. 2014-15 and we hold that assessee cannot be held to be “assessee in default” and no interest therefore is leviable u/s. 201(1A) of the Act for non-deduction of TDS,” the tribunal added.

To Read the full text of the Order CLICK HERE

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