The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) restored the files to the Assessing Officer to verify the correction statement of Tax Deduction at Source linking the unconsumed challan with the instances of Tax Deduction at Source (TDS), giving an opportunity to the assessee.
The bench of Rama Kanta (Technical Member) Panda and K. Narasimha Chary (Judicial Member) observed the recordings of the CIT(A) that there was no evidence linking instances of TDS deduction with unconsumed challan, however ruled against it.
The assessee, M/s. Country Club Hospitality & Holidays Limited is a company engaged in the business of hospitality and tourism services, filed its return of income declaring the total income at Rs. NIL.
The assessee company made a variety of payments over the course of business, many of which are subject to TDS under various sections of chapter XVII-B of the Income Tax Act of 1961. On November 27, 2019, a survey under section 133A(2A) of the Income Tax Act was carried out to assess compliance with the TDS rules.
The Assessing Officer issued an order under sections 201(1) and 201(1A) of the Income Tax Act, raising a demand of Rs. 60,75,570 after validating the information provided by the Assessee.
However, the assessee appealed the demand before the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that there had been no opportunity for a hearing before the demand was made and that there were some unconsumed challans that, if taken into account, precluded the imposition of interest.
According to the CIT(A) consumption of unconsumed challans may only be discharging the liability created under section 201(1A) of the Income Tax Act and has no bearing on the calculation of interest.
The representative of assessee asserted that if the unconsumed challans are taken into account, there will not be any TDS deficiency and consequently, no question of interest would arise.
Conversely, the representative of the department stated that instead of filing this appeal, the assessee could have got the defect, if any, rectified by filing a petition under section 154 of the Income Tax Act.
The bench observed that if the Assessing Officer considers correction statement of TDS, linking the unconsumed challan with the instance of TDS deduction, there will not be any amount to carry the interest under section 201(1A) of the Income Tax Act, rule of prudence dictates that such a fact must be verified before mulcting the assessee with the liability of interest.
Further stated that because of the pendency of this appeal, the Assessing Officer is not entertaining the application under section 154 of the Income Tax Act.
The tribunal has set aside the impugned order of the CIT(A) and allowed the appeals of the assessee statistical purposes.
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