The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the assessee was not required to deduct tax at source under Section 40(a)(ia) of the Income Tax Act, 1961 on submission of Form 15G and 15H.
Further, it has also not been disputed that above Form 15G was furnished to the concerned Commissioner. Thus, the penalty imposed under section 271C of the Income Tax Act for failure to deduct the tax at source was directed to set aside.
In the assessment proceedings passed under Section 143(3) of the Income Tax Act for the A.Y. 2012-13, the Assessing Officer (AO) observed that assessee had made payment of interest to 22 parties, but no TDS was deducted from interest payment made to 12 parties.
Accordingly, the AO made an addition on account of disallowance of Rs 11,69,412/- under Section 40(a)(ia) of the Act r.w.s. 194A of the Income Tax Act. The Assessing Officer also initiated proceedings under Section 271C for non-deduction of tax at source.
During the penalty proceedings, the taxpayer argued that they had received Form No. 15G from multiple entities on April 5, 2013. These forms certified that the payments were not subject to tax deduction at the source.
The taxpayer emphasized that all depositors had been subjected to tax assessment and had valid Permanent Account Numbers (PAN) as indicated in Form No. 15G. Furthermore, the taxpayer contended that the concerned parties did not possess income that was liable for income tax.
The Form No. 15F was filed with the officer of Commissioner of Income Tax, Baroda, 07-05-2013 i.e. after a delay of one month on account of the fact that the mother of the concerned staff member of the assessee company was unwell, which prevented her from depositing Form 15F within permissible time before the office of Commissioner of Income Tax, Baroda.
However, the Assessing Officer sustained the penalty on the ground that there was admittedly a delay in filing Form 15G, which was filed on 07-05-2013 with the officer of Commissioner of Income Tax and there was a delay of one month in filing Form 15G.
Aggrieved, the assessee appealed before the CIT(A). The first appellate tribunal upheld the penalty, thus, the assessee appealed before the tribunal.
The counsel for the assessee submitted that penalty under Section 271C of the Income Tax Act has been imposed without appreciating that Form 15G and 15H have been fully submitted before the CIT(A), although there was a minor delay of only one month in depositing of such forms.
It was pointed that the CIT(A) in quantum proceedings also deleted the addition under Section 40(a)(ia) of the Income Tax Act by observing that all the 12 parties had furnished Form 15G to the assessee before credit/payment of interest declaring no taxable income and therefore, the liability to deduct tax by the assessee ceases upon receipt of Form No. 15G.
After hearing both the parties, the tribunal observed that it is not disputed that the assessee received Form 15G before the credit/payment of interest from the parties declaring no taxable income.
Further, the CIT(A), in quantum proceedings, decided the issue in favour of the assessee by holding that the assessee was not required to deduct tax at source under Section 40(a)(ia) of the Income Tax Act. Further, it has also not been disputed that above Form 15G was furnished to the concerned Commissioner, although there was minor delay of one month in submitting the same for reasons mentioned by the assessee.
While allowing the appeal, the two-member bench consisting of Annapurna Gupta (Judicial member) and Siddhartha Nautiyal (Accountant member) held that penalty imposed under section 271C of the Income Tax Act for failure to deduct tax at source is to be set aside.
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