The Income Tax Appellate Tribunal (ITAT), New Delhi Bench has deleted the Penalty against Allahabad Bank for TDS default.
The assessee, Allahabad Bank explained before the CIT (Appeals) that for the purpose of invoking the provision of Section 201 of the Act, as observed and explained by the Allahabad High Court, which is a Jurisdictional High Court, while dealing with the provision of Section 201 of the Act, held that as per the provisions of Section 191 of the Act read with its explanation, the prime responsibility is of the recipient assessee to pay the tax directly and unless and until the Department pointed out that any tax liability is pending before the recipient assessee, the provision of Section 201 of the Act cannot be invoked because the provision of Section 201 of the Act is a recovery provision.
The Allahabad High Court observed that provision of Section 191 of the Act read with its Explanation and the provision of Section 201 of the Act has to be construed harmoniously and the provision of Section 201 cannot be interpreted independently keeping in mind the purpose for which Section 201 has been enacted.
So before invoking the provision of Section 201 of the Act, the AO has to bring on record that the tax demands against the recipient assessees are pending which has not been paid by the said assessee directly and thus the jurisdictional fact of invoking the provision of Section 201 of the Act and in the absence of such jurisdictional fact, the provision of Section 201 cannot be invoked and the deductor cannot be treated as assessee in default.
In Assessment Years 2002-03 to 2004-05, in the case of the assessee itself in the same branch, the Delhi ITAT after following the judgment of the Jurisdictional Allahabad High Court in the case of the assessee itself, has quashed the proceedings under section 201 of the Act on the similar lines.
The interest charged under section 201(1A) is very excessive and should be charged from the date of deductibility to the date of actual payment. In the case of TDS, the actual date of payment is the date on which the payee paid the tax directly.
The assessee contended that the AO has charged the tax arbitrarily without finding out the actual date of payment by the recipient assessee and accordingly the interest charged by the AO deserves to be deleted.
The coram of R.K.Panda and Suchitra Kamble noted that The assessee bank has not deducted TDS in respect of customers who have provided Form No. 15G and 15H of the Act under the statute as provided by the Income Tax Act. The customers who have provided Form No. 15G/15H has specifically requested through these forms that TDS should not be deducted on their FDs/respective withdrawals.
“The prime responsibility relating to TDS deduction u/s 201 is of the recipient assessee to pay the tax directly once they filed From No. 15G/15H and any tax liability will be held as pending in recipient assessee’s cases and hence Section 201 of the Act cannot be invoked as it is a recovery provision as submitted by the Ld. AR. The decisions are given by the Ld. AR also reiterates similar facts,” the ITAT while allowing the appeal said.
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