By TIOL News Service

AMRITSAR, SEPT 08, 2016: THE issue is - Whether Revenue is free to raise demand u/s 201(1A) on ground of non-mentioning of TDS on declarations when PAN of deductees were available and non-recording of same on declarations was only a technical breach. NO is the answer.

Facts of the case

The assessee is the branch of Punjab National Bank at Muktsar. During the course of survey u/s 133A, the AO observed that person responsible was not deducting tax at source on payment of salary on monthly average basis. Therefore, the AO created the demand u/s 201(1A) amounting to Rs.12,460/- for not deducting TDS on monthly average basis. The AO further observed that assessee in a number of cases had paid interest exceeding Rs.10,000/- and deductees had not furnished his PAN Nos. on the declarations and therefore, the assessee should have deducted TDS @ 20%.

Having heard the parties, the Tribunal held that,

++ as regards the first issue of non deduction of TDS on monthly average basis, we find that the contention of the assessee that at the end of financial year there was no short deduction of TDS on payment of salary to various employees has not been controverted by the authorities below. Further, we find that the TDS on salary was deducted on the monthly average basis by Circle Office of persons responsible and it was automatic and there is no interference by the Brach. We further find that deduction of amount of tax from salary depend upon the various saving schemes adopted by various employees and some time the employees make delay in submissions of their Saving certificates. Further we find from the reply of assessee to CIT(A) that the employees had declared the other income to the Bank only in the month of March and further that some times increment and pay perquisites of employees is paid in the last month and therefore, all these reasons could contribute to some short deduction of TDS in some earlier months of the financial year but the fact remains that at the end of financial year there was no short deduction of TDS. We find that the non deduction of TDS on monthly average basis was due to technical reasons and moreover, the issue for non deduction on monthly average basis is decided in favour of assessee in the decision of Delhi High Court in the case of CIT vs. Marubeni India (Pvt.) Ltd. We find that though assessee before CIT(A) had not raised specifically this ground of appeal, but another ground clearly indicates that assessee was aggrieved with the total demand raised which included amount on account of non deduction of TDS on monthly average basis and assessee during appellate proceedings before the CIT(A) had also made arguments for the same, therefore, CIT(A) should not have dismissed the same as not raised by assessee, therefore, we delete the demand on this account holding that the breach was merely technical in nature;

++ as regards non furnishing of PAN Nos., we find that assessee in proceeding u/s 201(1) and 201(1A) had provided a list of persons to whom the interest of 10,000/- or more was paid and TDS was not deducted along with PAN No. of all deductees. This is mentioned by AO in his order and therefore, the non mentioning of TDS was only a technical error. It was submitted to CIT(A) that the list of persons to whom interest of 10,000/- or more was paid and TDS was not deducted along with PAN of all deductees was submitted to AO and this fact is noted by CIT(A). The finding of CIT(A) that AR has failed to furnish any evidence in support of the contention that the PAN were available with the persons responsible at the time of accepting form 15G/15H, is only a technical breach in view of the fact that CIT(A) passed the order dated 26.06.2014 whereas as per the list of persons submitted to AO indicating the PAN Nos., it is observed that PAN Nos. of assessees to whom interest was paid without deduction of tax was issued in the years 2008-2011. Therefore, the PAN Nos. of such deductees was available at the time of deduction of TDS, and therefore, the mentioning of the same on the declarations was only a technical breach. Therefore, we delete the demand created by authorities.

(See 2016-TIOL-1619-ITAT-AMRITSAR)