ITAT allows appeal on TDS demand, rules Section 197 certificates valid despite multiple TANs for different locations

The ITAT Mumbai allowed the assessee's appeal regarding alleged short collection of TDS. The assessee had obtained separate TANs for different locations, and lower TDS certificates were issued under one TAN while returns were filed under another. The CPC raised demand for short deduction, but ITAT held that certificates issued under Section 197 remain valid for the company regardless of having multiple TANs. The assessee had properly deducted tax at prescribed rates and complied with deposit and filing requirements. The tribunal ruled that having separate TANs does not render Section 197 certificates redundant or make the assessee defaulter, deleting the demand for tax and interest.

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Issues Involved:
1. Confirmation of short collection of TDS.
2. Rejection of application u/s 154.
3. Validity of lower TDS certificates.
4. Levying of interest on alleged short deduction of TDS.

Summary:

Issue 1: Confirmation of Short Collection of TDS
The Learned CIT (Appeals) confirmed the orders passed by the Assistant Commissioner of Income Tax, CPC-TDS, determining short collection of TDS for various periods. The amounts involved were Rs. 29,86,447/- for Quarter-4, Rs. 9,84,564/- for Quarter-3, and Rs. 5,20,214/- for Quarter-2. The CIT (Appeals) upheld the action of the Assessing Officer, rejecting the application of the appellant filed on 17.02.2018, u/s 154 of the Income Tax Act, 1961, despite the appellant's consistent plea that lower TDS certificates had been obtained.

Issue 2: Rejection of Application u/s 154
The CIT (Appeals) erred in upholding the action of the Assessing Officer in rejecting the application u/s 154. The appellant argued that having obtained lower TDS certificates, there was no short deduction of tax at source, and no demand should have been raised. The CIT (Appeals) did not appreciate that the TDS Officers of the Deductees had issued certificates u/s 197 of the Act to the Principal Officer of the appellant, mandating lower tax deduction rates.

Issue 3: Validity of Lower TDS Certificates
The CIT (Appeals) failed to appreciate that the lower TDS certificates issued u/s 197(2) were valid despite the change in TAN due to a change in TDS jurisdiction. The certificates were issued to the Principal Officer of the company having a specific PAN, not based on TAN. The Tribunal noted that the certificates were issued to the person responsible for paying, as defined in Section 204 of the Act, which includes the company itself and the principal officer thereof.

Issue 4: Levying of Interest on Alleged Short Deduction of TDS
The CIT (Appeals) confirmed the action of the Assessing Officer in levying interest on alleged short deduction of TDS. The amounts involved were Rs. 14,34,097/- for Quarter-4, Rs. 5,08,490/- for Quarter-3, and Rs. 2,78,201/- for Quarter-2. The Tribunal held that there was no justification to hold the appellant in default merely because the certificates were not issued on the subsequent TAN obtained by it, as all necessary compliances had been made using the other TAN.

Conclusion:
The Tribunal allowed all three appeals of the assessee, holding that there was no short deduction of tax at source and deleting the demand raised both towards tax and interest. The Tribunal's observations and findings in ITA No. 4458/Mum/2023 applied mutatis mutandis to the other two appeals, ITA No. 4461/Mum/2023 and ITA No. 4464/Mum/2023. The order was pronounced in the open court on 16 May, 2024.

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