2024 (11) TMI 626 - AT - Income Tax

Assessee wins TDS addition case despite failing to submit Forms 15G/15H under section 40(a)(ia) technical breach

ITAT Lucknow ruled in favor of the assessee regarding TDS addition under section 40(a)(ia) for failure to submit Forms 15G/15H to the Commissioner. The ... Submission of Forms 15G/15H to the Commissioner for verification - Verification of Forms 15G/15H by Assessing Officer - Benefit under section 197A - Addition under section 40(a)(ia) - Technical breach versus assessee in default - Remand for verificationSubmission of Forms 15G/15H to the Commissioner for verification - Verification of Forms 15G/15H by Assessing Officer - Benefit under section 197A - Addition under section 40(a)(ia) - Whether failure to deliver one copy of Forms 15G/15H to the prescribed authority disentitles the assessee to the benefit under section 197A and warrants an addition under section 40(a)(ia). - HELD THAT: - The Tribunal found as a fact that the assessee had collected Forms 15G/15H from depositors but had not deposited one copy with the Commissioner. The AO and CIT(A) declined to examine or verify the forms and treated non-submission as ground for suspecting manipulation, sustaining an addition under section 40(a)(ia). Relying on precedents (including the Karur Vysya Bank decision) the Tribunal held that mere irregularity in submission is a technical breach and does not automatically render the assessee an assessee in default. The proper course is for the Assessing Officer to verify the correctness and genuineness of the collected Forms 15G/15H; if upon verification the forms are found to be correct the assessee is entitled to the benefit under section 197A and no addition should be sustained, whereas if the forms cannot be verified the AO may act in accordance with law. [Paras 6, 7]Orders of the CIT(A) are set aside and the matter is restored to the file of the Assessing Officer for verification of Forms 15G/15H and fresh adjudication; if forms are found correct, relief under section 197A to be granted, otherwise AO to act as per law.Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the CIT(A) order and remanded the matter to the Assessing Officer to verify the Forms 15G/15H and pass a fresh assessment in accordance with law. Issues:1. Failure to deliver Forms 15G/15H to the prescribed authority under section 197A(2).2. Disallowance of interest payments under section 40(a)(ia) due to non-deduction of tax at source.3. Applicability of legal precedents regarding verification of Forms 15G/15H.Analysis:Issue 1: Failure to deliver Forms 15G/15H to the prescribed authority under section 197A(2).The appeal was filed against the order of the ld. CIT(A)- Bareilly, which upheld the order of the Assessing Officer due to the failure of the assessee to deliver Forms 15G/15H to the Income tax authorities. The appellant argued that it had collected the required forms but failed to deliver them to the prescribed authority. The Tribunal referred to a similar case law where the appeal was allowed for statistical purposes as the forms were submitted but not considered in time by the authorities. The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to re-examine the issue after verifying the correctness of the forms.Issue 2: Disallowance of interest payments under section 40(a)(ia) due to non-deduction of tax at source.The District Cooperative Bank paid interest to depositors without deducting tax at source. The Assessing Officer disallowed a sum of interest payments under section 40(a)(ia) as the bank could not prove how Forms 15G/15H were obtained and submitted to the jurisdictional Commissioner. The CIT(A) upheld this decision, stating that failure to deliver the forms to the Income tax authorities raised suspicions of manipulation. The Tribunal noted that the bank had collected the forms but had not deposited them, leading to the disallowance. However, it emphasized the need for verification of the forms before imposing tax liability.Issue 3: Applicability of legal precedents regarding verification of Forms 15G/15H.The Tribunal cited various judgments emphasizing the importance of verifying Forms 15G/15H before holding the assessee in default for non-deduction of tax at source. It noted that failure to submit the forms to the Commissioner was a technical breach and should not automatically lead to tax liability. Following legal precedents, the Tribunal directed the Assessing Officer to verify the correctness of the forms and grant relief under section 197A if found correct. If not verifiable, the Assessing Officer was instructed to act in accordance with the law.In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the CIT(A)'s orders and directing a fresh assessment after verification of Forms 15G/15H by the Assessing Officer.