TaxTMI 
TaxTMI 
2026 (6) TMI 37
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.... the assessment year 2017-18. For the sake of convenience and brevity, both the appeals were heard together and are being disposed of by this consolidated order. First, we take up the appeal ITA. No. 173/LKW/2026, pertaining to the A.Y. 2016-17 is taken as a lead case. The assessee has raised following grounds of appeal: - "1 The Learned Commissioner of Income-tax (Appeals) ("CIT(A)") erred in confirming the order of the Assessing Officer ("AO") holding the appellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income-tax Act, 1961 ('the Act1). 2. The CIT(A) erred in not appreciating that the Appellant had issued e-Circular no. CDO/P&HRD-PM/7/2014-15 dated 15th April 2014 statin....
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....ng the Appellant to be an assessee in default. 5. The CIT(A) erred in not quashing the order of the AO holding the Appellant to be an assessee in default for the reason that the Appellant, even if it wanted to, could not have deducted tax at source on LTC paid during the year under consideration in view of the orders of the Hon hie Madras High Court till the time they were in force as acting contrary to the orders of the Hon'ble Court would have amounted to contempt of Court. 6. The CIT(A) erred in not following the judgment of the Hon'ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon'ble Court after considering the above set of facts held that the Appellant was justified in not deducti....
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....) granted to its employees during the F.Y. 2015-16. The AO for verification issued notices to the employee's u/s 133(6) of the Income Tax Act, 1961 ("Act", for short) there was no response. The AO also noted that the assessee failed to furnish Form 16 in respect of employees in question who were granted LFC. Consequently, the Assessing Officer proceeded to treat the assessee in default and raised a demand of Rs.12,52,757/- on this account. Further, the AO levied interest u/s 201(1A) of the Act for non-deduction of tax of the same amount. Thus, the total tax deduction at source liability was determined at Rs.24,55,404/-. Aggrieved by this, the assessee preferred appeal before the Ld. CIT(A) who dismissed the appeal of the assessee. Now, the ....
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....urt. Our attention was also drawn to the judgment passed by the Hon'ble Kerala High Court in ITA No. 45 of 2025, wherein it was held that during the F.Y. 2015-16 relevant to A.Y. 2016-17, the interim directions issued by the Hon'ble Madras High Court governed the field and, therefore, the appellant/assessee bank was not required to deduct tax. The Co-ordinate Bench of this Tribunal in ITA No. 514/Agra/2024 has also held that the assessee bank, in view of the interim order passed by the Hon'ble Madras High Court, was under an obligation not to deduct tax at source and, therefore, could not be treated as an assessee in default for non-deduction of tax at source on the impugned LFC payment. The present appeal pertains to A.Y. 2016-17. Under th....
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....d vide its order dated 25th April 2014 granted interim stay of the Circular. 3. The CIT(A) further erred in not appreciating that tax was not deducted at source by the Appellant on the LTC paid to its employees during the year under consideration in view of the specific interim directions issued by the Hon'ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT(A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hounable Madras High Court, the same even otherwise would not require withholding of tax under section 192 of Act. ....
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.... that the order of the Single Judge of the Hon'ble Madras High Court was challenged before the Division bench and -iter the Division bench's order before the Hon'ble Supreme Court and that the Hon'ble Supreme Court in SLP(C) no. 16734 of 2023 has ordered the Appellant bank from not making any recoveries from its employees during ¿he pendency of the petition. 8. Without prejudice to above grounds, the CIT(A) erred in not holding that Appellant could not have been deemed to be an assessee in default under section 201(1) of the Act if the employee had furnished the return of income, taken into account such sum for computing income and paid the st sue on income declared by the employee. 9. The appellant craves leave to ....