TaxTMI 
TaxTMI 
2026 (8) TMI 547
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....ical therefore these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The grounds of appeal as well as facts narrated in ITA No.343/Rjt/2026 for the assessment year 2017-18 have been taken into consideration for deciding these appeals en masse. 3. The grounds of appeal raised by the assessee in lead case, in ITA No.343/Rjt/2026 are as follows: 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 Act). 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 stating that the employees shall not be entitled to visit overseas countries/ centers as part of leave travel concession ("LTC") which Circular was challenged by the All India State Bank Officers Federation & Ors, before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th Apr....
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....rder 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 the pendency of the petition. 8. Without prejudice to above grounds, the CIT(A) erred in not holding that the 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 tax due on income declared by the employee. 4. Brief facts qua the issue are that in the instant case, information was received from the Deputy Commissioner of Income-tax, TDS Circle-2(2) Mumbai that during the financial year 2016-17 (relevant to AY 2017-18), the deductor, has paid Leave Fare Concession (LFC), which includes foreign travel, to the employees without deducting tax on such payments as required u/s. 192(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), which leads violation of provisions of sections 192(1) of the Act and making the assessee liable for default u/s 201(1) & 201(1A) r.w.s. 192(1) of the Act. The Hon'ble Suprem....
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....terest payable u/s 201(1A) for 91 Mts@ 1% of default (Rs.) Total amount Payable (Rs.) 2016- 17 2017- 18 PRAVINCHANDRA SOMABHAI CHAWDA PME TAX ABOPC7753M DEPARTMENT 3,65,340/- 1,09,602/- 99,738/- 2,09,340/- TOTAL 3,65,340/- 1,09,602/- 99,738/- 2,09,340/- Accordingly, the assessee is liable to pay tax/interest of Rs. 2,09,340/- u/s 201(1)/201(1A) of the Income-tax Act, 1961. 5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of Assessing Officer, observing as follows: "13. The contention of the Appellant that there is no specific bar under Section 10(5) for a foreign travel and therefore a foreign journey can be availed as long as the starting and destination points remain within India is also without merits. LTC is for travel within India, from one place in India to another place in India. There should be no ambiguity on this. 14. The second argument urged by the appellant that payments made to these employees was of the shortest route of their actual travel cannot be accepted either. It has already been clarified abov....
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.... Assessee, employer and he was therefore fully in a position to calculate the 'estimated income' of its employees. The contention of Shri K.V. Vishwanathan, learned senior advocate that there may be a bona fide mistake by the assessee-employer in calculating the 'estimated income' cannot be accepted since all the relevant documents and material were before the assessee- employer at the relevant time and the assessee- employer therefore ought to have applied his mind and deducted tax at source as it was his statutory duty, under Section 192(1) of the Act." 6. Aggrieved by the order of the Ld. CIT(A), the assessee is in further appeal before this Tribunal. 7. Learned Counsel for the assessee submitted written submission before me, which are reproduced below: (1) The LTC was paid to one employee by the branch i.e. to Mr. Mukesh Pandit, amounting to Rs. 4,94,480/- on dated 30-09-2016 and the corresponding tax and interest demanded by Income Tax Department thereon is Rs. 1,48,344/- (u/s.201(1)) and 1,26,092/- (u/s.201(1A)) respectively. Hence, total tax liability raised by ITD is Rs. 2,74,436/-. Said foreign travel was done by employee to foreign countries....
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....5 of 2025 (order dated 18th November 2025) has examined this issue in detail and has held in favour of the assessee. The relevant findings of the Hon'ble High Court, which have a direct bearing on the said issue, are reproduced below for ready reference: "The interim order granted by this Court is explained to the effect that any amount paid to the petitioner towards LTC or re-imbursement of LTC pursuant to the impugned order would not amount to income so as to enable the Bank to deduct tax at source. It is made clear that if the writ petition is dismissed, the employees are liable to pay tax on the amount paid by Bank." "It is only when the appellant-assessee, after having a liability to deduct tax, fails to do so, the question of invoking Section 201 of the Act and treating it as an 'assessee in default' could be arrived. Here, the Hon'ble Madras High Court found, prima facie, that the amount paid would not be the income of a payee so as to deduct tax. Therefore, the provisions of Section 201(1) of the Act are not attracted to the case at hand." "The appellant-assessee was under an obligation not to deduct tax at source and therefore, th....
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....reme Court has categorically held that the obligation to deduct tax at source under Section 192 is a statutory duty of the employer. The employer is required to compute the "estimated income" of the employee based on material available at the time of payment 2. Distinct Nature of Deduction and Payment of Tax The Court clarified that the obligation to deduct tax is distinct from the ultimate tax liability of the employee. Failure to deduct TDS, where legally required, renders the employer an "assessee in default" under Section 201 3. No Defence of Bona Fide Mistake Where Facts Are Available It has been expressly held that where all relevant documents and facts are available with the employer, the plea of bona fide mistake is not sustainable. The employer is expected to apply its mind and comply strictly with statutory provisions. 4. Strict Interpretation of Exemption Provisions. The Supreme Court reaffirmed that exemption provisions (such as Section 10(5) in that case) must be strictly construed, and any deviation from statutory conditions disentitles the benefit. Application to Present Case In view of ....
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....nk Officers Federation v. State Bank of India [2022] 140 taxmann.com 221/447 ITR 559 (Madras)/W.P. No.11991 of 2014, wherein vide order dated 16.02.2015 it was specifically clarified that the LFC/LTC payments would not amount to income so as to enable deduction of tax at source and further that if the writ petition was ultimately dismissed, the employees would be liable to pay tax. The assessee has submitted that in view of such binding judicial directions, it could not have deducted tax at source and any such deduction would have amounted to disobedience of the order of the Hon'ble High Court. 14. We find considerable merit in the aforesaid contention of the assessee. The interim directions of the Hon'ble Madras High Court were in force during the relevant previous year and the assessee, being a party to the proceedings, was duty bound to comply with the same. The obligation under section 192 of the Act to deduct tax at source cannot be read in isolation and must yield to binding judicial orders. Therefore, the failure to deduct tax in such circumstances cannot be equated with a default contemplated under section 201(1) of the Act. 15. We further find tha....
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....he Act cannot be invoked and the assessee cannot be treated as an assessee in default. 18. In the present case also, the facts are materially identical. The assessee was operating under the binding interim directions of the Hon'ble Madras High Court during the relevant period and therefore could not have deducted tax at source. The subsequent decision of the Hon'ble Supreme Court, though settling the issue on merits, cannot retrospectively fasten liability under section 201(1) of the Act for a period during which the assessee was acting in compliance with judicial orders. 19. We also find force in the argument of the assessee that the scheme of section 201 of the Act itself contemplates that a person can be treated as an assessee in default only when there is a failure to deduct tax in spite of a legal obligation to do so. In the present case, such legal obligation stood eclipsed by the interim directions of the Hon'ble High Court. 20. In view of the above discussion, respectfully following the decision of the Hon'ble Kerala High Court in State Bank of India (supra) and the decision of the Co-ordinate Bench in ITA No.514/Agr/2024, we hold ....