TaxTMI 
TaxTMI 
2026 (8) TMI 1040
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.... is providing credit facilities to small and marginal farmers. Petitioner has maintained its current account with respondent No.5-Bank of Baroda. The annual transaction in the said current account is about Rs.44 Crores. 3. That on 01.09.2020, without prior notice to the petitioner-Society the respondent No.5-Bank created a lien of Rs.31,51,475/- towards TDS as per Section 194A of the Act, 1961 as amended by the Finance Act, 2020. 4. That the petitioner had requested the respondent No.5-Bank to defreeze the account, which was not responded to. Petitioner had also approached Banking Ombudsman at RBI, who declined to consider the same on the premise of the issue being outside the purview of the Ombudsman Scheme, 2021. Hence, the petition. 5. Learned counsel for the petitioner drawing attention to the provisions of Section 271C of the Act, 1961 submits that deduction of tax at source is the primary responsibility of the person making the payment. Failure of compliance of this requirement would result in imposition of penalty on the person, who is fastened with such liability. 6. That in the instant case, he submits the petitioner- Society being a constituent of respondent N....
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....ould be dealt with if circumstances and the law warrant. He does not dispute that the respondent No.5-Bank has no authority to exercise lien over the account maintained by the petitioner-Society under the pretext of petitioner not paying the tax. 11. There is no representation on behalf of respondent Nos.4 & 5-Bank. 12. Heard and perused the records. 13. Section 194N of the Act (though shown as Section 194A by the respondent No.5) as amended by the Finance Act, 2020 reads as under: "194N. Every person, being,- (1) a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act); (i) a co-operative society engaged in carrying on the business of banking; or (iii) a post office, who is responsible for paying any sum, being the amount or the aggregate of amounts, as the case may be, in cash exceeding one crore rupees during the previous year, to any person (herein referred to as the recipient) from one or more accounts maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to two per cent of such sum, as income-....
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.... reduced rate, if such recipient satisfies the conditions specified in such notification." 14. Perusal of the aforesaid provision indicate that it is the responsibility of a person carrying on the business of Banking Company as provided under Banking Regulation Act, 1949, to deduct an amount equal to two percent of the aggregate amount paid in cash exceeding Rupees One Crore during the previous year. For the purpose of present case, it is respondent No.5-Bank, which is required to deduct the amount as required under the aforesaid provision under Section 194N of the Act. 15. Clearly the obligation/responsibility is casted on the person namely the entity carrying on the business of Banking Company under the Banking Regulation Act, 1949. 16. In the instant case, respondent No.5-Bank undisputedly falling within the Provisions of Banking Regulation Act, 1949 of which the petitioner-Society is a customer, is paying the amount in terms of the banking transaction. The tax at two percent on the aggregate of payment of Rupees One Crore made in the previous years was required to be deducted by respondent No.5-Bank. This is the undisputed meaning, from the plain reading and understand....
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....of TDS by the bank. Reply As per the latest Income tax guidelines on Cash withdrawal tax, customer has to produce last 3 years IT returns to the Branch for updating the same in CBS system but customer has not provided the same. The total cash withdrawn from their Sahakar Sangha from 08/04/2020 to 27/08/2020 was Rs. 6,30,00,000(Rupees Six crore thirty lakhs only). Accordingly TDS was computed at the rate 5% on cash withdrawal (194N) as Rs. 31.50 lakhs on 31/08/2020. Since the customer has not maintained the sufficient balance in the account for collection of TDS amount, the system has marked lien for that TDS amount 31.50 lakhs. Due to the lien marked for collection of TDS amount, the customer was not able to withdraw the balance amount and the account was not freezed. We hereby enclosed the account statement 2. Whether bank has received any order from Tax Authorities for placing a lien? Reply No, as per the Income tax rules, Bank has computed the TDS on cash withdrawal. 3. Kindly share copies of all communication with the complainant pertaining to the Issue In concern (as quoted in the previous reply) Reply-we submitted our reply to lega....