Whether interest on late payment of TDS can be imposed on an assessee where clearance of the assessee’s cheque for TDS payment is delayed due to technical error on part of the bank?

Short Overview of the case:

Lanco Infratech Ltd Vs ACIT

ITA No. 363/Del/2017

The assessee is a company engaged in the business of EPC and construction infrastructure development and power generation. Order u/s 153 has been issued by the CPC (TDS) charging interest on late payment of the TDS u/s 201(1A). The CIT (A) confirmed the order of the CPC.

On appeal, the issue before Tribunal was whether interest on late payment of TDS can be imposed on an assessee where clearance of the assessee’s cheque for TDS payment is delayed due to technical error on part of the bank.

ITAT held it as No.

It observed as under:

undisputed facts of the case are that the assessee deposited cheque on 30.04.2012 which has been cleared and the amount has been debited on 30.04.2012 itself from the account of the assessee whereas the challan generated by the bank reflected date of deposit as on 01.05.2012 which spinned off the charging of interest by the CPC.

The assessee has produced certificate from the Indian Overseas Bank, Secunderabad Branch confirming that the assessee has deposited the amounts through Internet Banking facility (IBF) of the bank on 30.04.2012 and amounts have been debited on the same date.

It was a technical error on the part of the bank to reflect the amount on 01.05.2012 instead of 30.04.2012 for which we hold that the assessee cannot be held to be responsible.

We are also guided by the circular of CBDT No. 1197 with regard to the Section 211, advance tax where in in case of bank holiday, the amounts were allowed to be paid on the next day of the due date without interest.

In the instant case, the matter pertaining to Section 201, the assessee has rightly deposited the TDS amount on 30.04.2012.

Hence, we hold that the assessee is not liable to pay any interest u/s 201(1A).