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2020 (8) TMI 728 - HC - Income TaxTDS u/s 194N - Consequences of failure to deduct or pay u/s 201 - cash withdrawal exceeding Rupees One Crore in an year from the bank account - writ petitioners herein are Co-operative Banks engaged in the business of banking and that they had failed to comply with the terms of Section 194N of the Act and that the explanation given by them was not satisfactory - HELD THAT:- No fault the respondents for having issued show cause notices to the writ petitioners for not having complied with Section 194N of the Act. But then, the enquiry could have been held only after the commencement of the assessment year and not in the previous year itself. Not agree with the stand of the writ petitioners' counsel that the volume of transaction that had taken place prior to 01.09.2019 should be ignored - as brought to notice computation of tax has been made only with effect from 01.09.2019 and there has been no levy on the transaction before the cut off date. The Central Board of Direct Taxes had issued a clarification that the provision having come into effect from 01.09.2019 any cash withdrawal prior to the said date will not be subjected to TDS. Since the threshold of One Crore Rupees is with respect to the previous year, with reference to the assessment year 2020-2021, the cash withdrawal for triggering Section 194N of the Act shall be counted from 01.04.2019. The writ petitioners have not questioned the validity of the provision. The provision employs the expression “Previous year”. With reference to the assessment year 2020-2021, the previous year would obviously mean the period commencing from 01.04.2019 to 31.03.2020. A taxing provision has to be understood in a plain manner. Such an application of the provision will not amount to retrospective operation. If TDS was levied even on transactions that had taken place prior to 01.09.2019, then, that would definitely be illegal, but that is not the case here. Therefore, Iustain the stand of the learned standing counsel that to calculate the threshold limit of One Crore rupees, the transactions that had taken place with effect from 01.04.2019 will have to be taken into account, but actual levy of tax will be on the cash withdrawals that had taken place with effect from 01.09.2019. Also sustain the stand of the learned Standing counsel that the department need not wait till the time limit for the assessees to file their returns for the assessment year gets over. It is open to the department to initiate action against the deductors, who have failed to act as per the requirements under Section 194N of the Act, as they are also deemed assessees. But then, when the enquiry is conducted, it is open to the noticees, who are to be treated as assessees in default to place materials before the Assessing Officer that the amounts received by the recipients do not represent income at their hands. If by then, the assessees had also filed their returns and the case falls under the proviso to Section 201(1) of the Act, the writ petitioners who have failed to deduct cannot be fastened with any liability. Since the Assessing Officers have not taken into account the entire scheme of the Act and had proceeded at breakneck speed, we are constrained to interfere with the impugned proceedings and they are accordingly quashed. The matters are remitted to the file of the respective jurisdictional Assessing Officers. Writ Petitions stand allowed.
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