आयकर अपीलीय अिधकरण ‘सी’ (cid:16)ायपीठ, चे(cid:22)ई।

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI माननीय (cid:27)ी मनु कु मार िग(cid:30)र, (cid:16)ाियक सद एवं माननीय अिमताभ शु’ा, लेखा सद के सम)

BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI HON’BLE AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No.1113/Chny/2025 िनधा:रण वष: /Assessment Year: 2020-21 The District Central Cooperative The Income Tax Officer, Bank Ltd., Vs. TDS Ward, Vannarpet, Tirunelveli.

Tirunelveli – 627 003.

PAN: AAAAT 7955J (अपीलाथ(cid:7)/Appellant) ((cid:8)(cid:9)यथ(cid:7)/Respondent)

अपीलाथF की ओर से/ Appellant by : Shri Y.Sridhar, FCA HIथF की ओर से /Respondent by : Ms. R. Anitha, Addl. CIT सुनवाई की तारीख/Date of Hearing : 16.06.2025 घोषणा की तारीख /Date of Pronouncement : 11.09.2025 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member):

This appeal filed by the assessee is directed against the order passed under section 201(1)/201(1A) of the Income Tax Act, 1961 (‘the Act’) dated 11.03.2020 and revised on 19.03.2024, for the assessment year 2020-21, wherein a demand of Rs.2,81,08,896/- (later revised to Rs.4,08,85,687/-) was raised on account of non-deduction of TDS under section 194N.

2. The assessee has raised the following legal grounds of appeal:

“1. That the Order of the Ld. Addl. CIT (Appeals-10), Mumbai is erroneous on the facts and the merits of the case and provisions of Law as well and hence requires to be quashed.

2. That the Addl. CIT(A) erred in failing to appreciate that the directions of the Madurai Bench of the Hon'ble Madras High Court while disposing the writ appeal of the appellant has not been complied by the Ld. AO (TDS) and thus the order passed by the Addl. CIT(A) stands vitiated.

3. That the Ld. Addl. CIT(A) erred in failing to appreciate that the order of the Ld. AO (TDS) which failed to comply with the directions of the High Court is contemptuous and therefore requires to be quashed.

4. That the benefit of retrospective application of third proviso to S. 194N needs to be extended to the appellant and the computation of quantum of amounts covered u/S 194N needs to be recomputed by providing additional deduction of Rs. 2,00,00,000/-.

4. That the Id. Addl. CIT (A) erred in not adhering to the directions of the Hon'ble Bench of Madras High Court that, if the recipients were proven to have filed Returns of Income for AY 2020-21, then the liability cannot be cast u/s 194N on the appellant.

5. For those and other reasons that may be adduced at the time of hearing, it is prayed by the Appellant that the Hon'ble Tribunal may be pleased to delete the unjust and inexplicable demand and thus render justice.”

3. Background and Facts of the Case:

The assessee is a District Central Co-operative Bank functioning in the districts of Tirunelveli and Tenkasi, catering to the needs of the Primary Agricultural Cooperative Banks (PACBs) who maintain accounts with the appellant. Due to various constraints beyond the control of the assessee, TDS under section 194N was not deducted on certain cash withdrawals made by the PACBs, particularly during the initial phase post introduction of the said section, which came into effect from 01.09.2019.

One of the key components of the withdrawn amount relates to Pongal Cash Gift of Rs.1,000/- per rice card holder distributed by the Government of Tamil Nadu through the PACBs, totaling Rs.

47,67,35,000/-.

4. The appellant contended that the sum withdrawn for distribution of Pongal Gift does not constitute income in the hands of the PACBs and therefore does not attract TDS under section 194N, relying on the Hon’ble Supreme Court’s judgment in CIT v. Vasisht Chay Vyapar Ltd. [2019] 13 SCC 747 (SC). He further submitted that the PACBs function as Business Correspondents of the appellant Bank and are thus covered under the exemption in section 194N(iii). If the PACBs had filed their Returns of Income (ROI), the benefit of the first proviso to section 201(1) and second proviso to section 40(a)(ia) becomes