ITAT Jaipur absolves SBI from TDS default for LTC claims during period when High Court restrained deduction, holding statutory compliance not possible under binding order.
ITAT Clears SBI of LTC TDS Default During Judicial Stay
The ITAT Jaipur allowed SBI’s appeal against TDS default penalties for failure to deduct tax on Leave Travel Concession (LTC) claims during a period when a High Court order restrained such deductions. The tribunal held that the bank could not have complied with TDS obligations without violating a binding injunction.
The Revenue argued that SBI remained liable under Section 201 for non-deduction. However, the ITAT ruled that when a statutory body acts in obedience to a judicial order, it cannot be deemed an 'assessee in default'. The tribunal emphasized that penalties under Section 221 require mens rea or negligence, which was absent here.
This decision clarifies that compliance obligations are suspended during valid judicial stays. Institutions must preserve copies of restraining orders to defend against default notices. Legal departments should promptly seek court protection when challenging ambiguous tax demands to avoid downstream penalties.
Citations
- Section 201, 221, Income Tax Act
