W.P.(MD)No.6102 of 2020 and etc batch BEFORE MADURAI BENCH OF MADRAS HIGH COURT DATED: 27.07.2020 CORAM : HON'BLE MR.JUSTICE G.R.SWAMINATHAN W.P.(MD)Nos.6102 to 6125, 6140, 6147, 6148 to 6161, 6163 to 6165, 6167, 6168, 6169 to 6188, 6225 to 6228, 6235 to 6239, 6241 to 6254, 6259, 6261 to 6263, 6265, 6267, 6269 to 6272, 6275, 6283, 6291, 6304, 6329 & 7336 of 2020 and W.M.P(MD)Nos. 5291 to 5314, 5330, 5338 to 5352, 5357, 5358, 5361 to 5384, 5432 to 5439, 5447 to 5450 to 5452, 5454 to 5467, 5471 to 5474, 5476 to 5479, 5481 to 5484, 5486 to 5491, 5493, 5494, 5502, 5503, 5510, 5511, 5527, 5528, 5560, 6198, 6785 & 6786 of 2020 in W.P.(MD).No.6102 of 2020 : 1.Tirunelveli District Central Cooperative Bank Limited rep. by its General Manager, No.4, Thiruvananthapuram Road, Vannarpet, Tirunelveli. 627 003. ... Petitioner Vs. 1. Joint Commissioner of Income Tax(TDS) Income Tax Department, Nellai City Centre, Thiruchendur Road, Rahmat Nagar, Maharajanagar Post, Tirunelveli. 1/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch 2. Income Tax Officer, Income Tax Department, TDS Ward , Nellai City Centre , Thiruchendur Road, Rahmat Nagar, Maharajanagar Post, Tirunelveli. ... Respondents Prayer : Writ petition is filed under. Article 226 of Constitution of India, to issue Writ of Certiorari, call for records relating to impugned order passed by second respondent vide No.12/MRIT 00623A/TDS/TNL/2019-20, dated 10.03.2020 and consequential Demand Notice issued by second respondent dated 10.03.2020 under Section 156 of Income Tax Act, 1961 and quash same. For Petitioners in W.P.(MD).Nos.6102 of Mr.D.Shanmugaraja 2020, 6140 of 2020 Sethupathi For Petitioners in W.P.(MD).Nos.6103 to 6125 Mr.S.Ravikannan of 2020, 6147 of 2020, 6163 of 2020, 6188 of 2020, 6148 of 2020 to 6161 of 2020, 6164 of 2020, 6165 of 2020, 6167 of 2020, 6169 of 2020 to 6187 of 2020, 6235 to 6239 of 2020, 6241 of 2020, 6242 of 2020, 6243 to 6354 of 2020, 6275 of 2020, W.P.(MD).Nos.6168 of 2020, 6225 of 2020, Mr.K.Vinayagam 6228 of 2020, 6269 of 2020, 6291 of 2020, 6304 of 2020, 6262 of 2020, 6263 of 2020, 6265 of 2020, 6267 of 2020, 6270 of 2020, 6259 of 2020, 6261 of 2020, 6271 of 2020, 6226 of 2020, 6227 of 2020, 6272 of 2020, 6283 of 2020 & 7336 of 2020 2/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch For Petitioner in W.P.(MD).No.6329 of 2020 Mr.K.Ravi For Respondents in 6102 of 2020, 6168 of Mrs.S.Srimathy 2020, 6225 of 2020, 6228 of 2020, 6140 of Special Government 2020, 6269 of 2020, 6304 of 2020, 6262 of Pleader 2020, 6263 of 2020, 6265 of 2020, 6267 of 2020, 6270 of 2020, 6259 of 2020, 6261 of 2020, 6271 of 2020, 6226 of 2020, 6227 of 2020, 6283 of 2020, 6272 of 2020, 7336 of 2020 For Respondents in W.P.(MD).No.6103 of Mr.N.Dilip Kumar 2020, 6117 of 2020, 6118 of 2020, 6104 to Standing counsel 6116 of 2020, 6119 to 6125 of 2020, 6147 of 2020, 6175 of 2020, 6157 of 2020, 6158 of 2020, 6188 of 2020, 6181 of 2020, 6180 of 2020, 6148 to 6156 of 2020, 6159 of 2020 to 6161 of 2020, 6164 of 2020, 6165 of 2020, 6167 of 2020, 6169 to 6174 of 2020, 6176 to 6179 of 2020, 6182 to 6187 of 2020, 6235 of 2020, 6241 of 2020, 6242 of 2020, 6236 to 6239 of 2020, 6243 to 6254 of 2020, 6275 of 2020, 6329 of 2020 COMMON ORDER writ petitioners are Societies registered under Tamil Nadu Co-operative Societies Act, 1983. They have been licensed by Reserve Bank of India to carry on banking business. main account holders with writ petitioners are various Primary Co-operative Societies, who provide loans and advances to end recipients. In affidavits filed in support of Writ Petitions, nature of activities 3/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch carried on by writ petitioners have been spelt out. writ petitioners grant loans to member-Societies by crediting same in loan accounts standing in their names. member-Societies in-turn transfer funds to farmers through banking channels, if they also having accounts. But financial inclusion is still far cry. Most of farmers do not have bank accounts. Therefore, member-Societies withdraw cash from their accounts for making cash disbursements. 2.The Government of Tamil Nadu utilizes banking infrastructure of writ petitioners and their member-Societies for distributing welfare assistance to ration cardholders on eve of Pongal. Every ration cardholder is entitled to collect Rs.1,000/- along with Pongal gift. Tamil Nadu Civil Supplies Corporation is Nodal Agency and writ petitioner-Banks along with Primary Co-operative Societies have been roped in to lend their 4/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch logistical support. writ petitioners specifically contend that such withdrawal of cash by Primary Co-operative Societies from Savings Bank Account maintained by them with writ petitioners would not constitute income at hands of respective Primary Co-operative Societies. 3.While so, jurisdictional Income Tax Officers conducted survey proceedings at business premises of writ petitioners under Section 133A [2A] of Income Tax Act, 1961 (hereinafter referred to as 'the Act') and found that writ petitioners were not deducting tax as required under Section 194N of Act. Based on data gathered during survey proceedings, show cause notices were issued in first week of March 2020. jurisdictional authority informed banks that they had failed to comply with provisions of Section 194N of Act and called upon them to explain in writing as to why order should not be passed under Section 201[1] and 201[1A] of Act to recover 5/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch default amount with interest from them. noticees were given time of less than week to appear in person and show cause as to why they should not be deemed to be assessees in default. Most of writ petitioners appeared before jurisdictional authorities and either sought adjournments or pleaded that they were not aware of requirement of law. They further contended that in view of nature of their activities, transactions are out of purview of Section 194N of Act. Not satisfied with response of writ petitioners, orders impugned in these writ petitions came to be passed. 4.The impugned orders state that writ petitioners herein are Co-operative Banks engaged in business of banking and that they had failed to comply with terms of Section 194N of Act and that explanation given by them was not satisfactory. 6/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch 5.The jurisdictional authorities noted that various Co-operative Societies are account holders of writ petitioners herein. account holders are not carrying on business of banking. Therefore, writ petitioner-Banks were obliged to have deducted tax when cash withdrawals exceeded prescribed limit of One Crore rupees. writ petitioners failed to do so. Since deductor Banks defaulted in complying with provisions of statutory provisions, they were deemed to be assessees in default. default amount was accordingly worked out and it was declared that writ petitioners are liable to pay said default amount with interest. impugned orders were issued to that effect. 6.Questioning same, these Writ Petitions have been filed. Heard various learned counsel appearing for writ petitioners and learned Standing counsel appearing for respondents / Income Tax Department. 7/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch 7.The learned counsel appearing for writ petitioners contended that having regard to overall object and scheme of Act, transactions in question clearly fall outside purview of Section 194N of Act. Section 194N of Act was brought into force with effect from 01.09.2019. respondents ought not to have retrospectively enforced said provision by taking into account transactions that had taken place even prior to said date. They would further contend that sums withdrawn by member- Societies would not constitute income at their hands and therefore, question of liability to pay or deduct income tax would not arise. They also pointed out that on occasions, Primary Co-operative Societies had acted as correspondents for writ petitioner-Banks and therefore, they would stand exempted from operation of provision itself. Most importantly, impugned orders have been passed prematurely and without giving reasonable opportunity to writ petitioners herein. 8/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch 8.Per contra, learned standing counsel contended that writ petitions are not maintainable. writ petitioners ought to have availed statutory remedy of Appeal under Section 246A of Act. They strongly denied contentions that there has been violation of principles of natural justice. In fact, impugned exercise was undertaken only after concluding survey exercises. During survey, department officials closely interacted with officials of writ Petitioner-Banks and all facts were fully gathered during that stage itself. impugned orders were preceded by show cause notices. writ petitioners did appear during enquiry. In fact, writ petitioners did not have anything to say. Therefore, it cannot be stated that respondents had unilaterally or arbitrarily passed impugned orders. core argument of learned standing counsel is that having regard to object behind incorporation of Section 194N of Act, nature of 9/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch transaction becomes irrelevant. Even if sum received by member-Societies did not constitute income at their hands still writ petitioner-Banks had obligation to deduct at prescribed rates. writ petitioners would draw my attention to few other provisions of Act to emphasize this point. Section 198 of Act states that amount deducted as per Section 194N of Act would not be included as income at hands of assessee. Provisions such as Section 206 C (1F) of Act were referred to to drive home point that this Court should apply principle of deemed income. writ petitioners had not challenged constitutional validity of Section 194N of Act. Therefore, this Court ought to apply provision as such. There is no scope for reading principles of equity into taxing provision. It has to be interpreted as such. So applied, it can be noted that writ petitioner-Banks have failed to effect deduction. Therefore, they were rightly treated as assessees in default by respondents. member-Societies can by no stretch of 10/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch imagination be called as assessees carrying on business of Banking. learned Standing counsel contested all other contentions made by writ petitioners' counsel. They also filed notes of submissions and reiterated contentions set out therein. 9.I carefully considered rival contentions and went through entire materials available on record. 10.The objections raised by learned standing counsel as regards maintainability can be disposed of first. It is true that Section 146 (1) (i) of Act states that any assessee aggrieved by order under Section 201 of Act may appeal to appellate authority. question is whether writ petitions should be dismissed on ground of non exhaustion of alternative remedy of appeal. It is no doubt statutory remedy. It is true that litigants should not be allowed to bypass such statutory remedies and straight away invoke writ jurisdiction of this Court. 11/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch 11.The Hon'ble Supreme Court in decision reported in (2005) 6 SCC 499-(State of Himachal Pradesh and others Vs. Gujarat Ambuja Cement Limited and another) held that there are two well recognized exceptions to doctrine of exhaustion of statutory remedies. One such exception is that doctrine has no application when impugned order has been made in violation of principles of natural justice. In case on hand, no doubt, impugned orders were preceded by show cause notices. But noticees were given hardly few days time to appear and respond. Natural justice is not only about affording opportunity, but also, giving reasonable time to noticees to prepare their defence. If opportunity given is not reasonable, then outcome is equally vitiated. Granting opportunity cannot be matter of empty formality. 12.The respondents have tried to sustain impugned orders by referring to stand taken by officials of writ petitioner-Banks during survey 12/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch proceedings. As rightly contended by writ petitioners' counsel, granting of opportunity to writ petitioners to explain during survey proceedings cannot be taken as compliance with requirements of principles of natural justice. writ petitioners had contended before respondents that transactions in question would not fall within purview of Section 194N of Act. Therefore, they ought to have been given some more time to make good their defence. I have no doubt whatsoever in my mind that respondents have simply rushed through process. Surveys were conducted followed by show cause notices. Enquiries were held for formality sake and impugned orders were passed either on same day or on next day. civil consequences are enormous. financial implications are humongous. Therefore, process adopted by respondents cannot be said to be fair compliance with principles of natural justice. Hence, I would not non suit writ petitioners on ground of maintainability. 13/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch 13.Section 194N of Act which was inserted by Finance Act, 2019, with effect from 01.09.2019 reads as under: 194N. Every person, being,- (i)a banking company to which Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii)a co-operative society engaged in carrying on business of banking or (iii)a post office, who is responsible for paying any sum, as case may be, aggregate of sums, in cash, in excess of one crore rupees during previous year, to any person (herein referred to as recipient) from one or more accounts maintained by recipient with it shall, at time of payment of such sum, deduct amount equal to two percent of sum exceeding one crore rupees, as income-tax: provided that nothing contained in this sub- section shall apply to any payment made to- 14/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch (i) Government; (ii)any banking company or Co-operative society engaged in carrying on business of banking or Post Office; (iii)any business correspondent of banking company or Co-operative society engaged in carrying on business of banking, in accordance with guidelines issued in this regard by Reserve Bank of India under Reserve Bank of India Act, 1934 (2 of 1934); (iv)any white label automated teller machine operator of banking company or co-operative society engaged in carrying on business of banking, in accordance with authorisation issued by Reserve Bank of India under Payment and Settlement Systems Act, 2007 (51 of 2007); (v)such other person or class of persons, which Central Government may, by notification in Official Gazette, specify in consultation with Reserve Bank of India). 15/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch 14.The writ petitioners' counsel initially endeavoured to contend that primary Societies, who had withdrawn sums beyond ceiling limit of One Crore Rupees are also Co-operative Societies engaged in carrying on business of banking. But this contention has been effectively demonstrated to incorrect by learned Standing counsel. But exempting proviso to Section 194N of Act also includes business correspondents of Co-operative Societies engaged in carrying on business of banking. writ petitioners' counsel drew my attention to G.O.(2D).No.66, Co-operation, Food and Consumer Protection (D1) Department, dated 26.11.2019, whereby, Government of Tamil Nadu sanctioned sum of Rs.2363.13 Crores towards Pongal hamper and cash support of Rs.1,000/- to all rice cardholders. Tamil Nadu Civil Supplies Corporation was appointed as Nodal Agency for distribution of cash support for Pongal festival 2020. It was to coordinate with Co- operative Societies to ensure distribution of cash support 16/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch to all rice cardholders. petitioners had acted as conduit between Government and end recipients. Government had placed this welfare fund at hands of petitioner-Banks, who in-turn credited same in Saving Bank accounts of member-Societies, who after withdrawing same, distributed to end-recipients, namely, rice cardholders. Thus, Primary Co-operative Societies had acted as business correspondents for writ petitioner-Banks. This business correspondent model was initiated by Reserve Bank of India in 2006 to promote financial inclusion in India. Under this framework, Banks are permitted to use services of third party agents to provide banking and financial services such as credit and savings on their behalf. In case on hand, Primary Co- operative Societies had acted as business correspondents to pass on cash benefit as mandated by State Government. I therefore have no hesitation to come to conclusion that at least this part of transaction between 17/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch petitioners and their member-Societies would qualify for being exempted under proviso to Section 194N of Act. Therefore, when entire volume of transaction is taken into account, this part has to be necessarily segregated. By no stretch of imagination, writ petitioner-Banks could have deducted 2% from Pongal gift fund even if it had breached ceiling limit of Rupees One Crore. If writ petitioner- Banks had done so, they would have violated mandate issued by State Government. impugned orders has failed to take note of this relevant aspect. If quasi judicial order does not take note of relevant materials, it is liable to be quashed on that ground. 15.As rightly contended by learned counsel appearing for writ petitioners, key expression occurring in Section 194N of Act is during Previous Year . Section 3 of Act defines previous year as financial year immediately preceding assessment year. It 18/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch is beyond dispute that transactions in question had taken place during 01.04.2019 to 31.03.2020. assessment year can only be 2020-2021. In fact, in all impugned orders 2020-2021 has been rightly shown as assessment year. But, assessments had been made even before previous year ended. Thus, on very face of it, impugned orders have been hastily and prematurely passed. 16.The impugned orders have been passed under Section 201 of Act. said provision is as under. 201. Consequences of failure to deduct or pay. 1[(1) Where any person, including principal officer of company, (a) who is required to deduct any sum in accordance with provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being employer, does not deduct, or does not pay, or after so deducting fails to pay, whole or any part of tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences 19/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch which he may incur, be deemed to be assessee in default in respect of such tax: 2[Provided that any person, including principal officer of company, who fails to deduct whole or any part of tax in accordance with provisions of this Chapter on sum paid to resident or on sum credited to account of resident shall not be deemed to be assessee in default in respect of such tax if such resident (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid tax due on income declared by him in such return of income,and person furnishes certificate to this effect from accountant in such form as may be prescribed:] 1[Provided further that] no penalty shall be charged under section 221 from such person, unless Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.] 2[(1A) Without prejudice to provisions of sub- section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct whole or any part of tax or after deducting fails to pay tax as required by or under 20/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch this Act, he or it shall be liable to pay simple interest, (i) at one per cent for every month or part of month on amount of such tax from date on which such tax was deductible to date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of month on amount of such tax from date on which such tax was deducted to date on which such tax is actually paid, and such interest shall be paid before furnishing statement in accordance with provisions of sub-section (3) of section 200:] [Provided that in case any person, including principal officer of company fails to deduct whole or any part of tax in accordance with provisions of this Chapter on sum paid to resident or on sum credited to account of resident but is not deemed to be assessee in default under first proviso to sub-section (1), interest under clause (i) shall be payable from date on which such tax was deductible to date of furnishing of return of income by such resident.] (2) Where tax has not been paid as aforesaid after it is deducted, 1[the amount of tax together with amount of simple interest thereon referred to in sub-section (1A) shall be charge] upon all assets of person, or company, as case may be, referred to in sub-section (1). 21/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch [(3) No order shall be made under sub-section (1) deeming person to be assessee in default for failure to deduct whole or any part of tax from person resident in India, at any time after expiry of seven years from end of financial year in which payment is made or credit is given.] (4) provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 153 shall, so far as may, apply to time limit prescribed in sub-section (3).] [Explanation. For purposes of this section, expression -accountant? shall have meaning assigned to it in Explanation to sub-section (2) of section 288.] 17.A mere look at Section 201 of Act would indicate that deductor even if he had failed to comply with requirements of Section 194N of Act, shall not be deemed to be assessees in default in respect of such tax, if payee has furnished his return of income under Section 139 of Act and has taken into account such sum for computing income in such return of income and has paid tax due on income declared by him in such return of income and that certificate is furnished in prescribed 22/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch format. learned standing counsel would urge that I should ignore nature of transaction by having regard to object behind incorporation of Section 194N of Act and language of Section 198 of Act. It is true that Section 194N of Act was introduced to promote digital payments and to discourage practice of making business payments in cash. It is seen from speech of Hon'ble Finance Minister that to promote less cash economy, TDS at 2% was proposed to be levied on cash withdrawal exceeding Rupees One Crore in year from bank account. core argument of learned Standing Counsel is that even if sum withdrawn by member-Societies does not represent income at their hands still writ petitioner-Banks were obliged to have deducted amount equal to 2% on sum exceeding One Crore Rupees. But Section 194N of Act indicates that this deduction is to be deduction of income tax at source. expression to deduct amount equal to 2% of sum exceeding one Crore Rupees as income tax is 23/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch clearly figuring in provision. Section 194N of Act is very much falling under Chapter XVII that deals with collection and recovery of tax. It is true that Section 198 of Act states that sum deducted in accordance with Section 194N of Act for purpose of computing income of assessee should not be deemed to be income received. But having regard to overall scheme of chapter and particularly, by reading Section 194N along with Section 201 of Act, one can safely come to conclusion that if sum received by assessee will not be income at his hands, then, question of deduction under Section 194N of Act will not arise. Hon'ble Supreme Court in recent decision reported in (2019) 13 SCC 747 (Commissioner of Income Tax Vs. M/s. Vasisth Chay Vyapar Limited) observed that income tax is levied on income. If income does not result at all, there cannot be levy of tax. Even if entry of hypothetical income is made in books of account, but, if income does not result at all, 24/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch then there is neither accrual nor receipt of income and no tax can be levied. This principle laid down in decision of Hon'ble Supreme Court reported in 1962 46 ITR 144 SC - (Commissioner of Income Tax Vs. Shoorji Vallabdhas and Co) has been reiterated in decision of Hon'ble Bombay High Court reported in 2019 (417) ITR 169-(Rupesh Rashmikant Shah Vs. Union of India), which held as follows:- provision for deduction of tax at source is not charging provision. It only makes deduction of tax at source on payment of same, which, in hands of payee, is income. If payee has no liability to pay tax on such income, liability to deduct tax at source in hands of payer cannot be fastened. 18.Though learned counsel appearing for writ petitioners strongly relied on decision of Hon'ble 25/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch Supreme Court reported in [2009] 312 ITR 225 (Commissioner of Income Tax vs. M/s. Eli Lilly and Company (India) Private Limited) said decision itself clarifies that it should be understood only in context of computation of salaries. Hence, I refrain from discussing it. 19.Of course as rightly contended by learned standing counsel, deductor cannot himself decide whether sum withdrawn by account-holder would not represent income at his hands and therefore, they are not obliged to deduct TDS at 2% on sum exceeding ceiling limit. But if in enquiry, deductor is able to place materials before authority so as to bring his case within proviso to Section 201 (1) of Act, authority is bound to drop further proceedings. I may refer to decision of Hon'ble Supreme Court reported in (2007) 8 SCC 463 (Hindustan Coca Cola Beverages Private Limited Vs. Commissioner of Income Tax) in this regard. Hon'ble Supreme Court in said decision observed as follows: 26/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch 9.Be that as it may, circular No. 275/201/95- IT(B) dated 29.1.1997 issued by Central Board of Direct Taxes, in our considered opinion, should put end to controversy. circular declares "no demand visualized under Section 201(1) of Income- tax Act should be enforced after tax deductor has satisfied officer-in-charge of TDS, that taxes due have been paid by deducted-assessee. However, this will not alter liability to charge interest under Section 201(1A) of Act till date of payment of taxes by deducted-assessee or liability for penalty under Section 271C of Income-tax Act." 20.I would not fault respondents for having issued show cause notices to writ petitioners for not having complied with Section 194N of Act. But then, enquiry could have been held only after commencement of assessment year and not in previous year itself. I do not agree with stand of writ petitioners' counsel that volume of transaction that had taken place prior to 01.09.2019 should be ignored. learned standing counsel bring it to my notice that computation of tax has been 27/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch made only with effect from 01.09.2019 and there has been no levy on transaction before cut off date. Central Board of Direct Taxes had issued clarification that provision having come into effect from 01.09.2019 any cash withdrawal prior to said date will not be subjected to TDS. However, since threshold of One Crore Rupees is with respect to previous year, with reference to assessment year 2020-2021, cash withdrawal for triggering Section 194N of Act shall be counted from 01.04.2019. writ petitioners have not questioned validity of provision. provision employs expression Previous year . With reference to assessment year 2020-2021, previous year would obviously mean period commencing from 01.04.2019 to 31.03.2020. taxing provision has to be understood in plain manner. Such application of 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 28/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch not case here. Therefore, I sustain stand of learned standing counsel that to calculate threshold limit of One Crore rupees, 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 cash withdrawals that had taken place with effect from 01.09.2019. 21.I also sustain stand of learned Standing counsel that department need not wait till time limit for assessees to file their returns for assessment year gets over. It is open to department to initiate action against deductors, who have failed to act as per requirements under Section 194N of Act, as they are also deemed assessees. But then, when enquiry is conducted, it is open to noticees, who are to be treated as assessees in default to place materials before Assessing Officer that amounts received by recipients do not represent income at their hands. If by then, assessees had also filed their 29/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch returns and case falls under proviso to Section 201(1) of Act, writ petitioners who have failed to deduct cannot be fastened with any liability. 22.Since Assessing Officers have not taken into account entire scheme of Act and had proceeded at breakneck speed, I am constrained to interfere with impugned proceedings and they are accordingly quashed. matters are remitted to file of respective jurisdictional Assessing Officers. Assessing Officers will issue fresh hearing notices to writ petitioners. writ petitioners are at liberty to bring on record returns filed by member- Societies who had withdrawn cash beyond ceiling limit of Rupees One Crore. Assessing Officers will exclude Pongal cash gift distributed by petitioner-Banks at instance of Government of Tamil Nadu from entire computation. This is because as already held member-Societies have merely acted as business correspondents of writ 30/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch petitioners herein. As regards remaining amounts, it is open to writ petitioners to establish before Assessing Officers that sums withdrawn by member-Societies do not represent income at their hands. As evidence annual income tax returns filed by member-Societies can be produced. If second respondent is satisfied that amounts withdrawn by member-Societies did not in fact represent income at their hands, jurisdictional Assessing Officers will drop further action. If they are not so satisfied, of course, it is open to Assessing Officers to pass further orders in accordance with law. 23.With this liberty, Writ Petitions stand allowed. No costs. Consequently, connected miscellaneous petitions are closed. 27.07.2020 tsg Index : Yes/No Internet : Yes/No 31/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch Note: 1.Issue order copy within one day after same received by Court Officers Section. 2.In view of present lock down owing to COVID-19 pandemic, web copy of order may be utilized for official purposes, but, ensuring that copy of order that is presented is correct copy, shall be responsibility of advocate/litigant concerned. To 1. joint commissioner of Income Tax(TDS) Income Tax Department, Nellai City Centre, Thiruchendur Road, Rahmat Nagar, Maharajanagar Post, Tirunelveli. 2. Income Tax Officer, Income Tax Department, TDS Ward , Nellai City Centre , Thiruchendur Road, Rahmat Nagar, Maharajanagar Post, Tirunelveli. 32/33 http://www.judis.nic.in W.P.(MD)No.6102 of 2020 and etc batch G.R.SWAMINATHAN, J. tsg Common Order made in W.P.(MD)Nos.6102 to 6125, 6140, 6147, 6148 to 6161, 6163 to 6165, 6167, 6168, 6169 to 6188, 6225 to 6228, 6235 to 6239, 6241 to 6254, 6259, 6261 to 6263, 6265, 6267, 6269 to 6272, 6275, 6283, 6291, 6304, 6329 & 7336 of 2020 27.07.2020 33/33 http://www.judis.nic.in Tirunelveli District Central Cooperative Bank Limited v. Joint Commissioner of Income-tax (TDS), Tirunelveli / Income-tax Officer, Income-tax Department, TDS Ward, Tirunelveli