TaxTMI 
TaxTMI 
TaxTMI 
1982 (9) TMI 137
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.... section 194C of the Act. The consequences of failure to deduct tax at source from the payments made to the contractors or after deducting, fails to pay the tax to the Government, are provided in section 201. Under section 201(1), if there is a failure to deduct or after deducting, to pay the tax as required by section 194C, the person responsible for making the payment to the contractors shall be deemed to be an assessee in default in respect of the tax and a penalty can be imposed upon him under section 221 of the Act, provided the ITO is satisfied that such person has without good and sufficient reasons failed to deduct and pay the tax. Sub-section (1A) was added to this section with effect from 1-4-1966 which provided that without prejudice to the provisions of sub-section (1), i.e., levy of penalty, if there is failure to deduct the tax or pay it as per section 194C, the persons responsible for making the payment is liable to pay simple interest at twelve per cent per annum on the amount of such tax from the date on which such tax was deductible, to the date on which such tax is actually paid. 3. Now, the assessee-company, after having deducted the tax from the payments made ....
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....asons put forward by the assessee, the Tribunal held that the assessee had good and sufficient reasons for not making the payment of tax in time and, therefore, there was no case for charging interest. The AAC disagreed with both these contentions. Even though there was a decision of the Tribunal, which he should normally have followed, he refused to follow by pointing out that he would differ from the view of the Tribunal which is totally uncalled for. He should have followed the order of the Tribunal and allowed the matter to be corrected by his superior appellate authorities, i.e., the Tribunal, instead of differing from the order of the Tribunal, forgetting his position that be being a subordinate official, should not have refused to follow the order of the Tribunal. Be that as it may, aggrieved by the order of the AAC, the assessee came up in appeal before the Tribunal. 6. At the time of hearing of this case, strong reliance was placed on behalf of the assessee on the decision of the Tribunal in the case of Salem Unit. The Bench there which heard the appeal was of a different opinion. The Bench took the view that it is open to the ITO not to levy interest if there were good a....
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....ice, the assessee filed a revised return and paid sales tax on freight charges also. Since the amount of tax due in respect of the freight charges was not paid within the period allowed, in addition to levying penalty for non-payment of tax, interest also was levied. Section 11B of the Rajasthan Sales Tax Act provided that if the amount of any tax payable under sub-sections (2) and (2A) or section 7 is not paid within the period allowed, simple interest on such amount at one per cent per month, from the day commencing after the end of the said period, for a period or three months and at one and a half per cent per month thereafter, during the time he continues to make default in the payments shall be leviable. The Sales Tax Officer levied interest by invoking this section. The Supreme Court found that there was no justification for the levy of penalty because the assessee bona fide believed that no sales tax was payable in respect of the freight and that bona fide belief was held to be a reasonable cause and as a consequence, the penalty was cancelled. But, in so far as the levy of interest was concerned, by majority of the Supreme Court held that interest was leviable under sectio....
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....en bargaining for by taking recourse to the appeal procedure was to establish a point that the ITO must before levying the interest, give the assessee an opportunity of being heard and in that opportunity the assessee could put forward his difficulties, which prevented it from deducting the tax or paying it to the Government after deduction. For this purpose, analogy was taken from section 201 which clearly provided that an opportunity must be given to the assessee. The clue or strength, whatever may be called, for that argument is taken from section 201(1). Assuming that the assessee is right, the facts of this case clearly show that the ITO did give an opportunity to the assessee on 2-12-1975, and the assessee did reply to it on 11-12-1975 and it was after considering the reply given by the assessee that interest had been levied. That shows that department was not convinced of the reasons given by the assessee. The assessee did not dispute the fact that it had deducted the tax from the payments made to the contractors. It is also not disputed that those payments have been made to the Government after considerable delay. When the assessee deducted tax from the payments made to the....
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....between the Bench that decided the assessee's case in the earlier year and the Calcutta Bench, was on this point. The Calcutta Bench held that once it is established that the assessee is in default, levy of interest is automatic. All it pointed out was that section 201(1A) did not provide for any particular formula or procedure or method before passing an order under sub-section (1A) of section 201. The Bench pointed out that the only prerequisite was that the assessee must have committed a default cognisable under section 194C. Once such a default was there, the levy of interest is unavoidable and consequential. Therefore, even according to the view expressed by the Calcutta Bench, the condition precedent for the levy of interest was that the assessee must be deemed to be an assessee in default. Once there is commission of the default, levy of interest is automatic. Therefore, it is open to an assessee, even according to this view, to agitate that such an offence had not been committed. Since the offence spoken of in section 201(1A) consists of two ingredients, namely, failure to deduct tax or failure to pay the tax after deduction, either one of them can be explained. Since an ex....
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.... an assessee in default, it follows, therefore, that the assessee has to be given an opportunity of being heard before the levy of interest. The levy of interest without giving an opportunity of being heard in such circumstances, may amount to violation of the principles of natural justice which are written into the section though not in section 201(1A) specifically. That was perhaps the reason why section 201(1A) opened with the words 'without prejudice to the provisions of sub-section (1)', which mean, in our opinion, without prejudice to the provisions of sub-section (1), since sub-section (1) provided for the levy of penalty after giving the assessee an opportunity of being heard. These words, in our opinion, would only mean that the interest can also be levied in addition to the penalty and not in substitution thereof and there is nothing limiting the assessee's right to have an opportunity of explaining the circumstances under which the ingredients referred to in sub-section (1A) are not present or did not exist. 14. The scope of section 201 is to enact a three-fold punishment for a person bound to deduct tax at source and defaulting to so deduct tax or, after having deducte....