AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (7) TMI 635
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....irmed the charging of interest by observing as under :- "4.3 I have carefully considered the facts of the case, the submissions of the appellant. The matter before me relates to interest demand of Rs. 22,460/- u/s 201(1A). The various pleas raised by the appellant are pertinent to demand raised u/s 201(1) for which separate appeal lies and are thus not relevant for the present appeal. In regard to the interest u/s 201(1A) it has been held in many court decisions like Bennet Coleman & Co. Ltd. v. V.P. Damle, Third ITO [1986] 157 ITR 812 (Bom.), CIT v. Dhanalakshmy Weaving Works [2000] 245 ITR 13 (Ker), CIT v. K.K. Engg. Co. [2001] 116 Taxman 390 (Ker), CIT v. Assam Small Industries Development Corporation [1996] 219 ITR 324, CIT v. Prem Nath Motors (P) Ltd. [2002] 120 Taxman 584 (Delhi) that the interest u/s 201(1A) is compensatory and mandatory in nature. Thus the AO is justified in levying interest u/s 201(1A) of the Act. Ground is dismissed." 5. In the written submission the assessee submitted that it had deducted TDS on the projected salary of each month. Such projections were made on the basis of salary of the immediately preceding month. The payments of overtime which were a....
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....was taken by ITAT Delhi Bench in the case of ITO v. Asian Hotels Ltd. [1991] 41 TTJ 28/11 taxmann.com 320. 6. On the other hand, the ld. DR submitted that assessee has not deducted the tax in accordance with the provisions of the Act. He had made short deduction from salary payment but had made lump sum deduction at the end of the year. Such lump sum deduction at the end of the year making good the deficiency in earlier months cannot be said to be deductions in accordance with the provisions of the Act and, therefore, the assessee is in default and, therefore, it is liable for interest u/s 201(1A). 7. We have considered the rival submissions and perused the material on record. The undisputed facts are that assessee has not deducted the tax regularly from the payments of salary at the average rate during each month on estimated income of the employees and it has finally made good the deficiency in the deduction by deducting the balance at the end of the Financial Year. The question is whether assessee is liable for interest u/s 201(1A). In this regard we refer to sections 201(1) and 201(1A) as under:- Sections 201-[(1) Where any person, including the principal officer of a compan....
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....his section also. Hon'ble Karnataka High Court in the case of Urban Infrastructure Development Finance Corpn. v. CIT [2009] 308 ITR 297 held that if tax is not deducted u/s 195 of the Act, the assessee is bound to pay interest as section 201(1A) is mandatory provision. The AO has a discretion to drop the penalty proceedings u/s 201(1) but assessee cannot escape the liability to pay the interest u/s 201(1A). Both the sections 201(1) and 201(1A) are independent and they are not interlinked. They cannot be read conjunctively as levy of interest and levy of penalty are two different proceedings. Hon'ble Calcutta High Court in the case of West Bengal State Electricity Board v. Dy. CIT [2005] 278 ITR 218/147 Taxman 234 held that scheme of sub-section (1A) of section 201 does not leave of any scope of ambiguity and makes it clear that an assessee in default is liable to pay simple interest for the period stipulated in sub-section (1A). The interest payable under section 201(1A) is mandatory and can neither be waived nor can the rate be reduced. However, principles of natural justice have to be read in the provision, meaning thereby that assessee is given an opportunity of being heard befo....
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....n (1A) makes it clear that condition laid down for levy of penalty u/s 201(1) cannot be necessarily brought into play for charging interest u/s 201(1A). In other words the AO has only to see whether the conditions laid down u/s 201(1A) are satisfied. If they are so, he can charge interest u/s 201(1A) irrespective of whether assessee has been declared as in default or penalty u/s 201 has been levied on him. The conditions laid down for charging interest u/s 201(1A) are - (1) The payer does not deduct the whole or any part of the tax; (2) Or, after deducting, fails to pay the tax as required by, or under the Act; On the other hand, conditions laid down u/s 201(1) for levy of penalty are that - (1) Payer does not deduct tax in accordance with the provisions of the Act; or (2) Assessee being an employer does not deduct or does not pay or after deducting fails to pay whole or part of the tax. 9. Thus in our considered view conditions laid down for levy of penalty and charging of interest are different. Assessee would be liable for penalty if tax is not deducted in accordance with the provisions of the Act but interest could be charged only when payer does not deduct whole or any p....
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....essee was in default or not. If there were bona fide reasons in deducting a lesser tax during the earlier months of Financial Year and is made good immediately after noticing such shortfall, then section 192(3) would save the employer from liability of making payment of interest. Therefore, in our considered view what is required to be seen by the AO in respect of short deduction, or failure of deduction of tax by the employer u/s 192(1) is that whether, while making the payment of salary to the employee, there was a bona fide belief in making the lesser deduction in a particular month and it was made good immediately after noticing the deficiency. If there is a finding by the AO that employer has taken the deduction casually during the earlier months of the Financial Year, by not deducting the tax correctly as required u/s 192(1), but had resorted to lump sum deduction of tax at the end of the Financial Year, then one can infer that employer has not deducted the whole or any part of the tax as required by or under the Act; being the condition to be satisfied before charging interest u/s 201(1A). Accordingly the AO has to see what was the deficiency in different months from deducti....