TaxTMI 
TaxTMI 
2014 (6) TMI 672
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....her. As a matter of convenience, therefore, all these appeals are being disposed of together by way of this consolidated order. 2. To adjudicate on these appeals, only a few material facts need to be taken note of. The assessee before us is branch of a nationalized bank, and it was subjected to a survey, for examining compliance with tax withholding obligations, by the income tax authorities. During the course of this survey, it was noticed that the assessee has not complied with tax deduction at source obligations inasmuch as taxes were not properly withheld in respect of interest on certain deposits placed by the customers with the assessee. It was in this backdrop that the demands under section 201(1), in respect of non deduction of t....
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....nbsp; ...........it is clear that deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly. In the present case, the Income tax authorities had not adverted to the Explanation to Section 191 nor had applied their mind as to whether the assessee has also failed to pay such tax directly. Thus, to declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that assessee has also failed to pay tax directly. The fact that assessee has failed to pay tax directly is thus, foundational and jurisdictional fact and only after finding that assessee has failed to pay tax directly, deductor can be deemed to be an assessee in default in respe....
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....hether or not the taxes have been paid by the recipient of income. This approach, in our humble understanding, is in consonance with the law la id down by Hon'ble Allahabad High Court. 7. It is also important to bear in mind that the lapse on account of non-deduction of tax at source is to be visited with three different consequences - penal provisions, interest provisions and recovery provisions. The penal provisions in respect of such a lapse are set out in Section 271 C. So far as penal provisions are concerned, the penalty is for lapse on the part of the assessee and it has nothing to do with whether or not the taxes were ultimately recovered through other means. The provisions regarding interest in delay in depositing the taxes ....
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..... It does put an additional burden on the Assessing Officer before he can invoke Section 201(1) but that' show Hon'ble High Court has visualized the scheme of Act and that's how, therefore, it meets the ends of justice. 8. As far as levy of interest under sect ion 201(1A) is concerned, this interest is admittedly a compensatory interest in nature and it seeks to compensate the revenue for delay in realization of taxes. Hon'ble Bombay High Court, in the case of Bennett Coleman & Co Ltd. v. ITO (157 ITR 812) has held so. Therefore, levy of interest under section 201(1A) is applicable whether or not the assessee was at fault. 9. However, since it is only compensatory in nature it is applicable for the period of the date o....