TaxTMI 
TaxTMI 
1999 (9) TMI 13
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....ssessee, Gujarat Narmada Valley Fertilizers Company Limited ("company" for short) filed its annual returns under section 206 of the Act for the financial Year 1995-96 on May 24, 1996. A survey was carried out at the premises of the assessee-company on July 19, 1996, by the Income-tax Officer (ITO) (TDS). As a result of the survey, the Income-tax Officer found that certain payments were made to the employees on which tax was not deducted at source though in accordance with the provisions of the Act, it was to be deducted. The employer, therefore, was liable to be dealt with under section 201 inasmuch as the assessee can be said to be a "deemed defaulter" as he had not deducted the tax at source. Details regarding payments which were made by the employer to the employees were as follows : -------------------------------------------------------------------------------- Period Particulars Rate Amount &....
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.... 2 years. -------------------------------------------------------------------------------- The Income-tax Officer (TDS), Baroda, vide big order dated March 14, 1997, held that the payments were made without reimbursement and accounting and, hence, the provisions of section 192 of the Act would be applicable. Considering the relevant items, the Income-tax Officer found that there was violation by the employer of the provisions of the Act and since tax was not deducted at source, the assessee was liable to be dealt with according to law. In view of the said finding, he observed as under : "It is, therefore, held that the assessee-company is an assessee deemed to be in default within the meaning of section 201(1) read with section 192 of the Income-tax Act in respect of tax of Rs. 2,36,45,731." He also passed the order under section 201(1A), wherein it was stated. : "Since the assessee has been held as an assessee in default in respect of an amount of Rs. 2,36,45,731, this default of the....
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....e conclusion that the payments were made to the employees as a remuneration but in the garb of reimbursement. As far as medical allow ance is concerned, the reasoning given by the Income-tax Officer in his order is correct and is accordingly upheld. For the reasons and the legal provisions discussed above, the finding of the Income-tax Officer in respect of reimbursement of conveyance expenses, gardening allowance, library allowance, safari allowance, canteen subsidy allowance and birth day gifts are held to be proper and confirmed. 6. The second appeal, is in respect of charging of interest under section 201(1A) of the Income-tax Act, amounting to Rs. 51,72,501. The appellant's case was that as the appellant was in appeal against the order under section 201(1) of the Income-tax Act, there was no question of charging any interest, It was also argued that no opportunity was granted by the Asses sing Officer while charging the interest. It was also stated that as the payments in respect of which short deduction has been worked out is not chargeable to income-tax, no interest should be levied. It was further argued that there was no monthly default and that if there is a charge of ....
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.... an assessee deemed to be in default under section 201(1)". Accordingly, the Tribunal quashed the order passed by the Income-tax Officer as also by the appellate authority. The Tribunal also observed that since the order passed under section 201 was liable to be set aside, it was not necessary to adjudicate on the merits regarding taxability or otherwise of the amounts which were received by the employees. Various contentions were raised before us by learned counsel for the Revenue. It was submitted that the Tribunal has committed an error of law apparent on the face of the record in not properly construing the provisions of sections 192, 200 and 201 read with sections 15, 16 and 17 of the Act. According to learned counsel, the provisions of section 201 are in two parts. The first part relates to default on the part of the employer. Under that part, only failure can be taken into consideration, viz., whether there is violation on the part of the employer in not deducting the amount. As soon as the fact situation comes into existence, the provision would operate notwithstanding the presence or absence of intention of the employer. The legislative intent is clear that the emplo....
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.... in which the said fact is reflected. In the order of the Tribunal, it was observed that notices were issued by the Department in the past, but they were not pursued further. It is observed that the assessee was regularly deducting tax from the payment of salary to the employees. For the first time, on September 24, 1993, the Assessing Officer issued notice for the financial year 1992-93 asking the assessee to show cause as to why he should not be charged with interest under section 201(1A) of approximately Rs. 3,50,000. The proceedings were, however, subsequently not pursued further. The Tribunal noted that in these circumstances, it was presumed by the assessee that the proceedings were dropped. Again, in 1993-94, notice was issued on May 16, 1994, and on an explanation being furnished by the assessee, the proceedings were not continued. It was, therefore, submitted that it could not be said that the Tribunal had committed an error of law which can be said to raise a "substantial question of law" under section 260A. If, according to the Tribunal, there was a bona fide belief on the part of the assessee in forming an opinion that the amounts which had been paid to the employees we....