2019 (3) TMI 589

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....ability Partnership. For the Assessment Year 2011-12, the Petitioner had filed return of income on 30th September, 2011, declaring income of Rs. 7.78 Crores (rounded of). Return was revised on 23rd March, 2013, without making any change in the returned income. In such returns, the assessee had claimed a deduction of an amount of Rs. 10,00,948/being interest paid under Section 201 (1A) of the Income Tax Act, 1961 (in short "the Act"), for delay in payment of tax deducted at source. Such claim was disclosed by the assessee by way of a note in the tax audit report, furnished in prescribed format. In such note, the assessee had stated as under:  "The amount of Rs. 1,000,948/has been debited to Profit & Loss A/c as interest paid u/....

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....s interest paid u/s. 201(1A). The management is of the opinion that since this is not in the nature of tax and also of compensatory nature, the same is not covered u/s. 40(a)(iii)/ explanation u/s. 37(1). On perusal of Computation of Income it is observed that the assessee did not suo moto disallow the said interest. Interest paid u/s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction as the liability to pay interest is directly related to the failure to deduct or remit the tax deducted at source as held by the Hon'ble Madras High Court in the case of Chennai Properties 239 ITR 435 (Mad.). The jurisdictional Bombay High Court in the case of Ferro Alloys Corporation Ltd. v/s. CIT 196 I....

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....ed in order to enable the Assessing Officer to issue notice of reassessment. In the present case, we have recorded that, the assessee had raised the claim and also put-forth the grounds for justifying the same. Thus, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the reasons recorded, the Assessing Officer had neither alleged nor such reasons in any other manner demonstrate any such failure on the part of the assessee. Only on this ground, the impugned notice needs to be set aside. 6. There is one more reason why the impugned notice cannot be sustained. During the scrutiny assessment, this issue had came up for discussion before the Assessing Officer as can ....