TMI Blog1992 (5) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... son given by the assessee company to the Assessing Officer was that it faced stringent financial problems on account of several reasons which were beyond its control. The ITO treated the assessee company as in default and charged interest under section 201(1A) amounting to Rs. 9,00,253. Being aggrieved against the order passed by the ITO under section 201(1A) the assessee company preferred appeals before the CIT (Appeals) who deleted the interest on the ground that since the proceedings for recovery of tax deducted at source were barred by limitation under section 231 of the Income-tax Act interest under section 201(1A) was not leviable at all on the company. It is against this finding of the CIT (Appeals) that the present appeals lie befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company faced stringent financial crisis for the reasons beyond its control due to which the failure occurred in depositing within time the tax deducted at source from the employees' salaries to the credit of the Central Government. The Assessing Officer ought to have considered this fact and not charged any interest under section 201(1A) particularly when though the assessee company has been treated as in default and no penalty having been levied under section 221 of the Income-tax Act. This goes to support the case of the assessee company that the Assessing Officer was satisfied about reasonable cause for failure to deposit the TDS. Under such circumstances the Assessing Officer not having levied any penalty also should not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleting the interest charged by the Assessing Officer under section 201(1A). We are not at all impressed by the argument of the assessee's counsel that if there is a reasonable cause no interest can be charged under section 201(1A) on the analogy that no penalty is leviable under section 221 if there is a reasonable cause. Penalty and interest operate in different fields. Penalty is levied for violation of the provisions of law and is quasi-criminal in nature whereas interest is an amount payable as compensation for use of moneys of the Government beyond a stipulated time. There is an element of mens rea involved for being penalised for a default or a failure whereas the element of mens rea does not come into play or operation for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deemed to be in default then the recovery of the tax due, may be made as per the procedure laid down under the provisions of the Income-tax Act, 1961 unless prohibited the recovery of Government dues can also be made by another mode or procedure under any other enactment or statute. 5. If we look at section 222 of the Income-tax Act it says that when an assessee is in default or is deemed to be in default in making payment of tax the ITO may forward to the TRO a certificate under his signature specifying the amount of arrears due from the assessee and the TRO on receipt of such certificate shall proceed to recover, from such defaulting assessee the amounts specified, in accordance with rules laid down in Second Schedule appended to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case may be, to have recourse to any such law or suit, notwithstanding that the tax due is being recovered from the assessee by any mode specified in this Chapter. " By reading the provision of section 231 it is clear that the period of limitation laid down is confined to recovery proceedings under the Act but in our view this provision of limitation, cannot curtail the power of the Government to file a suit to recover the outstanding amount of tax payable by any other process of law. Like any other debt due to the Government the outstanding amount of tax can be recovered by filing a suit subject to the provisions of the Limitation Act. The Supreme Court had an occasion to considers similar issue in the case of Raja Jagadish Pratap S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er an assessment is made upon the assessee quantifying the tax due from him and a demand for the payment thereof is issued within the period specified therein, it creates a debt payable by the assessee in favour of the State. It is well-established that once a debt is created, the State has the right to recover it by any of the modes open to it under the general law, unless as a matter of policy only a specific mode to the exclusion of any other is prescribed by the law. No such prohibition is enacted in section 32 of the Act. " Therefore, the consequences of the company being an assessee in default will follow, that is to say the provision of sub-section (1A) of section 201 becomes applicable and get in motion. The assessing company bein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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