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TMI Blog2011 (12) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 653/2005 is in respect of American Express Bank Limited. All the three appeals pertain to the financial year 1992-93. ITA No.74/2003 arises out of an order under Section 201 of the Income Tax Act, 1961 (hereinafter referred to as the said Act) whereby the respondent has been held to be an 'assessee in default‟ on account of short deduction and short payment of the taxes which ought to have been deducted at source in respect of reimbursements made to its employees on account of watchmen, gardeners, sweepers, etc., engaged by the employees of the assessee, out of their own funds. The said appeals also pertain to the reimbursement of travel expenses of the employees of the assessee company on account of their travel to and fro their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be deducted and, therefore, it had good cause and sufficient reason not to deduct the said amounts. 3. The substantial questions of law which arise for our consideration are:- "1. Whether the Income Tax Appellate Tribunal, despite having come to the conclusion that the assesse had under a bona fide belief not deducted/not paid the tax at source in respect of the reimbursements for the heads of expenses mentioned above, was right in holding that the assessee could not be treated as an assessee in default for the purposes of Section 201 of the Income Tax Act, 1961. 2. Whether the Income Tax Appellate Tribunal was correct in law in holding that no interest under Section 201 (1A) in the facts and circumstances of the present case, was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax is actually paid. xxxx xxxx xxxx xxxx" 6. Section 221 of the said Act which also falls in the same Chapter XVII - 'Collection and Recovery' and which deals with penalty payable when tax is in default, to the extent relevant, is reproduced hereinbelow:- "Section 221- Penalty payable when tax in default (1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as the Assessing Officer may direct, and in case of a continuing default such further amount or the amounts as the Assessing Officer may, from time to time, direct, so, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sister concern of the assessee, but we find that in the case of another sister concern, namely, the American Express Bank Ltd, the Bombay Bench of the Tribunal has considered this issue. Vide its order dated 03.12.96, in ITA No.3202/Bom/90, the Tribunal has held that the estimation of the income by the assessee was bona fide and, therefore, it could not held in default, even if ultimately it is found that the employees were liable to more tax than deducted by the assessee. Both the appeals directed by the assessee are therefore allowed." (underlining added) 8. From the above conclusions of the Income Tax Appellate Tribunal, it is apparent that as a finding of fact, the Tribunal came to the conclusion that the assessee had acted honestly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question of penalty. It would not absolve the assessee insofar as his being considered as an assessee in default for the purposes of Section 201(1) of the said Act. Therefore, this finding of the Tribunal is set aside. Consequently, question no.1 is decided in favour of the Revenue and against the assessee. 10. Insofar as the second question is concerned i.e., with regard to the interest payable under Section 201(1A) of the said Act, that is a mandatory provision, as already held by a Division Bench of this Court in the case of CIT v. ITC Limited, ITA No.475/2010, dated 11.05.2011. The said Division Bench observed as under:- "xxxx xxxx xxxx xxxx However, levy of interest under section 201(1A) is neither treated as penalty nor has the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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