TMI Blog2011 (7) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes. - IT APPEAL NO. 420 (AHD.) OF 2011 - - - Dated:- 8-7-2011 - BHAVNESH SAINI, D.C. AGRAWAL, JJ. H.K. Lal for the Respondent. ORDER D.C. Agrawal, Accountant Member. This is an appeal filed by the assessee raising following ground :- (1) The ld. CIT(A) has erred in law and facts in confirming the interest of Rs. 22460/- levied under section 201(1A) on the ground that the appellant has failed to deduct and pay tax at average rate during each month on estimated income of its employees. 2. Thus the only issue involved in the appeal is about charging of interest of Rs. 22,460/- u/s 201(1A). 3. The AO had passed order u/s 201(1A) by noticing on scrutiny of the annual return of TDS in Form No.24 that deduction of taxes at source from the payment of salary to the employees were made late. The assessee was treated to be in default u/s 201(1). A show-cause notice to the assessee was issued but no reply was received and accordingly he had charged interest u/s 201(1A) at Rs. 22,460/-. 4. The ld. CIT(A) confirmed the charging of interest by observing as under :- "4.3 I have carefully considered the facts of the case, the submissions of the appellant. The m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances and special incentives received by the employees and the like from time to time. Hence the provisions of section 192(2) will squarely apply to the facts of the assessee's case. In the instant case there is no dispute that the tax was deducted from the salary of employees whose income was liable to be taxed every month it was paid to the credit of the Central Government and the shortfall, if any, was made good and paid to the credit of the Central Government within the financial year. Hence in view of the expressed provisions of section 192(3) there is no justification for charging of interest under section 201(1A)." The assessee further referred to the decision of the Tribunal, Jaipur Bench in the case of Secretary, Board of Secondary Education v. ITO [2005] 93 TTJ 256 wherein it has been held that interest u/s 201(1A) cannot be charged on account of unequal deduction of tax u/s 192 in different months once the person responsible for deduction of tax has made good the deficiency before close of the Financial Year. Similar view was taken by ITAT Delhi Bench in the case of ITO v. Asian Hotels Ltd. [1991] 41 TTJ 28/11 taxmann.com 320. 6. On the other hand, the ld. DR submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct tax in accordance with the provisions of the Act. Thus where assessee, as an employer, is required as per section 192, to deduct the tax from the payment of salary but fails to do so, then he would be an assessee in default. For such default assessee is liable to be charged with penalty u/s 201(1) and also interest u/s 201(1A). Penalty u/s 201(1) may not be charged if after giving an opportunity of being heard to the assessee AO finds that there are good and sufficient reasons for not deducting the tax as per section 192. However, charging of interest u/s 201(1A) is mandatory as the word used therein is "shall". The meaning and effect of the word "shall" used in section 201(1A) is the same as the use of the word "shall" in section 234A, 234B 234C. It has been held by Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1/119 Taxman 352 that charging of interest u/s 234A,234B 234C is mandatory. Similar view has to be held in respect of charging of interest u/s 201(1A) when similar words are used in this section also. Hon'ble Karnataka High Court in the case of Urban Infrastructure Development Finance Corpn. v. CIT [2009] 308 ITR 297 held that if ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(2)" in section 143(1) means that the right of the AO to proceed u/s 143(2) despite intimation to the assessee of the sum payable as tax or interest is preserved and not taken away. From these interpretations it follows that whether action u/s 201(1) is taken or not taken action u/s 201(1A) can be taken independently, either in addition to, or separately. The powers conferred under two sub-sections are, therefore, independent and can be exercised by the AO simultaneously together, or independent of each other, or one after another. Therefore, for the purpose of charging of interest u/s 201(1A) it is not necessary that AO should have first taken the recourse to section 201(1) meaning thereby that assessee should have been first declared as assessee in default and only thereafter penalty u/s 201(1) or interest u/s 201(1A) can be levied. Declaring assessee in default is a condition precedent for levy of penalty u/s 201(1) but because of use of the expression "without prejudice to the provisions of sub-section (1)" in sub-section (1A) makes it clear that condition laid down for levy of penalty u/s 201(1) cannot be necessarily brought into play for charging interest u/s 201(1A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r - (1) to increase or reduce the amount of deduction of tax u/s 192, sub-section (1), sub-section (1A), sub-section (2), sub-section (2A), sub-section 2B) thereof; (2) the purpose of such increase or reduction is to adjust an excess or deficiency in any previous deduction; (3) the purpose of increase or reduction is also to adjust failure to deduct during the Financial Year. In other words if tax is not regularly deducted as per sub-section (1) at the average rate of income-tax computed on the basis of rates in force in the Financial Year then section 192(3) would enable the employer to make good the deficiency. Similarly a failure to deduct during any month of the Financial Year can be made good in next deduction. Therefore in the same way as excess or deficiency arising out of a previous deduction is made good then failure to deduct from any earlier payment can also be made good by increasing the deduction from the next payment. Therefore, it may not be necessary to apply exact expression used in sub-section (1) to find out whether assessee was in default or not. If there were bona fide reasons in deducting a lesser tax during the earlier months of Financial Year and is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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