TMI Blog2013 (6) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... same. The provisions to make good the shortfall in collection of taxes may thus end up being invoked even when there is no shortfall in fact. On the other hand, once assessee furnishes the requisite basic information, the Assessing Officer can very well ascertain the related facts about payment of taxes on income of the recipient directly from the recipients of income. It is not the revenue’s case before us that, on the facts of this case, such an exercise by the Assessing Officer is not possible. It does put an additional burden on the Assessing Officer before he can invoke Section 201(1). As far as levy of interest under section 201(1A) is concerned, this interest is admittedly a compensatory interest in nature and it seeks to compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in law in holding the appellant liable for not deducting tax at sourced while making payment of interest to Indian of Management, Lucknow. 2. On the facts and circumstances of the case and in law, the Ld. Lower Authorities erred on facts and in law in holding the appellant liable for not deducting tax at source while making payment of interest to Indian Institute of Management, Lucknow which had been conferred exemption u/s 10 (23C) (iv) of the Income Tax Act, 1961 read with rule 2C of the Income Tax Rules, 1962 by the Hon'ble Chief Commissioner of Income Tax, Lucknow. 2. None appeared for the assessee but learned Departmental Representative points out that the aforesaid issues are squarely covered against the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 194A of the Act as well as interest liability of the assessee. Since the ld. CIT(A) has properly adjudicated the issue in the light of the relevant provisions of the Act and we find no infirmity therein, we confirm the same. 4. The matter was originally taken as heard as covered by the aforesaid decision of the Tribunal in assessee s own case. However, during the course of finalizing the order, it was noticed that while there is indeed a case of short deduction of tax at source, the attention of the bench was not invited to the fact that a mere non deduction of tax at source or short deduction of tax at source, by itself, does not lead to a valid demand under section 201(1) and 201(1A). It is so for the reason that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted an assessee in default till it is found that assessee has also failed to pay such tax directly. In the present case, the Income tax authorities had not adverted to the Explanation to Section 191 nor had applied their mind as to whether the assessee has also failed to pay such tax directly. Thus, to declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that assessee has also failed to pay tax directly. The fact that assessee has failed to pay tax directly is thus, foundational and jurisdictional fact and only after finding that assessee has failed to pay tax directly, deductor can be deemed to be an assessee in default in respect of such tax .. 7. It is thus clear that the onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This approach, in our humble understanding, is in consonance with the law laid down by Hon ble Allahabad High Court. 8. It is also important to bear in mind that the lapse on account of non deduction of tax at source is to be visited with three different consequences penal provisions, interest provisions and recovery provisions. The penal provisions in respect of such a lapse are set out in Section 271 C. So far as penal provisions are concerned, the penalty is for lapse on the part of the assessee and it has nothing to do with whether or not the taxes were ultimately recovered through other means. The provisions regarding interest in delay in depositing the taxes are set out in Section 201(1A). These provisions provide that for any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that s how, therefore, it meets the end of justice. 9. As far as levy of interest under section 201(1A) is concerned, this interest is admittedly a compensatory interest in nature and it seeks to compensate the revenue for delay in realization of taxes. Hon ble Bombay High Court, in the case of Bennett Coleman Co Ltd Vs ITO (157 ITR 812) has held so. Therefore, levy of interest under section 201(1A) is applicable whether or not the assessee was at fault. However, since it is only compensatory in nature it is applicable for the period of the date on which tax was required to be deducted till the date when tax was eventually paid. However, in a case in which the recipient of income had no tax liability embedded in such payments, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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