TMI Blog1998 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... nker, the interest incurred by the principal for the period beyond the period of credit, is also a further sum equal to 3 1/2 per cent. of the amount in arrears. The assessee had made such payment of the principal through the banker. The assessee, however, failed to deduct the tax on the amount of interest and the amount described as penalty which amount was paid along with interest through its banker. Such payments were made during the years 1981-82, 1982-83, 1983-84 and 1984-85. The Assessing Officer, in the year, 1985 on November 29, 1985, raised the demand on the assessee for the payment of the amount of tax which, according to the Revenue, should have been deducted from the amount paid as interest and penalty to the principal. He tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is one of law, and the facts necessary for raising the same are already on record and not in dispute. The assessment years for which demand had been raised are 1981-82 to 1984-85. The date of demand was on November 29, 1985. Section 231 of the Act, as it stood at the relevant time, prescribed a period of limitation of one year for commencing recovery proceedings against a person, who is deemed to be an assessee in default under any of the provisions of the Act, that period of one year to be computed from the end of the financial year in which the assessee is deemed to be in default. The financial years in which the assessee was required to deduct the tax and make payment are the years immediately preceding the financial year ended on Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of collection of the amount and that did not constitute a payment exempting deduction of tax at source under section 194A of the Act. Thus, though the assessee was required to deduct the tax and has failed to do so and in the normal circumstances, was a person who was liable to be treated as an assessee in default, as the Assessing Officer has failed to treat him as an assessee in default, by passing an appropriate order under section 201 of the Act, and the proceedings for recovery had not been initiated until November 29, 1985, long after one year from the end of the financial year in which the assessee was required to deduct the tax, the proceedings must be held to be illegal. The impugned order of the Commissioner as also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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