TMI Blog2019 (3) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... demonstrate any such failure on the part of the assessee. Only on this ground, the impugned notice needs to be set aside. Also the impugned notice cannot be sustained. During the scrutiny assessment, this issue had came up for discussion before the Assessing Officer as can be gathered from documents on record. In a communication dated 14th January, 2014, assessee had supplied several details as called for by the Assessing Officer. In said letter, while justifying the claim for allowing the deduction for interests on late deposit of TDS, the assessee had asserted this amount is compensatory in nature and not penal in nature and accordingly is not covered by Explanation to section 37(1). Further, this amount is not in the nature of tax le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out making any change in the returned income. In such returns, the assessee had claimed a deduction of an amount of ₹ 10,00,948/being interest paid under Section 201 (1A) of the Income Tax Act, 1961 (in short the Act ), for delay in payment of tax deducted at source. Such claim was disclosed by the assessee by way of a note in the tax audit report, furnished in prescribed format. In such note, the assessee had stated as under: The amount of ₹ 1,000,948/has been debited to Profit Loss A/c as interest paid u/s. 201(1A). The management is of the opinion, that since this is not in the nature of tax and also of compensatory nature, the same is not covered under section 40(a)(ii)/explanation u/s. 37(1). (b) The return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 37(1). On perusal of Computation of Income it is observed that the assessee did not suo moto disallow the said interest. Interest paid u/s. 201(1A) cannot assume the character of business expenditure and is not allowable as deduction as the liability to pay interest is directly related to the failure to deduct or remit the tax deducted at source as held by the Hon'ble Madras High Court in the case of Chennai Properties 239 ITR 435 (Mad.). The jurisdictional Bombay High Court in the case of Ferro Alloys Corporation Ltd. v/s. CIT 196 ITR 406 (Bom.) it has been held that the said interest payment is not allowable u/s. 37 of the Act. The Hon'ble Apex Court decision in the case of Bharat Commerce Industries Ltd., 230 ITR 73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justifying the same. Thus, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the reasons recorded, the Assessing Officer had neither alleged nor such reasons in any other manner demonstrate any such failure on the part of the assessee. Only on this ground, the impugned notice needs to be set aside. 6. There is one more reason why the impugned notice cannot be sustained. During the scrutiny assessment, this issue had came up for discussion before the Assessing Officer as can be gathered from documents on record. In a communication dated 14th January, 2014, assessee had supplied several details as called for by the Assessing Officer. In said letter, while justif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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