TMI Blog2003 (2) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... le sum as income tax from the salary of its employees in the initial months of the year and deducted very high amounts of tax in the last few months. Therefore, the Assessing Officer was of the view that the assessee had failed to deduct correct amount of tax from the salary of the employees. Accordingly, a show cause notice was issued to the assessee but in the absence of any reply, the Assessing Officer presumed that the assessee failed to deduct correct tax in each month as required under section 192(1) of the Income-tax Act, 1961. Accordingly he levied a simple interest at 15% per annum on the amount of such tax from the date on which tax was deductible to the date on which the tax was actually paid, as detailed in the annexure to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs etc. but insist upon the employer not to deduct higher tax in the initial months with a promise that the information would be furnished before 31st December of every year. Therefore, the assessee has reasonably estimated the income and deducted tax from the salary in the initial months and shortfall/deficiency, if any, was adjusted in the later months, which is permissible under section 192(3) of the Income-tax Act, 1961. It was thus contended that penalty is not leviable for mere short deduction in the case of salary payments, interest is chargeable only when there is a total failure to deduct the tax, which is not the case here. It was also contended that before the end of the year the shortfall, if any, was adjusted and the correct a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employer would be liable to deduct Rs. 5,000 towards tax every month as against Rs. 2,500 deducted earlier. Neither the assessee nor the employer could have anticipated this position in the month of April. The only recourse is to deduct higher tax from the month of December onwards so as to cover up the deficiency. Under these circumstances, can it be said that the employer is a defaulter and failed to deduct the tax, so as to charge interest at the rate of 15% on the alleged short deduction, i.e., Rs. 2,500 per month? In our considered opinion, that could not have been the intention of the Legislature. To meet such eventualities sub-section (3) provides for adjustment of excess or deficiency arising out of any previous months or failure t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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