2001 (5) TMI 815 - AT - Income Tax

Summary

Issues:
Appeal against order dated 13-7-1996 for assessment year 1995-96; Department's grounds under sections 201(1) and 201(1A) of the Act; Cross objection regarding merit of appeal and verification of Form No. 15H; Levying interest and tax for non-deduction of tax at source on interest payments; Validity of Form No. 15H filing; Jurisdiction of ITO; Humanitarian grounds consideration.

Analysis:
The appeal before the Appellate Tribunal ITAT Cuttack involved a dispute arising from an order dated 13-7-1996 for the assessment year 1995-96. The Department's appeal challenged the setting aside of orders under sections 201(1) and 201(1A) of the Act by the DCIT(A), Cuttack, while the assessee filed a Cross objection against the appeal. The Department contended that tax was deductible on interest payments of Rs. 1,63,701 made by a firm, and the ITO treated the assessee as a defaulter for non-deduction of tax at source. The Department argued that Form No. 15H was either not filed or invalid, making the non-deduction a violation of section 194A, leading to the application of sections 201(1), 201(1A), and 201(2) of the Income-tax Act. The Department justified the demand of TDS and interest under section 201. However, the assessee's representative argued that the ITO lacked jurisdiction to levy tax and interest under section 201/201(1A) for non-filing or delayed filing of Form 15H. The representative highlighted the health condition of the managing partner suffering from brain cancer.

The Tribunal considered the legal arguments presented by both parties and concluded that the ITO should have shown leniency on humanitarian grounds, especially considering the managing partner's health condition. The Tribunal found that the ITO had exceeded his authority and jurisdiction by passing orders under section 201/201(1A), deeming it as an act of over-enthusiasm. Consequently, the departmental appeal was dismissed, and the cross-objection filed by the assessee was upheld. The Tribunal's decision was based on the lack of authority of the ITO to pass such orders and the exceptional circumstances surrounding the case, emphasizing the importance of considering humanitarian aspects in tax matters.