2009 (12) TMI 715 - AT - Income Tax

Summary

Issues:
1. Liability for failure to deposit tax deducted at source.
2. Contention regarding refund adjustment and interest liability.
3. Claim of not being treated as an assessee in default under section 201.
4. Validity of interest levy under section 201(1A).

Analysis:

1. The issue at hand revolves around the liability of the assessee for failing to deposit tax deducted at source (TDS) into the Government account. The inspection revealed that despite deducting TDS under different heads, the amount was not deposited. The Assessing Officer treated the assessee as an assessee in default and levied interest under section 201(1A) of the Income-tax Act, 1961.

2. The assessee contended that due to financial constraints and losses, it could not pay the TDS, requesting adjustment of a refund against the TDS demand. However, the Commissioner of Income-tax (Appeals) upheld the order, stating that the liability for TDS deposit was admitted, and the refund claim of Rs. 13 lakhs lacked supporting evidence. The interest levy was deemed consequential and upheld.

3. The assessee further argued that export embargoes and incurred losses led to the default in TDS payment, emphasizing a substantial assessed loss. The request to adjust the refund against the TDS department's cheque was pending, seeking non-treatment as an assessee in default under section 201 and withdrawal of penalty under section 201(1A).

4. The Departmental representative countered by asserting that the assessee had deducted TDS from 2004-05 to 2008-09, with the refund not due before 2007-08. Financial losses were deemed insufficient grounds to absolve the assessee from default. The obligation to deposit TDS on time was emphasized, with interest under section 201(1A) seen as compensatory for withholding Government funds.

In the final judgment, the Tribunal noted that the assessee admitted to deducting TDS but failed to deposit it, leading to default under section 201(1). Financial difficulties were not accepted as a valid reason for non-compliance. The obligation to deposit TDS promptly was stressed, and interest under section 201(1A) was upheld as compensatory. Consequently, all appeals by the assessee were dismissed, affirming the liability for TDS default and interest levy.