1998 (5) TMI 408 - AT - Income Tax

Summary

Issues Involved:
1. Non-deduction of tax at source u/s 201(1) and 221(1).
2. Charging of interest u/s 201(1A).
3. Imposition of penalties u/s 201(1) read with section 221(1).
4. Limitation for recovery of tax u/s 231.

Summary:

1. Non-deduction of tax at source u/s 201(1) and 221(1):
The assessee, a limited company, failed to deduct tax at source from interest payments to GESCO. The Assessing Officer, after issuing a show-cause notice, passed orders for the assessment years 1979-80 to 1983-84, directing the assessee to pay tax deductible at source amounting to Rs. 32,73,927 by 31-7-1984 and levied penalties at 10% for each year.

2. Charging of interest u/s 201(1A):
The Assessing Officer also levied interest u/s 201(1A) for the default period up to 31-7-1984. The CIT(A) directed the Assessing Officer to charge interest from the dates on which tax was deductible to the dates on which tax was actually paid by GESCO. If GESCO's assessment resulted in nil or negative income, the terminal date for the period of default would be the date of the assessment order.

3. Imposition of penalties u/s 201(1) read with section 221(1):
CIT(A) cancelled the penalties imposed by the Assessing Officer, holding that the failure to deduct tax was not without good and sufficient reasons. However, the Tribunal found that the assessee could not plead ignorance of the legal obligations regarding tax deduction at source and upheld the imposition of penalties in principle but remanded the matter to the Assessing Officer to verify if GESCO was assessed at nil or negative income.

4. Limitation for recovery of tax u/s 231:
CIT(A) held that the order of the Assessing Officer directing the assessee to pay tax was barred by limitation u/s 231, except for payments made on 28-6-1982 and 17-6-1982. The Tribunal upheld the CIT(A)'s order, noting that assessments of GESCO had been completed and no tax could now be realized from the assessee.

Conclusion:
- The appeals by the assessee regarding interest u/s 201(1A) were dismissed.
- The appeal by the assessee for the assessment year 1983-84 was allowed.
- The revenue's appeals regarding the CIT(A)'s decision on limitation were dismissed as infructuous.
- The revenue's appeals against the cancellation of penalties were partly allowed, with the matter remanded to the Assessing Officer for verification.