2011 (3) TMI 566 - HC - Income Tax

Interest - Demand - Application for stay - Whether the Tribunal was justified in law in holding that the interest under section 201(1A) was mandatory and automatic irrespective of the bona fide contentions/conduct of the appellant? - Held that - Yes. Assessee in default - deemed default - requirement of issuance of notice u/s 156 - Held that - if a case is one of deemed default under section 201, in that event, the service of notice under section 156 is not called for and to be ignored. - in a case where section 201(1) is attracted there is no need of giving any notice under section 156 of the Act and if any such notice is given the same should be held to be redundant.

Summary

Issues Involved:
1. Whether the Tribunal was justified in holding that interest under section 201(1A) was mandatory and automatic irrespective of the bona fide contentions/conduct of the appellant.
2. Whether interest under section 201(1A) can be charged concurrently with interest under section 220(2) for the same period.

Detailed Analysis:

Issue 1: Mandatory and Automatic Interest under Section 201(1A)
The Tribunal held that interest under section 201(1A) of the Income-tax Act, 1961, is mandatory and automatic, irrespective of the bona fide contentions or conduct of the appellant. The court analyzed the provisions of sections 195, 200, and 201 of the Act, which collectively indicate that liability for interest arises immediately upon the failure to deduct or pay tax as required. This liability is not contingent upon any further order or notice of demand under section 156 of the Act. The court emphasized that the statutory language makes the imposition of interest under section 201(1A) an automatic consequence of default, thereby affirming the Tribunal's decision on this point.

Issue 2: Concurrent Charging of Interest under Sections 201(1A) and 220(2)
The appellant contended that interest under section 201(1A) should not be charged concurrently with interest under section 220(2) for the same period. The court examined the statutory framework and noted that section 201(1A) deals with interest for the failure to deduct or pay tax, while section 220(2) pertains to interest on unpaid amounts specified in a notice of demand. The court found that these provisions serve different purposes and can operate concurrently. However, the court clarified that in cases of "deemed default" under section 201, the service of a notice under section 156 is not required, and any such notice should be considered redundant. Consequently, the court decided this issue in the negative, allowing concurrent charging of interest under both sections for the same period.

Conclusion:
The court affirmed the Tribunal's decision that interest under section 201(1A) is mandatory and automatic. It also held that interest under sections 201(1A) and 220(2) can be charged concurrently for the same period, provided that the procedural requirements are met. The appeal was disposed of with these clarifications, and no costs were awarded.