2020 (1) TMI 452 - AT - Income Tax

Levy of interest u/s 201(1A) - online payment of TDS on 7th of the following month - In the o nline Tax Accounting System (OLTAS), the date of remittance was shown as 8th / 9th of the succeeding month . - allegation of delaying in remitting tax deducted at source to the credit of the Central Government - HELD THAT - The collection of income-tax shall be regulated by the provisions of the Act. The circular issued by the CBDT, in exercise of their statutory power under section 119, would be binding on the income-tax authorities in preference to any other executive instruction issued by any other authorities. Therefore, it is very clear that even the Government has taken a decision with respect to the payment of the Government dues by cheque. The circular of Directorate of Service Tax clearly expresses the intention of the Government in treating the payments made by the individual assessee by cheque or bank draft. Central Government Account (Receipts and Payments) Rules, 1983 was framed by the executive authorities in exercise of their power under article 283(1) of the Constitution of India. Rule 20(1) of said Rules says that when the payment was made by cheque or draft, the payment shall be deemed to have been made on the date on which it was cleared and entered in the receipt scroll. Whereas under the Negotiable Instruments Act, 1881, as interpreted by the Supreme Court in the case of K. Saraswathy 1989 (5) TMI 318 - SUPREME COURT , it is obvious that the date of payment relates back to the date of presentation of the cheque provided the cheque was honoured on its presentation. Therefore, there is an apparent conflict between the law enacted by the Parliament, namely, the Negotiable Instruments Act, 1881 on one hand and the Rule framed by executive authorities in exercise of their power under article 283(1) of the Constitution of India, on the other hand. Whenever there is a conflict between the rules framed by the executive authorities and the law enacted by the Parliament, it is obvious that the law enacted by the Parliament will prevail over the rules framed by the executive authorities. Therefore, the provisions of the Negotiable Instruments Act, 1881 as interpreted by the Apex Court in the case of K. Saraswathy (supra) would prevail over the Central Government Account (Receipts and Payments) Rules, 1983. Tribunal finally concluded that when the cheques were presented and deposited before the authorized banker within the due date for payment of advance tax and when the cheques are encashed and the amounts were realised subsequently the date of payment should be taken as date of presentation of the cheques and the Assessing Officer was directed to take the date of presentation of the cheques before the authorized banker for payment of advance tax as date of payment. The aforesaid decision will apply with much greater force in the present case as the payment in the present case is online and the credit to the Government s account is instant. The Central Government Account (Receipts and Payments) Rules, 1983 do not apply to payments online but are applicable to payments made by cheques and the date of payment when payments are made by Cheques. Even in such cases, the rule is that if the cheques are ultimately honored the date of handing over the cheque to the Government should be regarded as the date of payment. Therefore the aforesaid decision of ITAT Chennai Bench in the case of P L Haulwel Trailers Ltd. 2006 (1) TMI 213 - ITAT MADRAS-B supports the plea of the assessee that the levy of interest under section 201(1A) of the Act to the facts and circumstances of the present case cannot be justified. We, therefore, direct that the order under section 201(1A) of the Act be cancelled. The appeals of the assessee are accordingly allowed.

Summary

Issues:
Levy of interest under section 201(1A) of the Income Tax Act, 1961 for delaying remittance of tax deducted at source.

Detailed Analysis:

Issue 1:
The primary issue in the appeals was whether the Revenue authorities were justified in imposing interest under section 201(1A) of the Income Tax Act for the delay in remitting tax deducted at source to the Central Government. The Assessee had deducted tax at source and deposited it to the Government of India within the prescribed due date, although the Online Tax Accounting System (OLTAS) showed a later date of remittance. The dispute arose regarding the date of payment as per OLTAS versus the actual remittance date. The Revenue authorities contended that the OLTAS date should be considered for charging interest.

Issue 2:
The Assessee presented evidence through a Paper Book, including bank statements and challans, demonstrating that the tax payments were made on the 7th of the succeeding month, contrary to the OLTAS date. The Revenue authorities relied on Receipts and Payments Rules applicable to cheque payments, arguing that the date of deposit or realization of cheques determines the payment date. However, the Assessee's payments were made online, resulting in instant credit to the Government account.

Issue 3:
The Tribunal referred to a precedent set by the ITAT Chennai Bench in a similar case involving advance tax payment by cheques. The decision highlighted the legal framework of the Negotiable Instruments Act, emphasizing that once a cheque is encashed, it discharges the drawer from payment obligations. The Tribunal concluded that the date of presentation of cheques should be considered the payment date, aligning with the ITAT Chennai Bench's ruling.

Issue 4:
In the present case, where payments were made online with instant credit, the Tribunal found that the Central Government Account Rules did not apply. The Tribunal upheld the Assessee's argument, citing the ITAT Chennai Bench decision, and directed the cancellation of the interest levied under section 201(1A) of the Act. The Tribunal emphasized that the date of presentation of cheques or the date of online payment should be deemed the payment date, supporting the Assessee's position.

Conclusion:
Ultimately, the Tribunal allowed the Assessee's appeals, highlighting the precedence set by the ITAT Chennai Bench and the legal principles governing payment dates under the Negotiable Instruments Act. The judgment emphasized the significance of the payment method, whether online or through cheques, in determining the date of payment for tax purposes.