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Issues:
1. Interest charged under section 201(1A) of the Income-tax Act, 1961 for assessment years 1989-90 & 1990-91. Analysis: The case involved appeals by the assessee concerning interest charged under section 201(1A) of the Income-tax Act, 1961 for the assessment years 1989-90 & 1990-91. The Assessing Officer found that the assessee, as an employer, had deducted a negligible sum as income tax in the initial months and significantly higher amounts in the later months from the employees' salaries. Consequently, a show cause notice was issued, and simple interest at 15% per annum was levied on the alleged tax shortfall. The CIT(A) upheld this action, leading to the appeals before the tribunal. The counsel for the assessee argued that section 192 of the Income-tax Act, 1961 does not mandate uniform monthly tax deductions and highlighted section 192(3) to support the adjustment of excess or deficiency in later months. It was contended that interest should not be charged for short deductions, as the employer had reasonably estimated income and adjusted deductions accordingly. The counsel emphasized that interest should only apply in cases of total failure to deduct tax, which was not the situation here. The Departmental Representative, on the other hand, supported the tax authorities' orders. Upon careful consideration, the tribunal analyzed sections 192(1) and 192(3) of the Income-tax Act, 1961. It concluded that TDS deductions need not be exact each month, as adjustments can be made for variations in income throughout the year. The tribunal illustrated a scenario where an employer must adjust deductions based on unforeseen changes in the employee's tax liability. It reasoned that charging interest for short deductions would be against the legislative intent and burden the employer unfairly. Therefore, it held that interest under section 201(1A) cannot be imposed for mere short deductions in initial months. Consequently, the appeals by the assessee were allowed, and interest charges were dismissed.
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