1999 (10) TMI 90 - AT - Income Tax

Summary

Issues:
Appeal against order of CIT(A) regarding confirmation of order passed by Assessing Officer under section 201 for improper tax deduction.

Analysis:
1. The Assessing Officer observed a deficiency in tax deduction by the assessee from the salary of an employee. The CIT(A) upheld the action of the Assessing Officer, stating that the assessee had not correctly deducted tax and was liable to pay the balance tax and interest under section 201. The CIT(A) also rejected the ground for penalty proceedings as premature.

2. The assessee argued that the deficiency in tax deduction was due to wrong intimation by the employee, who had a history of regularly depositing tax. The assessee relied on the decision in Gwalior Rayon Silk Co. Ltd. v. CIT, emphasizing that if the employee had paid the tax, the employer should not be held liable for further payment under section 201(1A).

3. The Departmental Representative contended that there is an absolute obligation on the payer to deduct tax at source, citing various judicial decisions. The DR highlighted the consequences of non-compliance with TDS provisions, including being treated as an assessee in default and liability for interest under section 201.

4. The Tribunal analyzed the submissions and legal precedents. It distinguished the facts of the present case from the Gwalior Rayon Silk Co. Ltd. case and held that the employer was duty-bound to ensure proper tax deduction. The Tribunal directed the Assessing Officer to verify if the concerned employee had paid the deficient tax amount, allowing relief to the assessee if the payment was made. The Tribunal sustained the payment of interest levied by the Assessing Officer.

5. Ultimately, the appeal was allowed in part, with the Tribunal directing the verification of the tax payment by the employee and granting relief accordingly. The decision highlighted the employer's responsibility to ensure correct tax deduction and upheld the levy of interest under section 201.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented by both parties, and the Tribunal's decision based on legal principles and precedents cited during the proceedings.