1988 (7) TMI 104 - AT - Income Tax

Summary

Issues:
1. Liability of the assessee under section 201(1) of the Income-tax Act, 1961 for short deduction of tax from employee salaries.

Comprehensive Analysis:
The judgment involves an appeal by the assessee against the order of the Appellate Assistant Commissioner concerning the creation of a liability of Rs. 4,944 under section 201(1) of the Income-tax Act, 1961 for short deduction of tax from two employees' salaries. The Income-tax Officer found that the assessee had not deducted full tax due from the employees, leading to the liability. The Appellate Assistant Commissioner dismissed the appeal, holding the assessee in default, which led to the present appeal before the tribunal.

The assessee argued that one employee had given an undertaking to pay the tax at the time of filing the income tax return, while the other had a rebate on House Rent Allowance. The authorities held that the statutory obligation was not fulfilled, leading to the default status. The assessee cited judgments to support their position, but the Departmental Representative emphasized that failure to deduct and pay tax constituted default, independent of employee payments. The tribunal considered the provisions of the Income-tax Act regarding tax deduction at source from salaries and the consequences of failure to deduct or pay tax under section 201(1).

The tribunal noted that the assessee knowingly flouted the provisions by not deducting tax as required by law, even with employee undertakings. The tribunal found the explanations unsatisfactory, leading to the assessee being rightfully treated as in default. The tribunal rejected the arguments based on previous judgments as they were distinguishable from the current case, where the employees' assessments were not completed, and no further tax was paid by them. Consequently, the tribunal dismissed the appeal, upholding the Appellate Assistant Commissioner's order.

In conclusion, the tribunal affirmed that the assessee was rightly treated as an assessee in default for the short deduction of tax from employee salaries, as per the provisions of the Income-tax Act, 1961. The judgment highlights the importance of complying with tax deduction obligations and the consequences of failing to do so under the law.