1994 (5) TMI 55 - AT - Income Tax

Summary

Issues Involved:
1. Chargeability of interest under Section 201(1A) of the Income Tax Act, 1961.
2. Applicability of the notification extending the IT Act, 1961 to the Continental Shelf of India and the Exclusive Economic Zone of India.
3. Jurisdiction of the Assessing Officer in passing the impugned order.
4. Bona fides of the assessee in making the payment of Rs. 1,19,10,729.

Detailed Analysis:

1. Chargeability of Interest under Section 201(1A) of the Income Tax Act, 1961
The main issue in these appeals revolves around the chargeability of interest under Section 201(1A) of the IT Act, 1961. The Assessing Officer held the assessee as a defaulter for not paying a sum of Rs. 1,10,41,678 under the provisions of Section 192 read with Section 200 of the IT Act and charged interest of Rs. 11,86,926. The Assessing Officer rejected the contention of the assessee that the CIT had condoned the delay, noting that there is no provision in Rule 30 for condoning the delay, as Rule 30 governed only deduction of tax quarterly.

The CIT(A) upheld the assessee's contention that the notification was applicable from the assessment year 1984-85 and not for the assessment year 1983-84. The CIT(A) directed the Assessing Officer to charge interest only for the intervening period in default, stating, "the adjustment of payable taxes by way of deduction at source to the extent of Rs. 1,19,10,729 be construed as paid on 24th Jan., 1984."

The Tribunal concluded that the assessee could not be held as a defaulter and charged interest under Section 201(1A), as the provisions of Section 192 were not attracted when the responsibility for payment of tax was that of the employer. The Tribunal stated, "Interest charged is cancelled and the assessee's ground of appeal is allowed."

2. Applicability of the Notification Extending the IT Act, 1961
The relevant facts indicate that the Government of India issued a notification on 31st March, 1983, extending the IT Act, 1961 to the Continental Shelf of India and the Exclusive Economic Zone of India with effect from 1st April, 1983. The assessee initially paid Rs. 1,19,10,729 under Section 140A in July 1983, under the impression that the notification was applicable for the assessment year 1983-84. However, it was later realized that the notification was applicable from the assessment year 1984-85.

The CIT(A) upheld the assessee's view, stating, "the income of the accounting year ending 31st March, 1983 is not to be assessed in the asst. yr. 1983-84 because the IT laws did not extend to the Continental Shelf and Exclusive Economic Zone during the relevant accounting period."

The Tribunal agreed with this interpretation, noting that the assessee could legitimately claim that the payment made for the assessment year 1983-84 should be treated as paid towards its liability for the assessment year 1984-85.

3. Jurisdiction of the Assessing Officer
The assessee's authorized representative attacked the jurisdiction of the Assessing Officer in passing the impugned order, suggesting that the jurisdiction vested with the IAC (Asst.) when the same was passed by the ITO. However, the representative pointed out that this issue had already been decided against the assessee by the Tribunal in a previous case, and thus, it was not pressed further. The Tribunal dismissed this issue as such.

4. Bona Fides of the Assessee
The assessee's authorized representative argued that the entire conduct of the assessee was bona fide. The assessee had paid the amount of Rs. 1,19,10,729 under a bona fide belief that the notification was applicable for the assessment year 1983-84. The Tribunal acknowledged the bona fides of the assessee, stating, "There can be no dispute in any manner whatsoever about the bona fides of the assessee when it made payment of Rs. 1,19,10,729 for asst. yr. 1983-84 in view of the Notification."

The Tribunal further noted that the assessee could not be expected to make a further payment of Rs. 1,19,10,729 and wait for the assessment to be completed for the assessment year 1983-84 to become entitled to a refund. The Tribunal concluded that the assessee was within its legitimate rights to claim adjustment of the payment made for the assessment year 1983-84 against its liability for the assessment year 1984-85.

Conclusion
In conclusion, the Tribunal ruled in favor of the assessee, canceling the interest charged under Section 201(1A) and allowing the assessee's appeal. The Departmental appeal was dismissed, and the assessee's appeal was partly allowed as indicated above.