2005 (2) TMI 468 - AT - Income Tax

Summary

Issues:
Levy of interest under section 201(1A) of the Income Tax Act for the financial years 1998-99 and 1999-2000.

Analysis:
The appeals were filed by the assessee against the orders of the CIT(A) for the financial years 1998-99 and 1999-2000, challenging the levy of interest under section 201(1A) of the Income Tax Act. The assessee, a Board of Secondary Education established by the Rajasthan Government, had deducted tax under section 192(1) of the Act, which the Assessing Officer (AO) found to be not in accordance with the law. The CIT(A) upheld the charging of interest under section 201(1A).

During the proceedings, the Authorised Representative explained that although there was a deviation in the deduction of TDS in equal instalments over twelve months due to certain reasons, the deficiency was rectified before the end of the financial year. The Representative cited section 192(3) of the Act and relied on the decision of the Tribunal, Mumbai Bench 'H', in the case of Vinsons vs. Third ITO (2004) 83 TTJ (Mumbai) 594 : (2004) 89 ITD 267 (Mumbai) along with other case laws.

The Departmental Representative supported the orders of the lower authorities. After considering the arguments and evidence, the ITAT Jaipur noted that section 192(3) allows for adjusting any deficiency arising from previous deductions during the financial year. Since the responsible person rectified the deficiency before the year-end, the ITAT concluded that the CIT(A) was wrong in confirming the interest levy under section 201(1A). Citing the decision of the Tribunal, Mumbai Bench 'H', in the case of Vinsons vs. Third ITO, the ITAT directed the AO to delete the interest charged under section 201(1A) for both years, thereby allowing the appeals of the assessee.

In conclusion, the ITAT Jaipur ruled in favor of the assessee, overturning the CIT(A)'s decision and directing the deletion of the interest charged under section 201(1A) for the financial years 1998-99 and 1999-2000.