2004 (11) TMI 305 - AT - Income Tax

Summary

Issues: Appeal against levy of penal interest under s. 201(1A) for asst. yr. 1997-98.

Analysis:
1. The appeal was filed against the order of the CIT(A) sustaining the levy of penal interest of Rs. 17,350 under section 201(1A) for the assessment year 1997-98. The AO charged the interest due to tax deduction shortfall by the responsible person. The CIT(A) upheld the order stating that tax deducted should equal the tax deductible during the year for the appellant's contention to be accepted.

2. The appellant's representative highlighted a similar case for the assessment year 2000-01 where the CIT(A) did not require penal interest. Referring to the CIT(A)'s order and the decision of the Hon'ble Andhra Pradesh High Court in P.V. Rajgopal vs. Union of India & Ors., it was noted that the tax deductible each month need not be uniform due to adjustments for excess or deficiency. The lack of uniformity in tax deduction due to increments in the last month was emphasized, leading to the conclusion that penal interest was not warranted as the tax was deposited correctly, causing no revenue loss.

3. Consequently, the Appellate Tribunal set aside the lower authorities' orders and deleted the addition of Rs. 17,350 as penal interest. The decision favored the assessee, granting relief in the mentioned amount. The appeal filed by the assessee was allowed in open court, overturning the levy of penal interest under section 201(1A) for the assessment year 1997-98.