1992 (3) TMI 162 - AT - Income Tax

Summary

Issues:
- Interest levied under section 201(1A) of the Income-tax Act, 1961 for multiple assessment years.
- Whether the assessee's failure to deduct interest at source was justified.
- Applicability of relevant legal provisions and case law on interest liability.
- Justification of the interest levied by the Income Tax Officer (ITO).
- Proper calculation and direction for levying interest.

Analysis:
The Appellate Tribunal ITAT Pune heard appeals filed by the revenue against the CIT(Appeals) Pune's order deleting the interest levied under section 201(1A) of the Income-tax Act, 1961 for various assessment years. The ITO had levied interest due to the assessee firm's failure to deduct interest at source in accordance with section 194A. The assessee argued that the failure was not wilful but due to a technical misunderstanding, as they followed instructions from M/s. Bhopatkar Finance Corporation without a certificate from the ITO 'T' Ward, Pune. However, the Tribunal found that the assessee should have deducted the interest as per the law, regardless of the creditor's income or application under section 197.

The CIT(Appeals) did not rely on a binding decision of the Bombay High Court regarding interest liability under section 201(1A). The Tribunal disagreed with the CIT(Appeals) and held that the interest levied by the ITO was justified. It emphasized that the failure to deduct interest at source was not excusable, and the assessee's actions indicated a lack of compliance with tax deduction provisions. The Tribunal directed the ITO to verify the dates for levying interest on the undeducted amounts, specifying different dates for each assessment year.

The Tribunal considered arguments from both the departmental representative and the assessee's representative regarding the interest liability. While the departmental representative stressed the independent liability of the assessee under section 194A, the assessee's representative tried to distinguish relevant case law and argued against the interest levy. However, the Tribunal found the interest levy justified and ruled in favor of the revenue, partially allowing the appeals and directing the ITO to calculate and levy interest on the undeducted amounts as per the specified dates.

In conclusion, the Tribunal upheld the interest levy by the ITO, emphasizing the importance of complying with tax deduction provisions and rejecting the assessee's justifications for the failure to deduct interest at source. The decision highlighted the legal obligations of the assessee and directed the ITO to calculate and levy interest on the undeducted amounts based on specific dates for each assessment year.