2001 (3) TMI 292 - AT - Income Tax

Summary

Issues:
1. Reduction of tax demand and interest under sections 201 and 201(A) of the IT Act.
2. Cancellation of penalties under section 272A(2)(c) of the IT Act.

Analysis:

Issue 1: Reduction of Tax Demand and Interest under Sections 201 and 201(A) of the IT Act:
The case involved the failure of an assessee-company to deduct tax at source while making payments to a contractor. The Assessing Officer (AO) deemed the company to be in default under sections 201 and 201(1A) of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] reduced the tax demand and interest levied by analyzing the shortfall in receipts and TDS. The CIT(A) relied on a judgment of the Madhya Pradesh High Court. The Departmental Representative argued that the CIT(A) erred in allowing relief based on the recipient's accounting and contended that the tax deductor's statutory obligation cannot be obviated by the actions of the deductee. The Tribunal held that the CIT(A) erred in his interpretation, stating that the liability to deduct tax at source is clear under sections 194C and 201(1A), and the recipient's receipts do not affect this liability. The Tribunal reversed the CIT(A)'s decision and upheld the AO's findings, allowing the appeals.

Issue 2: Cancellation of Penalties under Section 272A(2)(c) of the IT Act:
The penalties under section 272A(2)(c) were levied on the assessee for failure to furnish annual returns in Form No. 26C under section 206 of the Act. The CIT(A) deleted the penalties, citing that the assessee had not deposited the TDS into the Government account, thus being unable to file the required return. The Departmental Representative argued against this reasoning, stating that non-compliance with the law cannot be excused by the assessee's own default. The Tribunal held that the CIT(A) misinterpreted the law by granting leniency to the assessee for not filing returns due to non-deposit of TDS, which is a breach of section 206. The Tribunal also highlighted that the doctrine of double jeopardy does not apply in income tax proceedings, and non-deduction or delayed deposit of TDS cannot be a reasonable cause for not filing returns. Consequently, the Tribunal reversed the CIT(A)'s decision, reinstated the penalties, and allowed the appeals.

In conclusion, the Tribunal reversed the CIT(A)'s decisions in both issues, upholding the Assessing Officer's findings and allowing the appeals in favor of the Revenue.