2002 (1) TMI 294 - AT - Income Tax

Summary

Issues:
- Appeal against deletion of interest charged under s. 201(1A) by the AO for financial years 1994-95 and 1995-96.

Analysis:
1. The Assessing Officer (AO) charged interest under s. 201(1A) against the assessee for not deducting tax at source from interest on consumers' security deposits credited to an interest payable account at the end of financial years 1994-95 and 1995-96. The AO observed that tax amounts were liable to be deducted at source from these interest amounts and were paid late to the Government Treasury, resulting in a delay. Consequently, interest was charged for the alleged delay.

2. The assessee contended that any delay in deduction and payment of TDS was unintentional, citing the process of pre-audit for expenditure payments. The delay in determining exact payment amounts after internal audit and financial constraints in 1995-96 were highlighted. The learned CIT(A) accepted the plea of reasonable cause and due date for TDS payments, leading to the deletion of penalties for both years.

3. The Revenue appealed against the CIT(A)'s order, arguing for the restoration of the AO's decision based on delay in TDS deduction. Various case laws were cited to support the automatic and mandatory nature of interest charges for late TDS payment. The assessee, supported by the CIT(A)'s reasoning, differentiated their case from the cited jurisdictional High Court decision, emphasizing that TDS was deducted but paid late, not left unpaid.

4. Upon reviewing the arguments and case laws, it was found that TDS was deducted but paid late, warranting interest charges under s. 201(1A) mandatorily. Citing a recent Supreme Court decision, the word 'shall' in s. 201(1A) indicated mandatory levy of interest. While upholding the AO's decision on interest charges, the CIT(A)'s order was reversed concerning the quantum of interest. The AO was directed to recalculate interest from two months after the end of the financial year, not from April 8th, as initially held. The Revenue's appeals were partially allowed accordingly.