2012 (7) TMI 482 - AT - Income Tax

Demand of interest u/s. 201(1A) of the IT Act - late deposit of TDS - assessee has submitted explanation for late deposit of TDS on account of time involved in bank clearing, government holidays etc. Held that - Since the assessee has not deposited the amount of tax within the prescribed time, therefore, the assessee was liable for interest as per the above provisions. The time taken for clearing of cheques and government holidays and reasonable cause etc. are not the reasons, which could be considered while levying the interest against the assessee Excessive interest Held that - There may be some mistake in calculating the excessive interest as is demonstrated by the ld. counsel for the assessee on examining the payment of tax for the month of May, 2007 because the delay is apparently of 11 days but the AO treated the default for 60 days - to that extent, the matter remanded to CIT(A)

Summary

Issues Involved:

1. Legitimacy of the demand for interest under Section 201(1A) of the IT Act.
2. Calculation error in the amount of interest charged for late deposit of TDS.

Detailed Analysis:

1. Legitimacy of the demand for interest under Section 201(1A) of the IT Act:

Both assessees challenged the orders of the Assessing Officer (AO) invoking Section 201(1A) of the IT Act, which imposed interest for late deposit of Tax Deducted at Source (TDS). The assessees argued that delays were due to bank clearing times and government holidays, and there was no mala fide intention in the delay. However, the CIT(A) upheld the AO's decision, stating that the levy of interest under Section 201(1A) is mandatory and cannot be waived or reduced, as per the precedent set by the Hon'ble Calcutta High Court in West Bengal State Electricity Board vs. DCIT, 278 ITR 218. The CIT(A) further noted that reasons for the delay are irrelevant for the purpose of interest levy, though they might be considered for penalty under Section 271C.

2. Calculation error in the amount of interest charged for late deposit of TDS:

The assessees contended that the AO erroneously calculated the interest by considering a delay of two months instead of one month. Specifically, for the tax due on May 2007, the delay was 11 days, but the AO calculated it as 60 days. The CIT(A) did not address this issue in the appellate order. The Tribunal found merit in the assessees' claim of excessive interest being charged and noted that the CIT(A) failed to address this specific contention. Consequently, the Tribunal confirmed the mandatory nature of interest under Section 201(1A) but remanded the issue of excessive interest calculation back to the CIT(A) for reconsideration.

Conclusion:

The Tribunal upheld the imposition of interest under Section 201(1A) due to the mandatory nature of the provision. However, it directed the CIT(A) to re-examine the calculation of interest, ensuring that any excessive interest charged is corrected. The appeals were partly allowed for statistical purposes, focusing on the issue of recalculating the interest accurately.