2021 (7) TMI 1229 - AT - Income Tax

Addition on account of Short Deduction of TDS - Intimation u/s. 200A - HELD THAT - As per the provisions of Sec.201(1), where the assessee, inter-alia, fails to deduct whole or any part of the tax then such persons shall be deemed to be an assessee-in-default. However, as per the first proviso, the assessee shall not be deemed to be assessee-in-default in respect of such tax if the payee has furnished his return of income u/s 139 and has taken into account such payment for computing income and has paid tax due on income declared by him in such return of income. For the same, the payee is required to furnish a prescribed certificate to that effect. Thus, if the assessee could demonstrate the fulfilment of all these requirements, he could not be treated as assessee-in-default. To get the benefit of the proviso, the assessee is directed to demonstrate the fulfillment of these requirements before Ld. TDS officer who shall consider the same. If the same are found in order, the assessee could not be treated as assessee-in-default and the demand raised for short deduction of TDS shall stand deleted. We order so. The ground thus raised stands allowed for statistical purposes. Computation of interest u/s 201(1A) - As per clause (i), The assessee is liable to pay simple interest on short payment of tax from the date on which tax was deductible to the date on which tax was deducted. Clause (ii) provides for interest on the amount of such tax from the date on which the tax was deducted to the date on which the tax was actually paid. As been provided that in case the assessee is not treated as assessee-in-default in terms of first proviso to sub-section (1) then interest under clause (i) shall be payable from the date on which tax was deductible to the date of furnishing of return of income by the payee.Therefore, the statutory provisions are quite clear. The payment of interest shall be mandatory and the period shall run from the date on which tax was payable to the date of furnishing of return of income by the payee. Payment of interest is mandatory but the same may be re-computed at correct rates after ascertaining the fact that whether the assessee could be treated as assessee-in -default or not. The grounds, thus raised, stand partly allowed for statistical purposes.

Summary

Issues:
1. Natural justice violation in the order of CIT(A).
2. Addition on account of short deduction of TDS.
3. Levying interest under section 201(1A) for late payment of tax deducted at source.
4. Setting aside the issue of levying interest under section 201(1A) for short deduction of tax at source.
5. Setting aside the issue of levying interest under section 201(1A) on late deduction/collection.

Analysis:
1. The appeal by the assessee for AY 2008-09 challenged the CIT(A)'s order on grounds of natural justice violation. The delay in the appeal was condoned, and after considering the submissions and records, the adjudication was provided.

2. The assessee contested the addition due to short deduction of TDS, arguing that no such addition was warranted. The default arose from deducting tax at a slightly incorrect rate. The interest component was deemed consequential.

3. The issue of levying interest under section 201(1A) for late payment of tax deducted at source was raised. The CIT(A) confirmed the action, but the Tribunal directed a re-computation of interest based on the date of tax payment by the payees.

4. The CIT(A) setting aside the issue of levying interest for short deduction of tax at source was challenged. The Tribunal clarified the period for interest calculation and directed compliance with statutory provisions.

5. Similarly, the issue of levying interest on late deduction/collection under section 201(1A) was contested. The Tribunal provided detailed reasoning based on legal provisions and precedents, emphasizing the mandatory nature of interest payment and the need for re-computation at correct rates based on the assessee's default status.

In conclusion, the Tribunal partially allowed the appeal for statistical purposes, directing re-computation of interest and emphasizing compliance with statutory requirements.