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TMI Blog2014 (9) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... f liability relating to such deduction of tax at source. Thus the explanatory note itself reveals that there was a lacuna or loop hole in the unamended provisions of Section 194A which enabled the concerned person to postpone the liability relating to such deduction of tax at source and thus dwindling the tax collection. - there is absolutely no doubt that Explanation to subsection (1) of Section 194A has created a fresh penal liability and it cannot be said to be a simple Explanation of the existing provisions of this section. If that is so, then this Explanation cannot have retrospective operation. Scope of section 276B – Held that:- The perusal of amended Section shows that now mere failure to deduct tax is no longer offence under Section 276-B of the Income Tax Act. The Hon'ble Supreme Court also in M/s General Finance Company vs. Assistant Commissioner of Income Tax, [2002 (9) TMI 3 - SUPREME Court] while examining the provisions of Section 269SS concluded that even if the offence was committed at the time of filing of the complaint, the same could not be continued after the omission of the provision. - after the omission of the provision of failure to deduct tax at source, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account, the amount was not deposited. It is further stated in the petition that Income Tax Officer respondent filed a complaint before CJM, Chandigarh alleging that during the course of assessment proceedings, it was found that for the period from 01.01.1983 to 31.12.1983 relevant to the assessment year 1984-85, M/s Sukhna Paper Mills Limited accused No.1 had paid interest amounting to ₹ 4,40,360/- to various persons and as such was liable to deduct tax at source amounting to ₹ 44,036/- within stipulated time in the Government account i.e. upto 28.02.1984. In reply to the notice, details of amount of interest and the amount of tax deducted at source were submitted and it was further submitted that during the period relevant to the assessment year 1986-87, the assessee neither credited the interest to the accounts of the parties nor paid interest to them but only made a provision in the final accounts. However, in the profit and loss account, the company claimed this amount of ₹ 4,40,360/- as financial expense on account of interest to others. It was also stated in the complaint that by opening a separate account under head 'Interest Payable' the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation to Section 194-A of the Income Tax Act has been added by Finance Act 1987 with effect from 01.06.1987. Thus in assessment year 1984-85, the explanation making crediting of income by transferring the amount to 'Interest Payable' account was not an offence and the complaint filed by the Income Tax Officer for the year 1984-85 i.e. prior to insertion of the explanation treating the crediting of interest without deduction of tax at source as an offence was completely without jurisdiction and contrary to the provision of the Act. Learned counsel for the petitioner further argued that the complaint was filed under Section 276-B, which provision has been amended after 01.04.1989 and only failure to pay tax deducted at source has been made offence. Therefore, on the basis of earlier provision under Section 276-B, which has been amended, the petitioner cannot be punished and the trial cannot be continued. Learned counsel for the petitioner also argued that under Section 25 and 30-A of the Industrial Finance Corporation Act under Sub clause 3, it has been specifically provided that, a person appointed as a Director on behalf of the corporation, will not be liable to inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. The explanation was inserted by Finance Act 1987 to the provision under Section 194-A, which means that in the assessment year 1984-85, the explanation making crediting of income by transferring the amount to the Interest Payable account was not an offence and the complaint filed by Income Tax Officer for the year 1984-85 i.e. prior to insertion of explanation treating the crediting of interest without deduction at source as an offence was completely without jurisdiction and contrary to the provisions of the Act. Learned counsel for the petitioner cited judgment passed by this Court in Punjab Business and Supply Co. Pvt. Ltd. and another vs. Income Tax Officer and another, 1991 Income Tax Reports 550, in which it is held as under:- A bare glance through the above referred provisions leaves no doubt that failure to deduct income-tax from interest payable to different depositors is visited with penal consequences only if such deduction is not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve referred notes leaves no doubt that Section 194A has been amended to provide that the tax will be deducted at source on accrual of interest in the end of the accounting year or at the time of crediting to the account of payee or at the time of payment, whichever is earlier and it further states that it was done with a view to prevent postponement of liability relating to such deduction of tax at source. Thus the explanatory note itself reveals that there was a lacuna or loop hole in the unamended provisions of Section 194A which enabled the concerned person to postpone the liability relating to such deduction of tax at source and thus dwindling the tax collection. For the reasons stated above, there is absolutely no doubt that Explanation to subsection (1) of Section 194A has created a fresh penal liability and it cannot be said to be a simple Explanation of the existing provisions of this section. If that is so, then this Explanation cannot have retrospective operation. Consequently, it cannot be said that the petitioners had violated the provisions of Section 194A by showing the accruing interest to different depositors in their interest payable account instead at credit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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