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TMI Blog2014 (9) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of 'rent', the respondent No.1 has made payment of Rs. 4,87,83,300/- during the years 1998 to 2013 to the Gujarat State Land Development Corporation Ltd. but did not care to deduct tax at source, as provided in Section 194-I of the Income Tax Act, 1961. The petitioner contends that for the above violation of mandatory provision of law, the respondent No.1 has become deemed assessee in default within the meaning of Section 201 of the Income Tax Act but the Income Tax Authority did not take any step in spite of continuous violation of the mandatory provision at the instance of the respondent No.1. 3. The respondent No.1 has filed affidavit-in-reply thereby asserting that the Municipal Corporation under a bona fide but erroneous impression had not been deducting tax at source, as required under Section 194-I of the Act, at the time when it credited the amount of rent in the account of the Gujarat State Land Development Corporation Ltd. for the assessment years up to 2012- 13. The respondent No.1, however, claimed that to the best of information available with the Corporation, the payee of the amount, namely, the Gujarat State Land Development Corporation Ltd., has been paying inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the petitioner-in-person and has contended that the initiation of proceedings for the default committed earlier except last few years have already become time-barred even by virtue of the provisions of the Income Tax Act ('Act") and thus, this Court should not pass any direction for reviving the barred liability of his client. Mr Nanavati further contends that it is true that his client committed mistake through ignorance of law but the moment it has obtained notice of this application, immediately it has rectified its mistake and thereafter, started deducting TDS. According to Mr Nanavati, the prayer made by the petitioner cannot be said to be in public interest inasmuch as for the inaction on the part of his client, the nation has not has suffered any revenue loss. Mr Nanavati, therefore, prays for dismissal of this application. 8. Before considering the respective submissions of the learned counsel for the parties, it would be appropriate to refer to the provisions contained in Sections 194-I, 201 and 221 of the Act as it stands, which are quoted below :- "Rent. 194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident - (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that before the levy of such penalty he has paid the tax. (2) Where as a result of any final order the amount of tax, with respect to the default in the payment of which the penalty was levied, has been wholly reduced, the penalty levied shall be cancelled and the amount of penalty paid shall be refunded." 9. After hearing the learned counsel for the parties and after going through the materials on record, we find that admittedly there has been violation of the provisions contained in Section 194-I of the Act and as a consequence for not deducting tax at source, the respondent No.1 should not only be deemed to be an assessee in default in respect of such tax which has not been deducted but, at the same time, has also made itself liable to pay interest as provided in Section 201(1A) of the Act. 10. It is true that so far as the penalty under Section 221 of the Act is concerned, it is for the appropriate authority to decide whether there was good and sufficient reason for not deducting tax at source. 11. We are surprised to find that the Income Tax Authority in spite of service of notice has not come forward to disclose why it has not taken any step whatsoever against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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