9911796707
TMI Blog1988 (6) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... Being aggrieved, the assessee came up in appeal before the Commissioner of Income-tax (Appeals) and contended that the amounts payable to the Government had all along been shown in the liability side of the balance sheet. Though the ITO assessing the assessee was aware of this fact, he omitted to inform the assessee of its obligation to remit sums to the Government Certain refunds were issued to the assessee but the ITO failed to adjust such refunds against the deductions withheld by it. It was pointed out that some of the directors who were in the knew of things had retired from the company. Thus, it was contended that the ITO should have taken a lenient view of the matter since the assessee had paid the taxes so deducted before the interest and penalty were levied. The second argument taken by the assessee was that no proceedings for recovery of any sum payable could be initiated and that the proceedings were barred by limitation under section, 231 of the Act. In this connection reliance was placed on the decisions in CIT v. Dunlop Rubber Co. (India) Ltd. [1980] 121 ITR 476 (Cal.) and CIT v. Eyre Smelting (P.) Ltd. [1978] 114 ITR 51 (Cal.). Reliance was also placed on the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect that the tax need not be deducted at source when interest is credited to interest payable account." 4. Shri K. D. Singhania, counsel of the assessee, filed a paper-book containing seven pages. The paper-book includes a chart with facts and figures, copy of the Tribunal's order in Kedia Textiles (P.) Ltd.'s case and citation of some decisions of the Hon'ble High Courts. The counsel referring to those decisions and the statement at pages 1 and 2 of the paper-book indicated that the limitation under section 231 for the years under consideration expired on 31-3-1980, 31-3-1981, 31-31-1982, 31-3-1983 and 31-3-1984 respectively. The interest under section 201 (1A) was levied on 1-5-1985 for all the years and, therefore, the recovery proceedings were barred by limitation. The counsel supported his argument by the list of cases given in the paper-book and the decision of the Tribunal. The departmental representative, on the other hand, relying on the decision in Southern Brick Works Ltd. v. CIT [1984] 146 ITR 479 (Mad.), supported the order of the CIT (A). 5. The assessee was required to deduct tax under sections 192 to 194 from salary, interest and dividend. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 201(1A) of the Act were applicable and the ITO correctly passed the orders and charged interest on the assessee. The assessee took a plea before the CIT (A) that the ITO should have reminded the assessee to pay the deducted amounts to the Government. Sections 192 to 195 cast an obligation upon the assessee to deduct and pay the amount so deducted to the credit of the Central Government and it does not require any reminder from the ITO. Therefore such argument of the assessee was rightly rejected. Moreover, there was no substance in the other argument of the assessee that the amount could be adjusted against the refunds due. The refund is created under specific order of the ITO and unless such an order is passed, refund is not a debt. The facts are not available on record relating to this aspect of the matter and, therefore, no finding is given. 8. A strong argument has been made by the assessee before the Tribunal that the proceedings were barred by limitation under section 231 of the Act and, therefore, the orders passed by the ITO under section 201(1A) should be quashed. The counsel of the assessee has not clearly made the distinction between recovery of the amount payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to a Special Bench. However, firstly, we find that the Tribunal in the aforesaid case did not make any distinction between the recovery of interest charged by the ITO and the amount which remained unpaid being tax deducted at source by the assessee. It is true that recovery proceedings under the Act commence within one year from the last date of the financial year in which the demand is made or in the case of a person who is deemed to bean assessee in default from the last date of the financial yea r in which the assessee is deemed to be in default. The assessee was not deemed to be in default because neither there was any charge of interest on the assessee nor the assessee was under obligation to pay interest to the Government. Therefore, the assessee can be considered as in default only after the expiry of one year from the date when the demand for interest was raised. This position becomes clear from the decision of the Hon'ble Calcutta High Court in the case of B. D. Khaitan v. ITO [1978] 113 ITR 556. The Tribunal in the case of Kedia Textiles Pvt. Ltd. did not take into consideration the decision of the Hon'ble Calcutta High Court otherwise its decision was have been di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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