INCOME TAX OFFICER Vs. KHUSHI RAM AND SONS
LAWS(IT)-1989-6-6
INCOME TAX APPELLATE TRIBUNAL
Decided on June 09,1989

Appellant
VERSUS
Respondents

JUDGEMENT

S.Grover, - (1.)IN these four Revenue's appeals cancellation of interest levied under Section 201(1A) of the INcome-tax Act, 1961, hereinafter referred as the Act, amounting to Rs. 317, Rs. 475, Rs. 49 and Rs. 55 in respect of assessment years 1981-82, 1982-83,1983-84 and 1984-85 respectively is contested.
(2.)Right at the outset, I would like to state that though the amounts involved are small but the principle governing these appeals is singularly important there being no precedent available.
After framing the assessments and noticing that the respondent-assessee had not deducted tax from interest paid to Shri Salamat Rai Sehgal of Jalandhar levied interest under Section 201(1A) of the Act and the following graphical chart shall project the necessary related details : -

JUDGEMENT_9868_TLIT0_19890.htm

The learned AAC by a cryptic order and without understanding the implications of the provisions of Section 201(1A) of the Act cancelled the interest and it is considered expedient to produce the relevant portion of his order because it must necessarily be shown that not only the decision was incorrect but the judgment of the Honourable Madhya Pradesh High Court and the order of the Income-tax Tribunal, which were relied upon for giving relief had no application to the case at all: -

It has been stated before me that it was held by Jaipur Bench of IT AT in appeal ITA No. 20/JP/86 for the assessment year 1980-81 in the case of ITO v. Rathi Gun Industries, that tax deduction provision is only to ensure that the taxes payable by the assessee are paid. When a person who had received the payment without tax deduction has paid tax on such income, there is no purpose served by levying the interest Under Section 201. It was observed that the intention of the Legislatures in introducing the tax deduction provision is only to ensure that the taxes are paid and there should be no loss to the revenue. It was held by the Tribunal that interest is not chargeable where the tax has been paid by the recipient. The Tribunal followed the decision of CIT v. LIC.

(3.)IT would be sufficient if I refer to the judgment of the Honourable Madhya Pradesh High Court in the case of CIT v. Life Insurance Corporation of India. In that case, in accordance with the provisions of Section 206 of the Act, the Divisional Manager of the Life Insurance Company of India, Sagar filed for the assessment year 1977-78, the annual return of salary in respect of its employees showing the amount of tax deductible under Section 192 of the Act. The ITO noticing that tax was not properly deducted in the case of some of the employees recomputed the income of those employees and demanded under Section 201 of the Act, the additional tax that should have been deducted under Section 201 of the Act by the LIC. The CIT(A), however, allowed the first appeal because the employees had paid their proper taxes. The Tribunal though dismissed the Revenue's appeals but gave reference of the following reproduced question under Section 256(1) of the Act:-,
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that where regular assessment of an employee has been completed and the amount of tax fully paid by him, the ITO(TDS) has no jurisdiction under Section 201 of the Act, 1961, to demand further tax from the employer in respect of the tax short deducted relating to such employed?



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