- (1.) We have heard Shri R.K. Upadhyay, learned counsel appearing for the appellant. Shri Rupesh Jain and Shri R.S. Agrawal appear for the respondent-assessee. This income-tax appeal under s. 260A of the IT Act arises from an order of Tribunal. Delhi Bench "C", New Delhi dt. 12th June. 2001 in respect of asst. yr. 1992-93. The appeal was admitted on 11th July. 2007 on the questions of law as follows: (i) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law, that the assessee should not be treated as assessee in default in terms of s. 201 of the IT Act, 1961? (ii) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in deleting interest under s. 201(1A) of the Act, which is automatic and mandatory under the provisions of the Act? (iii) Whether the Tribunal could draw adverse inference against the Department on the so-called discussion between the assessee and the ITO (TDS) which was never took place in coming to the conclusion that the assessee was under bona fide belief that the conveyance allowance was exempt under s. 10(14) of the Act in not deducting tax at source?"
(2.) The respondent-assessee was treated as assessee in default and was made liable to pay the interest on the amount of income-tax, which was not deducted by the assessee from the conveyance allowance given to its employees under s. 192(1) of IT Act (in short "the Act")
(3.) The AO passed an order under s. 201(1A) r/w sub-s. (1) dt. 7th Feb., 1994 for the asst. yr. 1992-93, directing the assessee to pay interest under s. 201(1A) @ 15 per cent which worked out at Rs. 1,07,640 after treating the respondent as assessee in default and rejecting the explanation given by it that it was under fair and bona fide belief not to deduct the TDS on conveyance allowance. The AO held that it was obligatory on the part of company to deduct tax on source on conveyance allowance for which there was no exemption under s. 10(14) of the Act. The AO did not accept the explanation that as per CBDT Circular No. 196 : , dt. 31st March, 1976 [1976 CTR(Jour) 312], that the tax is not to be deducted on actual travelling expenses for which the employee has given declaration/certificate, on the ground that all the employees of the assessee are paid the conveyance allowance, and that in the financial year 1991-91, the assessee was deducting tax on the conveyance allowance.;