- (1.) These two appeals are by the revenue against the order of the Commissioner (Appeals) for the assessment years 1988-89 and 1989-90 against the deletion of interest of Rs. 2,001 and Rs. 2,466 respectively levied by the assessing officer under section 201(1A) of the Act. Both the appeals are late by 12 days and after going through the petition for condonation and the material on record, we are of the opinion that the revenue was prevented by sufficient and reasonable cause in delayed filing of the appeals. We, accordingly, condone the delay and proceed to decide the appeals on merits.
(2.) In both the appeals, the tax effect is less than Rs. 25,000 and, therefore, the revenue should have refrained to file the second appeal in view of the Central Board of Direct Taxes circular dated 28-10-1992 vide No. F. 279/116 of 1992-Income Tax and consequently the time of the Tribunal, of its own (Revenues) officers as well as the assessee would have been saved and utilised on some substantive matters. It would be apt to quote other observation of Delhi High Court in the case of CIT v. ITAT,1998 232 ITR 207 as below : "The Central Board of Direct Taxes instructions are binding on the department. If the case at hand is covered by a policy laid down by the Central Board of Direct Taxes in that case no fault can be found with the order of the Tribunal refusing to state the case and there is no reason why the High Court should interfere with such discretion of the Tribunal as has been exercised consistently with the uniform policy laid down by the Central Board of Direct Taxes which binds all the subordinate authorities of the Income Tax Department. The High Court would not ordinarily encourage breach of policy decisions and the departmental instructions which have a public purpose behind them. Valuable time of High Courts and highly placed Tribunals is not to be wasted on petty matters."
(3.) Be that as it may, on merits also we do not find any reason to take a different view than that of the Deputy Commissioner (Appeals). His order is just and proper and no interference therein is called for. Suffice it would be if we quote the following paragraph from his order : "4. I have considered the submissions made by the A/R of the appellant company. The issue of treating C.C.A. as a part of taxable income was controversial and complex. This controversy was put to rest when the Honble Calcutta High Court passed the judgment stating that C.A.A. does not form a part of taxable income and should not be taken into account while deducting tax at source from salary income. This was the position on the issue of C.C.A. until the matter was finally settled vide Direct Taxes Amendment Laws, 1989 effective retrospectively since assessment year 1962-63 wherein the decision of the Calcutta High Court was reversed. However, the decision of the Calcutta High Court has laid the appellant to believe that it is not a part of salary income and as such it was not required to deduct tax on this component of salary income. The liability of an employee to deduct income-tax on the amount of salary payable to his employees arises by virtue of section 192(1) of the Income Tax Act which reads as under : "Any person responsible for paying any income chargeable under the head salaries shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made. On the estimated income of the assessee under this head for that financial year". A perusal of the aforesaid section makes it clear that liability of the employer is to deduct tax on the estimated income of the employees. The provision of section 201 of the Income Tax Act are attracted in the case of an employer when the employer does not deduct or after deducting, fails to pay the tax as required by the Act. In this case the appellant company has right fully deducted tax on estimated income of its employees which excludes the C.C.A. by virtue of the direction given by the Honble Calcutta High Court. So it cannot be said that the appellant did not estimate the income of his employees correctly. The estimate by the employer was fair and honest. Further the provision of section 201 are not attracted in this case because there was no fault on the part of the appellant in not deducting tax on C.C.A. because it was prohibited to do so by the jurisdictional High Court. In this context Madhya Pradesh High Court in the case of Gwalior Rayon Silks Co. Ltd. v. CITI, 1983 140 ITR 832 considered levy of interest under section 201(1A) and held that a duty is cast on an employer to form an opinion about the tax liability of his employee in respect of the salary income. While forming this opinion, the employer is undoubtedly expected to act honestly and fairly. But if it is found that, the estimate made by the employer is incorrect this fact alone, without anything more, would not inevitably lead to the inference that the employer has not acted honestly and fairly. Unless that inference can be reasonably raised against an employer, no fault can be found with him. In this case the order of the Income Tax Officer has not brought out any findings to show that failure to deduct tax at source was not on the basis of honest and fair opinion. As a matter of fact the circumstances that lead to non-deduction only show that the appellant company has acted in a very fair honest manner. In this case appellant company has correctly deducted tax at source required under section 192(1) of the Income Tax Act and correctly estimated the income of its employees. The failure to deduct the C.C.A. cannot be held as an act of deliberate incorrect estimate of income made by the appellant company. Because the Calcutta High Court held that C.C.A. is not a part of taxable income and restrained the appellant company to deduct tax on C.C.A. However after the retrospective amendment, appellant company has not disputed the demand raised on account of short deduction of tax. But it is agitated over the levy of interest under section 201(1A) while it agreed that there is justification in recovering the amount which should have been deducted at source in the first place even retrospectively, there can be no justification to charge interest on such failure to deduct tax at the relevant time as there is nothing to show that the appellant had acted in a dishonest manner. Further had the position of law on the point been very clear and unambiguous such an occasion of short collection of tax at source would not have arisen. In such a situation levy of interest under section 201(1A) was obviously out of question. Therefore, in the present circumstances where the appellants failure to deduct tax at source during the years under appeal was based on bona fides and had arisen by virtue of direction of the jurisdictional High Court which was binding on the appellant, there is no default on the part of the appellant company in terms of section 201 of the Income Tax Act. Therefore, while I approve the action of the Income Tax Officer in recovering addl. Tax on CCA, the levy of interest under section 201(1A) is not justified. The levy of interest of Rs. 2001 Rs. 2466 for the Financial Years 1987-88 and 1988-89 respectively are deleted.";