M.M. Kumar, J. - (1.) THE petitioner which is a public sector undertaking has filed the instant petition under Article 226 of the Constitution with a prayer for quashing order dated 20.11.2006 (Annexure P.1 Colly) whereby the Commissioner of Income Tax, Panchkula has rejected its prayer for stay of demand raised in pursuance to a notice dated 20.12.2005 (Annexure P.2) issued under Section 156 of the Income Tax Act, 1961 (for brevity 'the Act'). A further prayer for quashing the recovery notice dated 5.2.2007( Annexure P.1 Colly.) issued by the Income Tax Officer for recovery of outstanding amount of Rs.3,52,01,284/ - has also been made.
(2.) FACTS in brief are that the respondent department noticed that the pay scales of the employees working in the HMT were revised in pursuance to a notification issued by the Government of India w.e.f. 1.1.1992. Arrears of salary were paid to employees in instalments between 1994 -95 to 1997 -98. The petitioner did not deposit any TDS in the Government account which was shown to have been deducted from the payments made to the employees. During investigation it was noticed that the petitioner company has paid Rs. 1,03,48,422/ - during the year 1994 -95 to its workers on account of pay revision w.e.f. 1.1.1992 to 30.9.1995. As no TDS on the above payment of salary arrears was deducted and deposited, various notices were issued to the petitioner company. It has been found that as on 31.3.2003 a sum of Rs., 8,63,40,683/ - is appearing in trial balance under the head interim relief to workmen. The stand of the petitioner company before the ITO cum TDS Panchkula was that the employees have not been paid any arrears of salary but only interim relief in the form of adhoc recoverable advance has been paid and as such the provisions of Section 201(1A) of the Act would not be attracted. The ITO cum TDS Panchkula still considered that the adhoc recoverable advance which has been paid to the employees against the final settlement of arrears of pay has to be regarded as a part of wage/ salary of the employees. It has also been found that as a special arrangement the advance has been paid to the employees which is subject to adjustment towards the final entitled amount of wage/salary. Rejecting the argument that the provisions of Section 201(1) of the Act would not be attracted the ITO cum TDS Panchkula placed reliance on the provisions of Section 17(1)(V) of the Act to conclude that the salary includes any advance of salary, or arrears. It further opined that arrears have also been held to be part of salary and are subject to deduction of TDS. It has also been held that there is no comparison of such an advance with loans like car advance etc. which do not constitute a part of salary and with the adhoc recoverable advance to be adjusted against the final settlement of salary. The ITO cum TDS in the concluding para of its order held as under: Accordingly, I hold the assessee in default Under Section 201(1) for not deducting the TDS on Advance salary arrears Under Section 192 of I.T. Act. As far as interest Under Section 201(1A) is concerned, the Hon'ble High Court of Kerala in 109 Taxman 395 has observed that the levy of interest Under Section 201(1A) is compensatory measure for withholding tax which ought to have gone to the exchequer. Provisions makes it clear that levy of interest is mandatory. In view of above liability of tax Under Section 201(1) including intt. Under Section 201(1A) is computed as under. Payment made to workers as 1,03,48,422/ - salary as discussed above. TDS liability at average rate of 20,69,684/ - 20% Intt. Under Section 201(1A) 26.69,884/ - - - - - - - - - - - - - - Total 47,39,568/ - - - - - - - - - - - - - - In pursuance to the afore -mentioned order, demand has been raised by issuance of notice of demand under Section 156 of the Act.
(3.) THE petitioner -company prayed for grant of stay of demand before the Assessing Officer and the Commissioner of Income Tax vide various applications dated 30.1.2006, 4.2.2006, 28.4.2006, 1.9.2006, 14.9.2006 and 7.11.2006 (Annexure P.4 colly.) The application with regard to interim relief was rejected vide order dated 20.11.2006 (Annexure P.1). Side by side, the petitioner challenged the order dated 20.12.2005 (Annexure P.3) before the Commissioner of Income Tax (Appeals). The appeal was dismissed vide order dated 28.2.2006. Against the order passed by the CIT(Appeals), the assessee filed an appeal before the Income Tax Appellate Tribunal (for brevity 'the Tribunal'). It is admitted position that the appeal is still pending.;