{"id":8306,"date":"2020-08-01T09:24:39","date_gmt":"2020-08-01T03:54:39","guid":{"rendered":"https:\/\/itatonline.org\/articles_new\/?p=8306"},"modified":"2020-08-01T09:24:39","modified_gmt":"2020-08-01T03:54:39","slug":"demystifying-section-201-of-the-income-tax-act-1961","status":"publish","type":"post","link":"https:\/\/itatonline.org\/articles_new\/demystifying-section-201-of-the-income-tax-act-1961\/","title":{"rendered":"Demystifying Section 201 Of The Income-tax Act, 1961"},"content":{"rendered":"

\"\"Section 201 of the Income-tax Act, 1961 imposes strict consequences upon the payer of a sum for failure to deduct tax at source and\/ or for failing to deposit the TDS with the Government. CA Manoj Kumar Mittal has explained the provision in the form of a FAQ. All important questions which are of day-to-day relevance have been asnwered by the learned author in the FAQ<\/strong><\/p>\n

Section 4 is the charging section. Under section 4(1), the total income for the previous year is chargeable to tax. Section 4(2), inter alia, provides that in respect of income chargeable under sub-section (1), income-tax shall be deducted at source where it is so deductible under any provision of the 1961 Act which, inter alia, brings in the TDS provisions contained in Chapter XVII-B. In fact, if a particular income falls outside the section 4(1), then TDS provisions cannot come into it.<\/p>\n

<\/p>\n

In fact, the scheme of tax deduction at source provides that the primary responsibility for payment of the tax is on the recipient of the income. This obligation is cast under the provisions of chapter XVII-B of the Act on the remitter\/payer of income, to deduct tax at source out of the payment made to the recipient. In case of any failure on the part of the remitter to deduct tax at source in accordance with the provisions of the said Chapter, the recipient of income is not absolved from the liability of paying tax on the income so chargeable under the provisions of the Act. The various sections in Chapter XVII-B, viz., <\/em>sections 192 to 194LA require deduction of tax at source by the payer at the time of making payment to the recipient or at the time of credit of income, whichever is earlier.<\/p>\n

With the above background of TDS provisions, if we see the scheme of section 201, then, it is a defaulting provision which can be invoked in the case of failure by deductor in not deducting TDS or deducting the amount but not depositing the TDS.<\/p>\n

TDS provisions are a vicarious liability which is fastened on the payer of the specified sum to discharge the liability of the payee. In case the payer fails to deduct the tax, short deduct the tax or fails to pay after deduction, then he is treated as assessee in default.<\/p>\n

The author has tried to capture the following issues arising out of section 201.<\/p>\n

1.1     Nature of proceedings?<\/strong>
\n 1.2   Limitation period?<\/strong>
\n 1.3   What type of notice can initiate proceedings under section 201?<\/strong>
\n 1.4   What is meant by assessee in default?<\/strong>
\n 1.5   What are the consequences of an assessee being in default?<\/strong>
\n 1.6   <\/strong>Is there any difference in recovery of tax where the assessee is deemed to be in default for non deduction of TDS as against  deduction of tax but not  depositing the same? <\/u><\/strong>
\n 1.7   Whether tax (TDS) can be recovered from the payer when it cannot be recovered from payee?<\/strong><\/p>\n

1.8   Whether the onus to prove that payee has paid the tax or not lies with the department or the payer?<\/strong><\/p>\n

1.09  What is the significance of amendment in section 201 by introducing proviso by Finance Act 2012?<\/strong><\/p>\n

1.10  What is the meaning of the term “taken into account such sum for computing income in such return of income”?<\/strong><\/p>\n

1.11  When an assessee is not deemed assessee in default, then whether penalty under section 271C can be charged?<\/strong><\/p>\n

1.12  Whether interest under section 201(1A) can be levied on the deductor when the employer has not deducted tds as per average rate of tds on monthly basis?<\/strong><\/p>\n

1.13   Where the tax has been paid by the payee, whether the amount can be recovered from the deductor as he has not deducted TDS?<\/u><\/strong><\/p>\n

1.14  Whether proceedings under section 201 may be vacated on account of illegality in notice?<\/strong><\/p>\n

1.15  What is jurisdictional requirement to invoke the provision of section 201?<\/strong>
\n 1.16  Whether opportunity can be provided by the AO before levy of interest under section 201(1A)?<\/strong><\/p>\n

1.17  Where the assessee did not deduct tds on bonafide belief, whether interest under section 201(1a) is leviable?<\/strong><\/p>\n

1.1   Nature of proceedings u\/s 201 <\/strong><\/p>\n

The proceedings under 201 are default proceedings that are initiated when  any default is committed by the assessee either in non-deducting tds, or in  not paying the tax or in deducting but not depositing or short deduction of tds.
\n When there is such a failure as that referred to in the preceding para, then proceedings are launched against the person responsible and an inquiry is conducted. If at the conclusion of such proceedings, it is found that the person responsible for paying has failed to deduct tax or has failed to deposit the same after deduction, he or she is deemed to be an assessee-in default with respect to such tax by way of an order under section 201(1) subject to the prescription of the Explanation to section 191.<\/p>\n

On the passing of the order under section 201(1), a notice of demand is then issued under section 156 in the name of such person who is deemed to be an assessee-in-default, specifying the sum so payable. If the notice of demand is complied with and the sum determined by way of an order under section 201(1), is paid, the matter ends there.<\/p>\n

If, however, there is a failure to comply with the terms of notice of demand issued under section 156, the tax recovery proceedings are initiated. As per section 222, the TRO can now draw the statement of arrears and assume jurisdiction as soon as the assessee is in default.<\/p>\n

Supreme Court in the case of ITO v. <\/strong>Delhi<\/strong> Development Authority<\/strong> [2001] 252 ITR 772 [2002] 120 Taxman 120<\/strong> has approved the view taken by the High Court holding that it is an order of assessment.<\/p>\n

1.2   Limitation period for passing the order and initiating the proceedings<\/strong><\/p>\n

Section 201 provides for the consequences of failure to deduct tax. The said Section 201 was amended by the Finance Act, 2008 with retrospective effect from 01\/06\/2002 wherein the proceedings were to be initiated within a reasonable period of time. Subsequently Section 201(3) and Section 201(4) were introduced w.e.f. 01\/04\/2010 by Finance (No.2) Act, 2009 which provided that the period of limitation was of two years from the end of financial year, in which the statement is filed in a case and four years from the end of financial year where the statement has not been filed.<\/p>\n

Then Section 201(3) of the Act was amended on 28\/05\/2012 by the Finance Act, 2012 with retrospective effect from 01\/04\/2010 whereby the limitation was substituted from four years to six years for passing of the order where the TDS statement had not been filed. The limitation of two years continued in cases where the statement is filed. Therefore, there was no effect on the limitation for FY 2007-2008 and 2008-2009. Section 201(3) of the Act was again amended on 01\/10\/2014 by Finance Act, 2014 w.e.f.01\/10\/2014 wherein Section 201 (3) (I) was omitted. The distinction between cases where statement has been filed and where such statements were not filed was removed and the amendment prescribed a common period of limitation i.e. seven years from the end of financial year in which the payment was made. It is further amended by Finance Act 2019 whereby further period of two year provided when correction statement is filed. Hence, the original or correction statement whichever is later.<\/p>\n

Whereas the period of limitation of completing the assessment of tds is provided by the status, still no time limit for initiating the proceedings is provided by the Act.<\/strong><\/p>\n

This issue  came up before Honorable Bench in the matter of Mahindra and Mahindra Ltd,<\/strong> [2009] 30 SOT 374 (Mumbai) (SB). <\/strong>Where it was  held that <\/strong>the order under section 201(1) is akin to an assessment and furthermore, the assessment includes reassessment, so naturally the reasonable time-limits for initiation of an action under section 201(1) have to be similar to those available for an assessment under section 147. Accordingly, the proceedings under section 201(1) can be initiated in the extended period of six years from the end of the relevant assessment year, if the income by virtue of sum paid without deduction of tax at source by the payer chargeable to tax in the hands of the payee is equal to or more than one lakh rupee. If, on the other hand, such amount is less than Rs. 1 lakh, then the lower period of four years as prescribed under section 149(1)(a) from the end of the relevant assessment year is available for initiation of proceedings under section 201(1). <\/p>\n

1.3   What type of notice can initiate proceeding under section 201?<\/strong><\/p>\n

Sec 201 proceedings being default proceedings, only show cause notice(SCN)  can be issued to initiate such proceedings. <\/p>\n

However, the author has found that the proceedings under section 201 are being carried out as scrutiny proceedings, where in the general notice itself, lots of details are being issued and even in the whole proceedings no SCN is being issued. Hence, the issue arises whether in such cases, the proceedings under section 201 may be said to be invalid.<\/p>\n

1.4   What is meant by assessee in default?<\/strong><\/p>\n

Sec 2(7) "assessee" means<\/strong> a person by whom any tax or any other sum of money is payable under this Act, and includes—<\/p>\n

(a<\/em>) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to any other person;<\/p>\n

(b<\/em>) every person who is deemed to be an assessee under any provision of this Act;<\/p>\n

(c<\/em>) every person who is deemed to be an assessee in default under any provision of this Act<\/strong>;<\/p>\n

Hence, the term assessee includes assessee in default.  The term default has not been defined under the act. As per the Black Law Dictionary, the term default means the omission or failure to perform a legal or contractual duty, the failure to pay a debt when due.<\/p>\n

So assessee in default means any assessee for whom  any tax or any other sum is payable under the Act and he fails to pay the same.<\/p>\n

1.5   What are the consequences of an assessee being in default?<\/strong><\/p>\n

Sec 222 provides that when an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may draw up under his signature a statement in the prescribed form specifying the amount of arrears due from the assessee (such statement being hereafter in this Chapter and in the Second Schedule referred to as "certificate") and shall proceed to recover from such assessee the amount specified in the certificate by one or more of the modes mentioned below, in accordance with the rules laid down in the Second Schedule—<\/p>\n

(a<\/em>) Attachment and sale of the assesses’s movable property;
\n (b<\/em>) Attachment and sale of the assesses’s immovable property;
\n (c<\/em>) Arrest of the assessee and his detention in prison;
\n (d<\/em>) Appointing a receiver for the management of the assesses’s movable and immovable properties.<\/p>\n

1.6   Is there any difference in recovery of tax where the assessee is deemed to be in default for non deduction of TDS as against deduction of tax but not  depositing the same?<\/u><\/strong><\/p>\n

Where section 201(2) provides that where the tax has not been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in sub-section (1). However, it does not provide the same in case where the tax has not been deducted. <\/p>\n

Honorable AHC in Jagran Prakashan Ltd vs DCIT, 21 taxmann.com 489 (All.) held that <\/strong>  Where in a case where tax has not been deducted at source, short deducted tax cannot be realized from deductor and liability to pay such tax shall continue to be with payee\/deductee direct, whose income is to be charged and a person who fails to deduct tax at source, at best is liable for interest and penalty only.<\/strong><\/p>\n

Similar view has been upheld by the ITAT MUMBAI BENCH (SMC II) in the case of Associated Cement company ltd vs ITO,TDS, <\/strong>[2000] 74 ITD 369 (MUM.)<\/p>\n

However, there are contrary judicial views also.<\/p>\n

1.7   Whether tax (tds) can be recovered from the payer when it cannot be recovered from payee?<\/strong><\/p>\n

Section 201(1) states that where the person responsible for paying any sum chargeable to tax under the provisions of this Act fails to deduct or after deducting fails to pay the tax as per the provisions of this Act, he shall be deemed to be an assessee in-default in respect of the tax. <\/p>\n

Further, the Explanation to section 191 has a direct impact on the liability of the person to deduct but failing to deduct or failing to pay after deduction of tax at source. <\/p>\n

On going through the Explanation to section 191 in juxtaposition to section 201(1), it is divulged that the person responsible for deducting who has failed to deduct or has failed to deposit to deposit tax deducted at source is to be deemed to be an assessee-in-default only if the payee of income has also failed to pay such tax directly. <\/p>\n

One can also notice that where the payee is not liable to pay tax on the amount of income received by him without deduction of tax at source, even then  the person responsible cannot be treated as the assessee-in-default. <\/p>\n

To sum up, the liability of the person responsible is dependent upon the deductee failing or otherwise to pay such tax directly. Thus, the action under section 201(1) is dependent on the outcome of the assessment of the payee and the time-limit for passing an order under section 201(1) has to be viewed in the light of the fate of the assessment in the hands of the recipient.<\/p>\n

Logically, the person responsible for paying sums chargeable to tax can be treated as the assessee-in-default at any time prior to the assessment of the payee or at the time available for the making of the assessment of the payee. If the person responsible is deemed to be an assessee-in-default after the assessment of the payee or the time available for making assessment has expired, then such amount of tax will be incapable of adjustment against tax liability of the payee and would be returned to such person who has been treated as an assessee-in-default. Thus, both, the initiation of proceedings under section 201(1) as well as the completion of such proceedings by passing an order have to be prior to the time-limit within which the tax can be determined in the hands of the payee. It cannot be beyond such a period.
\n  (Mahindra and Mahindra Ltd<\/strong>, [2009] 30 SOT 374 (Mumbai) (SB))<\/strong><\/p>\n

1.8   Whether the onus to prove that payee has paid the tax or not lies on the department or the payer?<\/strong><\/p>\n

ITAT KOLKATA BENCH, in the case of Ramakrishna Vedanta Math vs ITO, 24 taxmann.com 29 (Kol.) T<\/strong>he assessee was quite right in its submission that, as a result of the judgment of Allahabad High Court in Jagran Prakashan Ltd. v. Dy. CIT (TDS) [2012] 21 taxmann.com 489<\/strong> and in the absence of anything contrary thereto from jurisdictional High Court, there is a paradigm shift in the manner in which recovery provisions under section 201(1) can be invoked. As observed, the provisions of section 201(1) cannot be invoked and the ‘tax deductor cannot be treated an assessee-in-default till it is found that assessee has also failed to pay such tax directly’. Once this finding about the non-payment of taxes by the recipient is held to a condition precedent to invoking section 201(1), the onus is on the Assessing Officer to demonstrate that the condition is satisfied.  There is no doubt the assessee has to submit all such information about the recipient as he is obliged to maintain under the law; but once this information is submitted, it is for the Assessing Officer to ascertain whether or not the taxes have been paid by the recipient of income. This approach is in consonance with the law laid down by <\/strong>Allahabad<\/strong> High Court. <\/strong> <\/strong><\/p>\n

However, by insertion of 1st   proviso to sec 201(1),  the onus has now been shifted to the assessee.<\/p>\n

In the Author’s view, where the assessee is not able to produce the certificate from the payee for non cooperation of the payee, then he must write a letter to the AO and request him to directly verify as the Ld  the AO has wide powers under section 131 or 133(6) of the Income Tax Act, 1961.<\/u><\/strong><\/p>\n

1.09  What is the significance of  the amendment in section 201 by introducing proviso by Finance Act 2012?<\/strong><\/p>\n

Sec 201 (1) was amended by the Finance Act 2012, providing that the deductor shall not be treated on account of either non or short  deduction of TDS  as assessee in default in respect to such tax if the payee:-<\/p>\n

(i<\/em>) has furnished his return of income under section 139;
\n (ii<\/em>) has taken into account such sum for computing income in such return of income; and
\n (iii<\/em>) has paid the tax due on the income declared by him in such return of income,
\nand the person furnishes a certificate to this effect from an accountant in such form as may be prescribed: Form 26A has been prescribed for the same.<\/p>\n

Hence by virtue of this proviso, the deductor is not treated as assessee in default and he is saved from the consequences of treating him as assessee in default in case, he satisfies the conditions as stipulated above.<\/p>\n

     1.10     What is the meaning of the term “taken into account such sum for computing income in such return of income”?<\/strong><\/p>\n

The proviso to section 201(1) provides that the payer shall not be treated as assessee in default if the payee has taken into account such sum for computing income in his return of income.<\/p>\n

It does not say that the payee should have paid the tax on the sum received from the payee.<\/p>\n

In the matter of  DCIT vs <\/strong>Shreyas S. Morakhia, 40 SOT 432 (MUM.)(SB), it was discussed that <\/strong>the condition stipulated in the first limb of clause (I) of sub-section (2) of section 36 is that no deduction on account of bad debt or part thereof shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee<\/u><\/strong> of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year.<\/p>\n

It was held that the amount receivable by the assessee, who was a share broker, from his clients against the transactions of purchase of shares on their behalf constituted a debt which was a trading debt. The brokerage\/commission income arising from such transactions very much formed part of the said debt and when the amount of such brokerage\/commission had been taken into account in computation of income of the assessee of the relevant previous year or any earlier year, it satisfied the condition stipulated in section 36(2)(I) and, thus, the assessee was entitled to deduction under section 36(1)(vii) by way of bad debts after having written off the said debts from his books of account as irrecoverable.<\/p>\n

Hence, even  where the sum received is set off against the capital receipt or the receipt is capital in nature in the hands of recipient,  can  it be said that the sum has been taken into account in computing the income of the assessee.<\/p>\n

1.11     When an assessee is not deemed assessee in default, then whether penalty under section 271C can be charged?<\/strong><\/p>\n

271C. <\/strong>(1) If any person fails to—<\/p>\n

(a<\/em>) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or
\n (b<\/em>) pay the whole or any part of the tax as required by or under—
\n  (i<\/em>)  sub-section (2) of section 115-O; or
\n (ii<\/em>)  the second proviso to section 194B,<\/p>\n

Then, such person shall be liable to pay, by way of a penalty, a sum equal to the amount of tax which such person had failed to deduct or pay as aforesaid.<\/p>\n

From the perusal of the above provisions, it is very much clear that provision of section 271C is independent of the fact that whether the payer held to be assessee in default or not as the word used is any person.<\/strong><\/p>\n

The Honorable SC in CIT vs Elly lily and <\/strong>Co.<\/strong> 312 ITR 225<\/strong> held that penalty under section 271C is not leviable if there are reasonable cause for non deduction.<\/p>\n

1.12  Whether interest under section 201(1A) can be levied on the deductor when the employer has not deducted tds as per average rate of tds on monthly basis?<\/strong><\/p>\n

In the case of HERO<\/em> HONDA MOTORS <\/strong>LTD<\/strong>. V. ITO, 112 TAXMAN 154 (<\/strong>DELHI<\/strong>) (MAG.)<\/strong>
\n  <\/em>The income-tax had been held to have been short deducted only because the Assessing Officer had not accepted the computation of the perquisite value of accommodation provided by the assessee to its employees. There was, however, no finding that the estimate made by the assessee was not bona fide and honest. In view of the ratio of the various judicial decisions, it was to be held in the instant case that no case was made out for treating the assessee to be in default in terms of the provisions of section 201(1). Accordingly, the orders of the Assessing Officer and the Commissioner (Appeals) were to be cancelled.<\/p>\n

In Madhya Gujarat Vij Co. Ltd vs ITO, 14 taxmann.com 156 (Ahmedabad) held that <\/strong>the undisputed facts were that the assessee had not deducted the tax regularly from the payments of salary at the average rate during each month on estimated income of the employees and it had finally made good the efficiency in the deduction by deducting the balance at the end of the financial year. The question was whether the assessee was liable for interest under section 201(1A). An assessee would be in default if he does not deduct tax in accordance with the provisions of the Act. Thus where assessee, as an employer, is required as per section 192, to deduct the tax from the payment of salary but fails to do so, then he would be an assessee in default. For such default assessee is liable to be charged with penalty under section 201(1) and also interest under section 201(1A). Penalty under section 201(1) may not be charged, if after giving an opportunity of being heard to the assessee. The Assessing Officer finds that there are good and sufficient reasons for not deducting the tax as per section 192. However, charging of interest under section 201(1A) is mandatory as the word used therein is ‘shall’. The meaning and effect of the word ‘shall’ used in section 201(1A) is the same as the use of the word ‘shall’ in sections 234A, 234B & 234C. <\/p>\n

From the perusal of the above,  can it  be said that where there are good and sufficient reasons for non deduction of tds on monthly basis on proper estimate because of sufficient reasons, then interest under section 201(1A) should not be levied.<\/p>\n

1.13   Where the tax has been paid by the payee whether the amount can be recovered from the deductor as he has not deducted TDS?<\/u><\/strong><\/p>\n

The explanation to section 191 provides that for the removal of doubts, it is hereby declared that if any person including the principal officer of a company,—<\/p>\n

(a<\/em>) who is required to deduct any sum in accordance with the provisions of this Act; or
\n (b<\/em>) referred to in sub-section (1A) of section 192, being an employer,<\/p>\n

does not deduct, or after so deducting fails to pay, or does not pay, the whole or any part of the tax, as required by or under this Act, and where the assessee has also failed to pay such tax directly, then, such person shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default within the meaning of sub-section (1) of section 201, in respect of such tax.<\/p>\n

From the perusal of above, it is very much clear that where the assessee has paid the tax, then no recovery can be made from the deductor.  This proposition of law is supported by various Judicial precedents like Mahindra and Mahindra Ltd, [2009] 30 SOT 374 (Mumbai) (SB), ITO vs Manav Grey Exim Pvt Ltd 75 TTJ 115 MUM (TRIB).<\/strong><\/p>\n

1.14  Whether proceedings under section 201 may be vacated on account of illegality in notice?<\/strong><\/p>\n

Section 201, read with sections 195 and 200, indicated that a person responsible for deduction of tax at source in terms of section 195 is deemed to be in default if he does not either deduct the tax at source, or having deducted it, does not pay it as required by section 200 within the time prescribed under rule 30. Section 201 further states that the failure of such a person makes him an assessee in default, although he would not, but for the default, be an assessee in respect of the sum referred to in section 195. It is his failure to discharge his statutory obligation that visits him with the liability of ‘an assessee in default’. This liability is cast upon him under the aforesaid provisions not because of any order or notice of demand, but because of the operation of the statute itself. Sections 195, 200 and 201 deal with a liability which is at no time ambulatory, but which is attracted immediately on the happening of an event, namely,  failure to deduct under section 195 or failure to credit the sum deducted as required by section 200. As soon as such failure occurs, the liability arises once and for all, and there is no further requirement of computation or assessment. Once the liability is incurred, no further demand is necessary to recover the tax and the interest due thereon.<\/strong> Traco Cables Co. Ltd vs CIT, 33 Taxman 282 (Kerala)<\/strong> <\/p>\n

Hence, the legality and illegality of the notice does not impact the proceedings under section 201 as a notice under sec 201 is not a jurisdictional notice. <\/strong><\/p>\n

1.15  What is the jurisdictional requirement to invoke the provision of section 201?<\/strong> <\/p>\n

The special bench in the case of Mahindra & Mahindra Ltd. vs DCIT, 30 SOT 374 (Mumbai) (SB) held that <\/strong>the very idea of passing an order under section 201(1) stands on the foundation of the presumption that there is a default in deducting the whole or any part of tax or that after deduction there is a failure to pay such tax as required by or under this Act. So, the pre-condition for having jurisdiction under this section is that there should be a default as referred to in section 201(1) by which the person responsible is treated as an assessee-in-default.<\/strong><\/p>\n

1.16  Whether opportunity to be provided by the AO before levy of interest under section 201(1A)?<\/strong><\/p>\n

In the case of Executive Engineer and Administrative Officer, Tamil Nadu Housing Board V <\/em>First Income-Tax Officer, [1982] 2 ITD 336 (MAD.)(SB),<\/strong> it was held that before levying interest for non-payment of tax deducted at source, assessee should be provided with an opportunity of being heard.<\/p>\n

Similar view was held in the case of M\/s Vijay Hemant Finance & Estates Ltd. vs ITO, 105 TAXMAN 519 <\/strong>( MAD.) and West Bengal State Electricity Board vs DCIT, <\/em><\/strong>147 TAXMAN 234 (CAL.).<\/p>\n

However, contrary view was taken in the case of M\/s INCOME-TAX OFFICER vs SHRI GAJANAN AUTO ENGG. (P.) LTD., 75 TTJ 75 (PUNE)<\/strong><\/p>\n

1.17  Where the assessee did not deduct tds on bonafide belief whether interest under section 201(1A) is leviable?<\/strong><\/p>\n

KERALA High Court in the case of Ernakulam District Co-operative Bank <\/em>v.  Assistant Commissioner of Income-tax<\/em>75 TTJ 75 (PUNE),<\/em><\/strong>  Where, <\/em> Assessee-bank deducted tax at source from salary paid to employees on regular basis – Subsequently, ITO, noticed that no tax had been deducted or paid on salary advance paid to employees and, therefore, issued a show-cause notice proposing to levy interest under section 201(1A).  The assessee explained that there were specific agreements with the employees for recovering the advances and it was under bona fide belief that payments were not salary advance on which tax was deductible under Act. It was held that in such a case, interest was not leviable under section 201(1A).<\/p>\n

Conclusion<\/p>\n

From the perusal of above, it is inferred that the liability under section 201(1) and (1A) is subject to many check and balances and it is not  automatic.<\/p>\n\n\n
Disclaimer: <\/strong>The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org<\/td>\n<\/tr>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

Section 201 of the Income-tax Act, 1961 imposes strict consequences upon the payer of a sum for failure to deduct tax at source and\/ or for failing to deposit the TDS with the Government. CA Manoj Kumar Mittal has explained the provision in the form of a FAQ. All important questions which are of day-to-day relevance have been asnwered by the learned author in the FAQ<\/p>\n

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