Madhya Gujarat Vij Co.Ltd., Petlad V. The Income tax Officer,Ward-3(4) & TDS, Petlad

ITA 420/AHD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6138 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 15-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; TDS
• Section: 234B; 201(1); 143(1); 195; 201; 143(2); 192

Judgement Text

FIT FOR PUBLICATION - 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M MADHYA GUJARAT VIJ CO. LTD., (ERSTWHILE GUJARAT ELECTRICITY BOARD) DIVISION OFFICE PETLAD, NR. RAILWAY CROSSING PETLAD. VS. INCOME-TAX OFFICER, WARD 3(4) & TDS, PETLAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- NONE RESPONDENT BY:- SHRI H. K. LAL, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUND :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIR MING THE INTEREST OF RS.22460/- LEVIED UNDER SECTION 201(1A) ON THE GROUND THAT THE APPELLANT HAS FAILED TO DEDUCT AND PAY TAX AT AVERAGE RATE DURING EACH MONTH ON ESTIMATED INCOME OF ITS EMPLOYEES. 2. THUS THE ONLY ISSUE INVOLVED IN THE APPEAL IS AB OUT CHARGING OF INTEREST OF RS.22,460/- U/S 201(1A). ITA NO.420/AHD/2011 ASST. YEAR 2004-05 ITA NO.420/AHD/2011 ASST. YEAR 2004-05 2 3. THE AO HAD PASSED ORDER U/S 201(1A) BY NOTICING ON SCRUTINY OF THE ANNUAL RETURN OF TDS IN FORM NO.24 THAT DEDUCTI ON OF TAXES AT SOURCE FROM THE PAYMENT OF SALARY TO THE EMPLOYEES WERE MA DE LATE. THE ASSESSEE WAS TREATED TO BE IN DEFAULT U/S 201(1). A SHOW CAUSE NOTICE TO THE ASSESSEE WAS ISSUED BUT NO REPLY WAS RECEIVED A ND ACCORDINGLY HE HAD CHARGED INTEREST U/S 201(1A) AT RS.22,460/-. 4. THE LD. CIT(A) CONFIRMED THE CHARGING OF INTERES T BY OBSERVING AS UNDER :- 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE SUBMISSIONS OF THE APPELLANT. THE MATTER BEFORE ME RELATES TO INTE REST DEMAND OF RS.22,460/- U/S 201(1A). THE VARIOUS PLEAS RAISED B Y THE APPELLANT ARE PERTINENT TO DEMAND RAISED U/S 201(1) FOR WHICH SEP ARATE APPEAL LIES AND ARE THUS NOT RELEVANT FOR THE PRESENT APPEAL. IN RE GARD TO THE INTEREST U/S 201(1A) IT HAS BEEN HELD IN MANY COURT DECISIONS LI KE BENNET COLEMAN & CO. LTD. VS. . V.P. DAMLE, THIRD ITO (1986) 157 ITR 812 (BOM), CIT VS. DHANALAKSHMY WEAVING WORKS (2000) 245 ITR 13 (KER), CIT VS. K.K. ENGG. CO. (2001) 116 TAXMAN 390 (KER), CIT VS. ASSA M SMALL INDUSTRIES DEVELOPMENT CORPORATION (1996) 219 ITR 324, CIT VS. PREM NATH MOTORS (P) LTD. (2002) 120 TAXMAN 584 (DELHI) THAT THE INTEREST U/S 201(1A) IS COMPENSATORY AND MANDATORY IN NATURE. TH US THE AO IS JUSTIFIED IN LEVYING INTEREST U/S 201(1A) OF THE AC T. GROUND IS DISMISSED. 5. IN THE WRITTEN SUBMISSION THE ASSESSEE SUBMITTED THAT IT HAD DEDUCTED TDS ON THE PROJECTED SALARY OF EACH MONTH. SUCH PROJECTIONS WERE MADE ON THE BASIS OF SALARY OF THE IMMEDIATELY PRECEDING MONTH. THE PAYMENTS OF OVER-TIME WHICH WERE ALSO SUBJECT T O TDS COULD NOT BE ESTIMATED WITH ACCURACY. FURTHER THERE WERE SEVERAL EMPLOYEES AND THE LIABILITY OF TAX WAS VERY LESS AND HENCE NO TDS WAS MADE IN THE INITIAL ITA NO.420/AHD/2011 ASST. YEAR 2004-05 3 MONTHS. THE EMPLOYER I.E. THE ASSESSEE IS EMPOWERED TO INCREASE OR REDUCE THE AMOUNT TO BE DEDUCTED FOR THE PURPOSE OF ADJUSTING ANY EXCESS OR DEFICIENCY ARISING OUT OF ANY PREVIOUS DEDUCTION . THE TAX FINALLY REQUIRED TO BE DEDUCTED ON THE ACTUAL AMOUNT OF SAL ARY WAS DEDUCTED AT THE END OF FINANCIAL YEAR. IN ANY CASE, THE ISSUE I S DIRECTLY COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS. CAD ILA LABORATORIES (P) LTD. 56 TTJ 156 WHEREIN THE TRIBUNAL HAS OBSERVED A S UNDER :- THE TASK OF INTERPRETATION OF A STATUTORY ENACTMEN T IS NOT A MECHANICAL TASK. IT IS MORE THAN A MERE READING OF MATHEMATICA L FORMULAS BECAUSE FEW WORDS POSSESS THE PRECISION OF MATHEMATICAL SYM BOLS. THE AO HAS ADOPTED TOO TECHNICAL AN APPROACH BY NUMBER OF MONT HS IN A YEAR I.E. 12 AND FINDING OUT THE AVERAGE. SUCH AN APPROACH RUNS CONTRARY TO THE EXPRESS PROVISIONS OF SECTION 192(3). THE AMOUNTS O F SALARIES PAID TO EMPLOYEES IN A LARGE ORGANIZATION LIKE THAT OF THE ASSESSEE CANNOT REMAIN CONSTANT AS THESE VARY FROM MONTH TO MONTH DEPENDIN G UPON A NUMBER OF FACTORS LIKE PERIODICAL INCREMENT IN SALARY, ENHANC EMENT OF DEARNESS ALLOWANCE, ARREARS OF SALARY AND ALLOWANCES AND SPE CIAL INCENTIVES RECEIVED BY THE EMPLOYEES AND THE LIKE FROM TIME TO TIME. HENCE THE PROVISIONS OF SECTION 192(2) WILL SQUARELY APPLY TO THE FACTS OF THE ASSESSEES CASE. IN THE INSTANT CASE THERE IS NO DI SPUTE THAT THE TAX WAS DEDUCTED FROM THE SALARY OF EMPLOYEES WHOSE INCOME WAS LIABLE TO BE TAXED EVERY MONTH IT WAS PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT AND THE SHORTFALL, IF ANY, WAS MADE GOOD AND PAID T O THE CREDIT OF THE CENTRAL GOVERNMENT WITHIN THE FINANCIAL YEAR. HENCE IN VIEW OF THE EXPRESSED PROVISIONS OF SECTION 192(3) THERE IS NO JUSTIFICATION FOR CHARGING OF INTEREST UNDER SECTION 201(1A). THE ASSESSEE FURTHER REFERRED TO THE DECISION OF TH E TRIBUNAL, JAIPUR BENCH IN THE CASE OF SECRETARY, BOARD OF SECONDARY EDUCAT ION, RAJASTHAN VS. ITO 93 TTJ 256 WHEREIN IT HAS BEEN HELD THAT INTERE ST U/S 201(1A) CANNOT BE CHARGED ON ACCOUNT OF UNEQUAL DEDUCTION OF TAX U /S 192 IN DIFFERENT ITA NO.420/AHD/2011 ASST. YEAR 2004-05 4 MONTHS ONCE THE PERSON RESPONSIBLE FOR DEDUCTION OF TAX HAS MADE GOOD THE DEFICIENCY BEFORE CLOSE OF THE FINANCIAL YEAR. SIMILAR VIEW WAS TAKEN BY ITAT DELHI BENCH IN THE CASE OF ITO VS. ASIAN HO TELS LTD. 41 TTJ 28. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT ASS ESSEE HAS NOT DEDUCTED THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. HE HAD MADE SHORT DEDUCTION FROM SALARY PAYMENT BUT HAD MA DE LUMP SUM DEDUCTION AT THE END OF THE YEAR. SUCH LUMP SUM DED UCTION AT THE END OF THE YEAR MAKING GOOD THE DEFICIENCY IN EARLIER MONT HS CANNOT BE SAID TO BE DEDUCTIONS IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND, THEREFORE, THE ASSESSEE IS IN DEFAULT AND, THEREFORE, IT IS LI ABLE FOR INTEREST U/S 201(1A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT ASSESSEE H AS NOT DEDUCTED THE TAX REGULARLY FROM THE PAYMENTS OF SALARY AT THE AVERAG E RATE DURING EACH MONTH ON ESTIMATED INCOME OF THE EMPLOYEES AND IT H AS FINALLY MADE GOOD THE DEFICIENCY IN THE DEDUCTION BY DEDUCTING T HE BALANCE AT THE END OF THE FINANCIAL YEAR. THE QUESTION IS WHETHER ASSE SSEE IS LIABLE FOR INTEREST U/S 201(1A). IN THIS REGARD WE REFER TO SE CTIONS 201(1) AND 201(1A) AS UNDER:- SECTIONS 201-[(1) WHERE ANY PERSON, INCLUDING THE P RINCIPAL OFFICER OF A COMPANY ITA NO.420/AHD/2011 ASST. YEAR 2004-05 5 (A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WIT H THE PROVISIONS OF THIS ACT; OR (B) REFERRED TO IN SUB-SECTION (1A) OF SECTION 192, BEI NG AN EMPLOYER, DOES NOT DEDUCT, OR DOES NOT PAY, OR AFTER SO DEDUC TING FAILS TO PAY, THE WHOLE OR ANY PART OF THE TAX, AS REQUIRED BY OR UNDER THIS ACT, THEN, SUCH PERSON, SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX: PROVIDED THAT THE PENALTY SHALL BE CHARGED UNDER SE CTION 221 FROM SUCH PERSON UNLESS THE AO IS SATISFIED THAT SUCH PE RSON, WITHOUT GOOD AND SUFFICIENT REASONS, HAS FAILED TO DEDUCT A ND PAY SUCH TAX] [(1A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-S ECTION (1), IF ANY SUCH PERSON, PRINCIPAL OFFICER OR COMPANY AS IS REFERRED TO IN THAT SUB-SECTION DOES NOT DEDUCT (THE WHOLE OR ANY PART OF THE TAX) OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS ACT, HE OR IT SHALL BE LIABLE TO PAY SIMPLE INTEREST AS (ONE PER CENT FOR EVERY MONT H OR PART OF A MONTH) ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SU CH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACTUALLY PAID (AND SUCH INTEREST SHALL BE PAID BEFORE FURNISHING (THE STATEMENT) IN ACCORDANC E WITH THE PROVISIONS OF SUB-SECTION (3) OF SECTION 200]. AN ASSESSEE WOULD BE IN DEFAULT IF HE DOES NOT DEDU CT 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 PENAL TY U/S 201(1) AND ALSO INTEREST U/S 201(1A). PENALTY U/S 201(1) MAY NOT BE CHARGED IF AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSE E AO FINDS THAT THERE ARE GOOD AND SUFFICIENT REASONS FOR NOT DEDUCTING T HE TAX AS PER SECTION 192. HOWEVER, CHARGING OF INTEREST U/S 201(1A) IS M ANDATORY AS THE WORD ITA NO.420/AHD/2011 ASST. YEAR 2004-05 6 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 W ORD SHALL IN SECTION 234A, 234B & 234C. IT HAS BEEN HELD BY HON. SUPREME COURT IN THE CASE OF CIT VS.ANJUM M.H. GHASWALA (2001) 252 ITR 1(SC) THAT CHARGING OF INTEREST U/S 234A,234B & 234C IS MANDATORY. SIMILAR VIEW HAS TO BE HELD IN RESPECT OF CHARGING OF INTEREST U/S 201(1A) WHEN SIMILAR WORDS ARE USED IN THIS SECTION ALSO. HON. KARNATAKA HIGH COUR T IN THE CASE OF URBAN INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION VS. CIT (2009) 308 ITR 297 (KARNATAKA) HELD THAT IF TAX IS NOT DEDUCTED U/ S 195 OF THE ACT, THE ASSESSEE IS BOUND TO PAY INTEREST AS SECTION 201(1A ) IS MANDATORY PROVISION. THE AO HAS A DISCRETION TO DROP THE PENA LTY PROCEEDINGS U/S 201(1) BUT ASSESSEE CANNOT ESCAPE THE LIABILITY TO PAY THE INTEREST U/S 201(1A). BOTH THE SECTIONS 201(1) AND 201(1A) ARE I NDEPENDENT AND THEY ARE NOT INTERLINKED. THEY CANNOT BE READ CONJUNCTIV ELY AS LEVY OF INTEREST AND LEVY OF PENALTY ARE TWO DIFFERENT PROCEEDINGS. HON. CALCUTTA HIGH COURT IN THE CASE OF WEST BENGAL STATE ELECTRICITY BOARD VS. DCIT (2005) 278 ITR 218 (CAL) HELD THAT SCHEME OF SUB-SECTION ( 1A) OF SECTION 201 DOES NOT LEAVE OF ANY SCOPE OF AMBIGUITY AND MAKES IT CLEAR THAT AN ASSESSEE IN DEFAULT IS LIABLE TO PAY SIMPLE INTERES T FOR THE PERIOD STIPULATED IN SUB-SECTION (1A). THE INTEREST PAYABLE UNDER SEC TION 201(1A) IS MANDATORY AND CAN NEITHER BE WAIVED NOR CAN THE RAT E BE REDUCED. HOWEVER, PRINCIPLES OF NATURAL JUSTICE HAVE TO BE R EAD IN THE PROVISION, ITA NO.420/AHD/2011 ASST. YEAR 2004-05 7 MEANING THEREBY THAT ASSESSEE IS GIVEN AN OPPORTUNI TY OF BEING HEARD BEFORE LEVY OF INTEREST. IN AN EARLIER DECISION IN CANOI INDUSTRIES (P) LTD. VS. ACIT (2003) 261 ITR 488 HON. CALCUTTA HIGH COUR T HAD HELD THAT CHARGEABLE OF INTEREST U/S 201(1A) IS MANDATORY AND AUTOMATIC. SIMILAR VIEW WAS HELD BY HON. MADRAS HIGH COURT IN VISWAPRI YA FINANCE GENERAL SECURITIES LTD. VS. CIT (2002) 258 ITR 496 (MAD). 8. THE INITIAL PHRASE IN SECTION 201(1A) WITHOUT P REJUDICE TO THE PROVISIONS OF SUB-SECTION (1) MEANS THAT IN ADDITI ON TO LEVY OF PENALTY U/S 201(1) ASSESSEE IS LIABLE FOR INTEREST. THE WOR DS WITHOUT PREJUDICE TO HAVE BEEN INTERPRETED BY HONBLE CALCUTTA HIGH COUR T IN SATIS KAPOOR VS. CIT (2004) 265 ITR 673 (CAL). IT HELD IN THE COTEXT OF SUB-SECTION (4) AND SUB-SECTION (1) OF SECTION 273A, THAT USE OF THE WO RDS WITHOUT PREJUDICE TO IN SUB-SECTION (4) OF SECTION 273A MAKES IT CLE AR THAT SUB-SECTION (4) IS NOT A PROVISION OVER-RIDING THE PROVISIONS OF SU B-SECTION (1) AND IS CLEARLY A PROVISION IN ADDITION TO SUB-SECTION (1). THE PHRASE WITHOUT PREJUDICE TO WAS ALSO USED IN SECTION 143(1)(A) OF THE INCOME-TAX ACT, 1961 WHEN LEGISLATURE USED THE WORDS WITHOUT PREJU DICE TO THE PROVISIONS OF SECTION 143(2). HONBLE DELHI HIGH C OURT IN CIT VS. PUNJAB NATIONAL BANK (2001) 249 ITR 763 (DEL) HELD THAT THE USE OF EXPRESSION WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143(2) IN SECTION 143(1) MEANS THAT THE RIGHT OF THE AO TO PR OCEED U/S 143(2) ITA NO.420/AHD/2011 ASST. YEAR 2004-05 8 DESPITE INTIMATION TO THE ASSESSEE OF THE SUM PAYAB LE AS TAX OR INTEREST IS PRESERVED AND NOT TAKEN AWAY. FROM THESE INTERPRETA TIONS IT FOLLOWS THAT WHETHER ACTION U/S 201(1) IS TAKEN OR NOT TAKEN ACT ION U/S 201(1A) CAN BE TAKEN INDEPENDENTLY, EITHER IN ADDITION TO, OR SEPA RATELY. THE POWERS CONFERRED UNDER TWO SUB-SECTIONS ARE, THEREFORE, IN DEPENDENT AND CAN BE EXERCISED BY THE AO SIMULTANEOUSLY TOGETHER, OR IND EPENDENT OF EACH OTHER, OR ONE AFTER ANOTHER. THEREFORE, FOR THE PUR POSE OF CHARGING OF INTEREST U/S 201(1A) IT IS NOT NECESSARY THAT AO SH OULD HAVE FIRST TAKEN THE RECOURSE TO SECTION 201(1) MEANING THEREBY THAT ASS ESSEE SHOULD HAVE BEEN FIRST DECLARED AS ASSESSEE IN DEFAULT AND ONLY THEREAFTER PENALTY U/S 201(1) OR INTEREST U/S 201(1A) CAN BE LEVIED. DECLA RING ASSESSEE IN DEFAULT IS A CONDITION PRECEDENT FOR LEVY OF PENALTY U/S 20 1(1) BUT BECAUSE OF USE OF THE EXPRESSION WITHOUT PREJUDICE TO THE PROVISI ONS OF SUB-SECTION (1) IN SUB-SECTION (1A) MAKES IT CLEAR THAT CONDITION L AID DOWN FOR LEVY OF PENALTY U/S 201(1) CANNOT BE NECESSARILY BROUGHT IN TO PLAY FOR CHARGING INTEREST U/S 201(1A). IN OTHER WORDS THE AO HAS ONL Y TO SEE WHETHER THE CONDITIONS LAID DOWN U/S 201(1A) ARE SATISFIED. IF THEY ARE SO, HE CAN CHARGE INTEREST U/S 201(1A) IRRESPECTIVE OF WHETHER ASSESSEE HAS BEEN DECLARED AS IN DEFAULT OR PENALTY U/S 201 HAS BEEN LEVIED ON HIM. THE CONDITIONS LAID DOWN FOR CHARGING INTEREST U/S 201( 1A) ARE - (1) THE PAYER DOES NOT DEDUCT THE WHOLE OR ANY PART OF THE TAX; ITA NO.420/AHD/2011 ASST. YEAR 2004-05 9 (2) OR, AFTER DEDUCTING, FAILS TO PAY THE TAX AS REQUIR ED BY, OR UNDER THE ACT; ON THE OTHER HAND, CONDITIONS LAID DOWN U/S 201(1) FOR LEVY OF PENALTY ARE THAT - (1) PAYER DOES NOT DEDUCT TAX IN ACCORDANCE WITH THE PR OVISIONS OF THE ACT; OR (2) ASSESSEE BEING AN EMPLOYER DOES NOT DEDUCT OR DOES NOT PAY OR AFTER DEDUCTING FAILS TO PAY WHOLE OR PART OF THE T AX. 9. THUS IN OUR CONSIDERED VIEW CONDITIONS LAID DOWN FOR LEVY OF PENALTY AND CHARGING OF INTEREST ARE DIFFERENT. ASS ESSEE WOULD BE LIABLE FOR PENALTY IF TAX IS NOT DEDUCTED IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT BUT INTEREST COULD BE CHARGED ONLY WHEN PAYER D OES NOT DEDUCT WHOLE OR ANY PART OF THE TAX OR AFTER DEDUCTING FAILS TO PAY THE TAX. IT IS BECAUSE WHAT WE FIND IS THAT THE EXPRESSION REQUIRED TO DE DUCT ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THE ACT IS MISSI NG FROM SECTION 201(1A). THEREFORE, A SITUATION WHERE A PAYER DOES NOT, IN EQUAL INSTALMENT DEDUCT THE TAX IN ACCORDANCE WITH THE PR OVISIONS OF THE ACT, CAN BE CONDITION FOR DECLARING AN ASSESSEE IN DEFAU LT AND CONSEQUENTLY FOR LEVY OF PENALTY U/S 201(1) BUT DUE TO ABSENCE OF TH IS EXPRESSION IN SUB- SECTION (1A), THIS SITUATION WOULD NOT AUTOMATICALL Y BECOME CONDITION PRECEDENT FOR CHARGING OF INTEREST. ON THE OTHER HA ND, SECTION 192(3) ENABLES THE EMPLOYER TO MAKE ADJUSTMENT OF ANY EXCE SS OR DEFICIENCY ARISING OUT OF ANY PREVIOUS DEDUCTION OR FAILURE TO DEDUCTION DURING THE ITA NO.420/AHD/2011 ASST. YEAR 2004-05 10 FINANCIAL YEAR. FOR THE SAKE OF CONVENIENCE WE REPR ODUCE SECTION 192(3) AS UNDER :- SECTION 192(3) - THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT REF ERRED TO IN SUB-SECTION (1)[OR SUB-SECTION (1A)] [OR SUB- SECTION (2) OR SUBSECTION (2A) OR SUBSECTION 2B)] MAY, AT THE TIME OF MAKING ANY DEDUCTION, INCREASE OR REDUCE THE AMOUNT TO BE DEDU CTED UNDER THIS SECTION FOR THE PURPOSE OF ADJUSTING ANY EXCESS OR DEFICIENCY ARISING OUT OF ANY PREVIOUS DEDUCTION OR FAILURE TO DEDUCT DURI NG THE FINANCIAL YEAR. THE ABOVE SUB-SECTION OF SECTION 192(3) CLEARLY EMP OWERS AN EMPLOYER - (1) TO INCREASE OR REDUCE THE AMOUNT OF DEDUCTION OF TA X U/S 192, SUB-SECTION (1), SUB-SECTION (1A), SUB-SECTION (2), SUB-SECTION (2A), SUB-SECTION 2B) THEREOF; (2) THE PURPOSE OF SUCH INCREASE OR REDUCTION IS TO ADJ UST AN EXCESS OR DEFICIENCY IN ANY PREVIOUS DEDUCTION; (3) THE PURPOSE OF INCREASE OR REDUCTION IS ALSO TO ADJ UST FAILURE TO DEDUCT DURING THE FINANCIAL YEAR. IN OTHER WORDS IF TAX IS NOT REGULARLY DEDUCTED AS PER SUB-SECTION (1) AT THE AVERAGE RATE OF INCOME-TAX COMPUTED ON THE BASIS OF RATES IN FORCE IN THE FINANCIAL YEAR THEN SECTION 192(3) WOULD ENABLE THE EMPLOYER TO MAKE GOOD THE DEFICIENCY. SIMILARLY A FAILURE TO DEDUCT DURING ANY MONTH OF THE FINANCIAL YEAR CAN BE MADE GOOD IN NEXT DEDUCTION. THEREFORE IN THE SAME WAY AS EXCESS OR DEFICIENCY ARISING OUT OF A PREVIOUS DEDUCTION IS MADE GOOD THEN FAILURE TO DEDUCT FROM ANY EARLIER P AYMENT CAN ALSO BE MADE GOOD BY INCREASING THE DEDUCTION FROM THE NEXT PAYMENT. THEREFORE, IT MAY NOT BE NECESSARY TO APPLY EXACT E XPRESSION USED IN SUB- SECTION (1) TO FIND OUT WHETHER ASSESSEE WAS IN DEF AULT OR NOT. IF THERE ITA NO.420/AHD/2011 ASST. YEAR 2004-05 11 WERE BONA FIDE REASONS IN DEDUCTING A LESSER TAX DU RING THE EARLIER MONTHS OF FINANCIAL YEAR AND IS MADE GOOD IMMEDIATELY AFTE R NOTICING SUCH SHORT-FALL, THEN SECTION 192(3) WOULD SAVE THE EMPL OYER FROM LIABILITY OF MAKING PAYMENT OF INTEREST. THEREFORE, IN OUR CONSI DERED VIEW WHAT IS REQUIRED TO BE SEEN BY THE AO IN RESPECT OF SHORT D EDUCTION, OR FAILURE OF DEDUCTION OF TAX BY THE EMPLOYER U/S 192(1) IS THAT WHETHER, WHILE MAKING THE PAYMENT OF SALARY TO THE EMPLOYEE, THERE WAS A BONA FIDE BELIEF IN MAKING THE LESSER DEDUCTION IN A PARTICUL AR MONTH AND IT WAS MADE GOOD IMMEDIATELY AFTER NOTICING THE DEFICIENCY . IF THERE IS A FINDING BY THE AO THAT EMPLOYER HAS TAKEN THE DEDUCTION CAS UALLY DURING THE EARLIER MONTHS OF THE FINANCIAL YEAR, BY NOT DEDUCT ING THE TAX CORRECTLY AS REQUIRED U/S 192(1), BUT HAD RESORTED TO LUMP SUM D EDUCTION OF TAX AT THE END OF THE FINANCIAL YEAR, THEN ONE CAN INFER THAT EMPLOYER HAS NOT DEDUCTED THE WHOLE OR ANY PART OF THE TAX AS REQUIR ED BY OR UNDER THE ACT; BEING THE CONDITION TO BE SATISFIED BEFORE CHARGING INTEREST U/S 201(1A). ACCORDINGLY THE AO HAS TO SEE WHAT WAS THE DEFICIEN CY IN DIFFERENT MONTHS FROM DEDUCTION OF TAX I.E. WHAT WAS ACTUALLY REQUIRED TO BE DEDUCTED AS PER SECTION 192(1), AND WHAT HAS BEEN A CTUALLY DEDUCTED, WHETHER THE DEFICIENCY IS SUBSTANTIAL AND CONTINUES TO PERCOLATE IN SUBSEQUENT MONTHS. IT WOULD INDICATE APPARENTLY, T HAT APPROACH IN DEDUCTION OF TAX WAS CASUAL AND DEFICIENCY IN DEDUC TION OF TAX IN EARLIER MONTH WAS NOT MADE GOOD IN THE IMMEDIATELY SUBSEQUE NT MONTHS. UNDER ITA NO.420/AHD/2011 ASST. YEAR 2004-05 12 THIS SITUATION ONUS WOULD BE ON THE ASSESSEE EMPLOY ER TO SHOW HIS BONA FIDES. AND IF NO SUCH BONA FIDE IS SHOWN THEN HE WO ULD BE LIABLE TO PAY INTEREST U/S 201(1A) FOR THE DEFICIENCY SO CONTINUE D. THE INTENTION OF SECTION 192(3) IS NOT THAT EMPLOYER CAN CASUALLY TA KE DEDUCTION OF TAX FROM PAYMENTS OF SALARY IN DIFFERENT MONTHS AND RES ORTS TO LUMP SUM DEDUCTION AT THE END OF THE FINANCIAL YEAR FOR MAKI NG GOOD THE DEFICIENCY. THE EMPLOYER HAS TO FIND OUT IMMEDIATEL Y AT THE TIME OF SUBSEQUENT PAYMENT TO THE EMPLOYEE WHETHER THERE WA S DEFICIENCY OF DEDUCTION OF TAX IN THE PRECEDING MONTH. HE HAS TO MAKE GOOD SUCH DEFICIENCY IN THE SUBSEQUENT FOLLOWING MONTH OR OTH ERWISE HAS TO SHOW HIS BONA FIDE. WE, THEREFORE, RESTORE THE MATTER TO THE FILE OF AO FOR FINDING OUT WHETHER THERE WAS A BONA FIDE IN NOT DE DUCTING THE TAX REGULARLY FROM THE PAYMENT OF SALARY IN EACH MONTH AND IF NOT, ASSESSEE WOULD BE LIABLE TO PAY INTEREST. IF THERE WAS BONA FIDE AND SHORTFALL IN EVERY MONTH WAS NOMINAL WHICH WAS MADE GOOD AT THE END OF THE YEAR THEN, NO MALA FIDE NEED TO BE SEEN. AS A RESULT, WE RESTORE THE MATTER TO THE FILE OF AO FOR CONSIDERING THE ABOVE MATTER AFR ESH. AS A RESULT, THE APPEAL IS ALLOWED BUT FOR STATISTICAL PURPOSES. ITA NO.420/AHD/2011 ASST. YEAR 2004-05 13 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 8/7/11. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 8/7/11. FIT FOR PUBLICATION. MAHATA/- (JM) (AM) COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 1/7/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 5/7/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..