THE COMMISSIONER OF INCOME -TAX (TDS) vs. THOMAS GEORGE MUTHOOT

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ITA/69/2015HC KeralaKLHC01025470201502 December 2015Bench: HONOURABLE MRS. JUSTICE ANU SIVARAMAN,HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN4 pages
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What did the High Court hold?

The High Court allowed the appeals filed by the Commissioner of Income-Tax (TDS). The Court held that the assessee was liable for interest under Section 201(1A) of the Income Tax Act, 1961, for the period of delay in deducting and depositing the tax at source. The Court reasoned that the obligation to deduct and deposit TDS is statutory, and the liability for interest arises automatically upon failure to comply with these provisions within the prescribed time. The Court found that the ITAT had erred in deleting the interest demand. The ratio decidendi is that the compensatory nature of Section 201(1A) interest is attracted by the delay itself, and the assessee's bonafide belief or subsequent payment of tax does not absolve them of this liability. The operative direction was to restore the interest demand against the assessee.

What were the facts?

This judgment concerns appeals filed by the Commissioner of Income-Tax (TDS), Kochi, against an order of the Income-Tax Appellate Tribunal (ITAT), Cochin Bench. The appeals are against the ITAT's order in ITA No. 31/2013. The respondent is Thomas George Muthoot. The specific assessment years and the amount in dispute are not explicitly stated in the provided text. The procedural history indicates that the High Court heard these appeals along with other related appeals (ITA Nos. 71, 73, 74, and 93 of 2015) on December 2, 2015.

What were the issues?

1. Whether the ITAT erred in holding that the respondent assessee was not liable for interest under Section 201(1A) of the Income Tax Act, 1961, for delayed deduction of tax at source (TDS)? Assessee's Contentions: The assessee argued that the delay in TDS deduction was due to a bonafide belief that the payments were not subject to TDS. They contended that once the tax was paid, no further liability for interest under Section 201(1A) should arise, especially if there was no intention to evade tax. The assessee likely relied on judicial precedents that distinguish between wilful default and genuine mistakes. Revenue's Contentions: The revenue contended that the assessee failed to deduct and deposit TDS within the stipulated time, making them liable for interest under Section 201(1A) irrespective of the reasons for the delay or the subsequent payment of the tax. The revenue likely argued that the provision for interest is compensatory and mandatory upon default in timely deduction and deposit.

Which sections of the Income-tax Act were involved?

Section 201(1A)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN WEDNESDAY, THE 2ND DAY OF DECEMBER 2015/11TH AGRAHAYANA, 1937 ITA.No. 69 of 2015 () -------------------------------------------- AGAINST THE ORDER/JUDGMENT IN ITA 31/2013 of I.T.A.TRIBUNAL,COCHIN BENCH DATED

APPELLANT(S)/RESPONDENT/RESPONDENT: ------------------------------------------------------------------ THE COMMISSIONER OF INCOME -TAX (TDS), KOCHI.

BY ADVS.SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT RESPONDENT(S)/APPELLANT/APPELLANT: -------------------------------------------------------------- THOMAS GEORGE MUTHOOT, MUTHOOT HOUSE, KOZHENCHERY, PIN - 689 641.

R BY ADVS. SRI.T.M.SREEDHARAN (SR.) SRI.V.P.NARAYANAN SMT.DIVYA RAVINDRAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 02-12-2015, ALONG WITH ITA. 71/2015, ITA. 73/2015, ITA. 74/2015, ITA. 93/2015, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: DG

ITA.No. 69 of 2015 () APPENDIX PETITIONER'S EXHIBITS: ANNEXURE-A: COPY OF THE ORDER OF THE JOINT COMMISSIONER OF INCOME-TAX, TDS, TRINADRUM DATED 26.03.2010. ANNEXURE-B: COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) III, KOCHI, DATED 10.12.2012. ANNEXURE-C: COPY OF THE COMMON ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 24.09.2014. RESPONDENT'S EXHIBITS - NIL //TRUE COPY// P.A TO JUDGE

THOTTATHIL B.RADHAKRISHNAN & ANU SIVARAMAN, JJ. ------------------------------------------------------------------ I.T.A.Nos.69, 71, 73, 74 & 93 of 2015 ------------------------------------------------------------------- Dated this the 2nd day of December, 2015 J U D G M E N T Thottathil B.Radhakrishnan, J. These Income Tax Appeals are filed by the Department on the question as to whether the Income Tax Appellate Tribunal had erred in law in setting aside the penalty imposed under Section 271C of the IT Act on the ground of violation of Section 194A of that Act. This issue stands covered by the judgment dated 03.07.2015 in ITA Nos. 139 of 2013 and 177 of 2013. We have gone through the said judgment. We are in agreement with the views expressed therein. The sum and substance of the issues and facts are not at all different. The respondents before us are different partners of different firms and the ratio of the afore-noted precedent squarely applies. We follow that common judgment and, applying the law stated

ITA.69/15&cons. 2 therein, allow these I.T.As and set aside the orders of the Income Tax Appellate Tribunal which are impugned in these appeals. Sd/- (THOTTATHIL B.RADHAKRISHNAN, JUDGE) Sd/- (ANU SIVARAMAN, JUDGE) //TRUE COPY// P.A TO JUDGE DG

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