SANTHANAGOPALAN CHITRA,TIRUCHIRAPALLI vs. ITO, TDS WARD-1,, TIRUCHIRAPALLI

This appeal filed by the assessee is directed against the order dated 10.05.2024 passed by the ADDL/JCIT(A)-2, Mumbai for the assessment year 2022-23.

We find no representation on behalf of the assessee nor any application filed seeking adjournment. Thus, the assessee called absent and set exparte. We proceed to decide the appeal on merits after hearing the ld. DR basing on the material available on record.

We note that the assessee is a Doctor by profession, conducts business under name and style of Lalitha Nursing Home & Shyamala Nursing Home. A survey was conducted on 31.12.2021 and found an amount of ₹.1,12,50,000/- towards salary to Dr. V. Akila and Dr. N. Gayathri. According to the ITO, TDS, the said TDS was made under section 194J of the Income Tax Act, 1961 [“Act” in short] @ 10% under professional charges instead of section 192 of the Act at average rate of tax under salary. In explanation, the assessee admitted the same as clerical mistake of the accounts department and paid differential amount of ₹.23,75,000/-. The ITO, TDS imposed interest payable under section 201(1A) of the Act for late deduction/short deduction to an extent of ₹.1,49,050/-.

Aggrieved by the order of the ITO, TDS, the assessee preferred an appeal before the ld. CIT(A) with a contention that the assessee cannot be construed to have acted deliberately in defiance of law by deducting tax at lower rates under section 194J of the Act instead of 192 of the Act. The deductions under section 194J of the Act were made on a bonafide belief and on the advice of tax consultants. The assessee placed reliance of case law, which are reflected in page 7 of the impugned order. The ld. CIT(A) confirmed the order of the Assessing Officer in levying interest under section 201(1A) of the Act by holding that the levy of interest under section 201(1A) of the Act is consequential and mandatory.

The ld. DR Ms. Gauthami Manivasagam, JCIT submits that the assessee is not contesting the chargeability of TDS as to whether under section 194J or 192 of the Act. The assessee clearly admitted that TDS is required to be made under section 192 or under section 194J of the Act and accordingly, paid the additional amount to the exchequer. The assessee cannot raise non-levy of interest under section 201(1A) of the Act at this stage as there was no dispute with regard to the deduction of TDS under the head “professional charges” or under the head “salary”. The ld. CIT(A) rightly confirmed the order of the Assessing Officer and prayed to dismiss the ground raised by the assessee.

Heard the ld. DR and perused the material available on record. Admittedly, as rightly pointed by the ld. DR there is no ambiguity as to which provision under section 194J or 192 of the Act is applicable to the facts on hand. The dispute only with regard to levy of interest under section 201(1A) of the Act, which is leviable for short deduction/late deduction and we have to examine as to whether the interest could be levied under section 201(1A) of the Act or not. The survey team observed that the amounts paid to two Doctors are under the head “salary” and therefore, the TDS under section 192 of the Act is to be made. The assessee contended that it was due to mistake of the accounts department, TDS was deducted under the head “professional charges”. The assessee admitted the said mistake and paid the difference of TDS in respect of salary under section 192 of the Act. A contention was made before the ld. CIT(A) that the assessee cannot be construed to have deliberately acted in short deduction for the reason as the assessee was in the impression that TDS requires to be at 10% of professional charges. Therefore, the levy of interest under section 201(1A) of the Act is not justified as the short deduction was bonafide belief on the advice of accounts department, which is according to the assessee, a mistake. The ld. CIT(A) held that levy of interest under section 201(1A) is consequential and mandatory. In view of the same, we shall examine the provisions of section 201 of the Act. Under clause (b) of sub-section 1 of section 201 of the Act explains that any person, including Principal Officer of the Company shall be deemed to be an assessee in default in respect of such tax, where any person including the Principal Officer of the Company does not deduct, or does not pay or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act. In the present case, as discussed above, the assessee deducted TDS, but, at the rate of 10% under the head “professional charges” under section 194J of the Act instead of under the head “salary” under section 192 of the Act. There was no allegation by the ITO, TDS that no tax was deducted or paid or after so deducted failed to pay the whole or any part of the tax. Therefore, in our opinion, in the present case, the assessee cannot be deemed to be an assessee in default in respect of short deduction of tax. Therefore, imposition of interest for short deduction as imposed by the ITO, TDS, which was confirmed by the ld. CIT(A) is not justified. Accordingly, the interest levied under section 201(1A) of the Act stands deleted. Thus, the ground raised by the assessee is allowed.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 13th September, 2024 at Chennai.