SIVASHAKTHI AND CO Vs. FOURTH INCOME-TAX OFFICER

JUDGEMENT

(1.) These appeals are directed against the levy of interest under section 201(1A) of the Income-tax Act, 1961.

(2.) The assessee is a registered firm. In making the assessment for the assessment years 1982-83 and 1983-84, the Income-tax Officer found that the assessee had not deducted tax at source while paying interest on capital borrowed. He, therefore levied interest under section 201(1A) of the Income-tax Act. This was confirmed in appeal.

(3.) In the further appeal before us it is not in dispute that the assessee was liable to deduct interest and it had failed to do so and, therefore, prima facie interest is chargeable under section 201(1A) of the Act. However, the assessee has taken a technical plea that the wording of this section does not extend to a person who has failed to deduct the tax. The argument is as follows : Sub-section (1A) states that if any such person, does not deduct or after deducting fails to pay the tax as required by the Act he shall liable to pay interest. Since the words such person has not been defined (even though it occurs in section 201(1) also, we have to refer to the immediately preceding section 200 which refers to any person deducting any sum in accordance with the provisions of sections 192 to 194 imposing a duty on him to pay the sum deducted within the prescribed time. It was submitted that if words such person refers only to the persons referred in section 200, those persons are those who have deducted the tax and delayed in making payment and not those who have failed to deduct the tax. Hence, such person does not take into account the persons who fail to deduct the tax. It was argued that section 201 refers to two separate offences, viz. failing to deduct, and failing to pay the tax after deduction. The second is a greater offence since it refers to the mis-use of the funds collected on behalf of the revenue and unless there is an express intention to treat the offences pari materia, interest, which is of a penal nature cannot be imposed on a person who has not committed an equally serious offence. On the other hand, it was contended on behalf of the revenue that in the context of section 201 the expression "such person" would refer to all persons liable to deduct tax under the provisions of sections 192 to 194.