Law:

Section:

Section 231, read with section 201, of the Income-tax Act, 1961 - Collection and recovery of tax - Period for commencing recovery proceedings - Position prior to 1-4-1989 - Assessment years 1974-75 to 1981-82 - Assessee contractor did not deduct tax under section 194C(2) while making payment to sub-contractors - Assessing Officer for assessment years 1974-75 to 1981-82, by issuing notice dated 26-2-1983, initiated recovery proceedings of said sum along with interest under section 201 - Whether since assessee had not deducted any tax when it was required to be deducted, he was deemed to be assessee-in-default in respect of tax as on date he made payment of any sum to his sub-contractor or credited such amount in his account as the case may be - Held, yes - Whether, however, since last financial year 1981-82 ended on 31-3-1981, in terms of section 231, no recovery proceedings could have been initiated after expiry of one year from 31-3-1981 - Held, yes - Whether, therefore, recovery proceedings initiated on 26-2-1983 in respect of sum not so deducted under section 194C(2) up to financial year ending on 31-3-1981, were barred by time - Held, yes Section 221, read with section 201, of the Income-tax Act, 1961 - Collection and recovery of tax - Penalty payable when tax in default - Assessment years 1974-75 to 1981-82 - Whether in matter of levy of penalty under section 221 read with section 201, an obligation is cast upon Assessing Officer to be satisfied that default by assessee was without good and sufficient reason - Held, yes - Whether where assessee did not deduct tax at source under section 194C(2) while making payment to sub-contractors under bona fide belief that since sub-contractors to whom payments were made did not have taxable income, no sum was required to be deducted at source and said bona fide belief was fortified by fact that no proceedings for assessing income of said persons had ever been initiated, it could be said that revenue had failed to discharge its burden in terms of proviso to section 201 by not placing any material on record that assessee had defaulted without good and sufficient reasons and, therefore, no penalty could be levied -…

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