INCOME TAX ACT, 1961

Section 271C(1) Section 273B

Penalty under section 271C(1) - Reduction or waiver of penalty - Reasonable cause - Delay in paying whole or part, tax deducted at source

Assessee was a 100 per cent. Government of India undertaking, incorporated under the Companies Act, 1956. Its operation was mainly for the general welfare of the people of the Lakshadweep Islands. The task as was undertaken through contractors, who were being paid accordingly. There occurred some delay in paying the tax deducted at source from the bills of the contractors. On coming across the lapse on the part of the assessee, notice was issued under section 274 read with section 271C, proposing to impose penalty. According to the assessee, it was only a 'short delay', because of administrative exigencies and shortage of staff. The situation arose when certain invoices/bills of contract works corresponding to the financial year in question were received after that financial year. It was asserted that the TDS was recovered at the time of effecting payment to such contractor. But, there occurred an inadvertent omission in remitting the same to the government, which however, was cleared with interest payable under section 201(1A). An equal amount of tax in respect of the financial year concerned, was imposed upon the assessee as penalty under section 271C. Benefit of section 273B was also denied. Assessee filed appeal before all lower appellate authorities but without success.Held:Circular No. 551 deals with the circumstances under which section 271C was introduced in the statute book, for levy of penalty. On deduction of tax, if there is delay in remitting the amount to the Revenue, it had to be satisfied with interest as payable under section 201(1A) as mentioned above, besides the liability to face the prosecution proceedings, if launched in appropriate cases, in terms of section 276B. This alone has been sought to be explained in the said Circular issued by the CBDT. Even according to the CBDT, no penalty is envisaged under section 271C for non-payment of the tax deducted at source. Non-remittance of tax deducted at source as in the instant case (which comes under section 194C of Chapter XVII-B of the Act) was not covered by section 271C(1)(b) to attract penalty. Nothing remains to be considered further, either by the Tribunal or by this court since the verdict passed by the Departmental authorities and the Tribunal stand contrary to the declaration as above. The said orders stand set aside. The appeals were allowed accordingly.

Overruled:U.S. Technologies International (P) ltd. v. CIt (2010) KHC 6118 : (2010) (1) KIT SN 66 and Classic Concepts Home India (P) Ltd. v. CIT (2016) 383 ITR 626 (Ker) : 2015 TaxPub(DT) 2535 (Ker-HC).

REFERRED : CIT (TVS) v. Muthoot Bankers (2017) 398 ITR 276 (Ker) : 2017 TaxPub(DT) 4214 (Ker-HC), CIT v. Eli Lilly and Company (India) (P) Ltd. (2009) 312 ITR 225 (SC) : 2009 TaxPub(DT) 1585 (SC), Sneh Enterprises v. Commissioner of Customs (2006) 7 SCC 714, A.V. Fernandez v. State of Kerala, AIR 1957 SC 657, ITO v. T.S. Deoinatha Nadar (1968) 68 ITR 252 (SC) : 1968 TaxPub(DT) 0296 (SC), Nalinakhya Bysack v. Shyamsunder Haldar AIR 1953 SC 148, Trutuf Safety Glass Industries v. Commissioner of Sales-tax (2007) (3) KLT1013, Union of India v. Dharamendra Textile Processors (2008) 306 ITR 277 (SC) : 2008 TaxPub(DT) 2320 (SC), Singareni Collieries Co. Ltd. v. Vemuganti Ramakrishan Rao (2013) 8 SCC 789 and State of Uttar Pradesh v. Subhash Chandra Jaiszval (2017) 5 SCC 163.

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