Penalty for late deposit of tax deducted at source remains valid despite interest payment, later remittance, or financial hardship.

Valid jurisdiction could be conferred on the Assistant Commissioner under the Act to impose penalty for failure to deposit tax deducted at source within time. The penalty under section 221 was treated as distinct from the default covered by section 271C, because section 221 addresses non-deposit of deducted tax, not non-deduction. Subsequent payment of the tax, payment of interest, or financial hardship did not remove liability for penalty, and business loss was not a defence to the statutory obligation to remit deducted tax to the Central Government within the prescribed time.

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Issues: Whether the Assistant Commissioner of Income-tax had jurisdiction to impose penalty under section 221 of the Income-tax Act, 1961 for failure to deposit tax deducted at source within time, and whether payment of interest or plea of financial hardship barred such penalty.

Analysis: The definition of "Assessing Officer" and the power to confer jurisdiction under section 120 empowered the Chief Commissioner to authorize the Assistant Commissioner to exercise powers including those under section 221. The penalty under section 221 was held to operate on a different default from the penalty contemplated under section 271C, which deals with failure to deduct tax, whereas section 221 deals with failure to deposit deducted tax within the prescribed time. The Explanation to section 221 makes it clear that subsequent payment of tax does not wipe out liability to penalty, and the levy of interest does not exclude penalty. The assessee's loss and financial strain were held irrelevant to the obligation to remit deducted tax to the Central Government within time.

Conclusion: The penalty order under section 221 was upheld and the challenge to the Assistant Commissioner's jurisdiction and to the levy of penalty failed.

Final Conclusion: The appeal was rejected on merits and the interim relief sought by the assessee was declined.

Ratio Decidendi: Where jurisdiction has been validly conferred under the Act, failure to deposit tax deducted at source within time attracts penalty under section 221 notwithstanding payment of interest or later payment of the tax, and business hardship is no defence to that statutory default.

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