Strict construction of penalty provisions limits Section 271C(1)(b) and preserves reasonable-cause relief under Section 273B.

Section 271C(1)(b) is confined to the specific defaults expressly mentioned in that provision and cannot be extended to non-remittance of tax deducted at source under Section 194C; such a default falls outside its scope under a strict reading of the penalty provision. Section 273B applies to Section 271C as a whole and permits relief where the assessee proves reasonable cause, including in cases involving non-payment of deducted tax. The stated ratio is that fiscal penalty clauses must be construed strictly and cannot be enlarged by implication.

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Issues: (i) whether Section 271C(1)(b) of the Income-tax Act, 1961 covers failure to remit tax already deducted at source in cases falling under Section 194C; and (ii) whether the benefit of Section 273B is available where the default is non-payment of deducted tax.

Issue (i): Whether Section 271C(1)(b) covers failure to remit tax already deducted at source in cases falling under Section 194C.

Analysis: Section 271C(1)(a) separately deals with failure to deduct tax under Chapter XVII-B, while Section 271C(1)(b) is confined to failure to pay tax only in the specific situations mentioned in sub-section (2) of Section 115-O and the second proviso to Section 194B. The provision is clear and unambiguous, and in a fiscal statute it cannot be enlarged by reading the default covered by clause (a) into clause (b). Non-remittance of tax deducted under Section 194C is therefore outside the scope of Section 271C(1)(b).

Conclusion: Section 271C(1)(b) does not apply to non-payment of tax deducted at source under Section 194C, and penalty was not leviable on that basis.

Issue (ii): Whether the benefit of Section 273B is available where the default is non-payment of deducted tax.

Analysis: Section 273B applies to Section 271C in its entirety and contains no restriction confining reasonable-cause relief only to clause (a) of Section 271C(1). Where the statute permits penalty to be imposed, the assessee may still avoid it by proving reasonable cause. The earlier view that Section 273B was unavailable for cases of non-remittance of deducted tax was incorrect.

Conclusion: The benefit of Section 273B is available even in cases falling under Section 271C(1)(b), subject to proof of reasonable cause.

Final Conclusion: The contrary departmental and appellate orders were set aside, the reference was answered in favour of the assessee, and the appeals were allowed.

Ratio Decidendi: In a fiscal statute, a penalty provision must be construed strictly, and a court cannot enlarge a clearly limited penal clause by reading into it defaults covered by a different clause; Section 273B remains available where the statute itself includes Section 271C.

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