Reasonable cause under section 273B protects delayed TDS remittance where financial hardship explains the default and penalty fails.

Penalty under section 271C was held unsustainable where tax deducted at source was remitted with interest before the penalty notice and the delay was attributable to severe financial hardship, accumulated losses, and borrowing constraints. The Tribunal applied the Full Bench view that section 273B extends to section 271C in full, so reasonable cause can be examined even for failure to remit deducted tax. On the facts, the delay was treated as a genuine financial difficulty rather than wilful default, and relief under section 273B was available.

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Issues: Whether penalty under section 271C of the Income-tax Act, 1961 was leviable for delayed remittance of tax deducted at source and whether the assessee was entitled to the benefit of section 273B of the Income-tax Act, 1961 on account of reasonable cause.

Analysis: The tax deducted at source had been remitted with interest before the issue of the penalty notice. The assessee showed severe financial hardship, accumulated losses, and borrowing constraints, which were accepted as the cause for delay. The Tribunal followed the Full Bench view that section 273B applies to section 271C as a whole and that reasonable cause can be examined even in cases of failure to remit deducted tax. In the facts of the case, the delay was treated as arising from genuine financial difficulty rather than wilful default.

Conclusion: Penalty under section 271C was not sustainable, and the assessee was entitled to relief under section 273B.

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