Reasonable cause defeats penalty for failure to collect tax at source where delayed compliance was supported by illness and payment evidence.

Penalty under section 271CA for failure to collect tax at source on sale of coal and lignite is not automatic where the assessee establishes reasonable cause under section 273B. The assessee had deposited the tax in the same financial year, though belatedly, and supported the delay with evidence that the person responsible for obtaining and filing Form 27C was unavailable due to illness. On those facts, the default was treated as not deliberate, reasonable cause was accepted, and the penalty was deleted.

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Issues: Whether penalty under section 271CA of the Income-tax Act, 1961 was sustainable for alleged failure to collect tax at source on sale of coal and lignite, and whether the assessee had shown reasonable cause under section 273B.

Analysis: The assessee had deposited the tax at source in the same financial year, though belatedly, and explained the delay by referring to the unavailability of the person responsible for obtaining and filing Form 27C due to illness. The material on record showed payment of the disputed amount and supported the plea that the default was not deliberate. Section 271CA is attracted for failure to collect tax at source, but the penalty is not automatic where reasonable cause is established. On the facts, the Tribunal accepted that the assessee had demonstrated reasonable cause within the meaning of section 273B.

Conclusion: The penalty under section 271CA was held unsustainable and was deleted, in favour of the assessee.

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