Penalty recovery stay: administrative guidelines do not restrict discretion where belated tax remittance raises a prima facie case.

Recovery of penalty for belated deduction and remittance of tax deducted at source may be stayed pending appeal where a prima facie case exists that Section 271C does not apply. The notes state that CBDT instructions and office memoranda are guidelines and do not create a statutory restriction on discretion to grant stay under Section 220(6). Recovery was stayed pending disposal of the appeals and for two further weeks, subject to the prescribed aggregate payment, while the appeals were to be considered expeditiously. No final determination was made on Section 271C's applicability.

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Issues: Whether recovery of penalty imposed under Section 271C of the Income-tax Act, 1961 should be stayed during pendency of appeals, and whether administrative guidelines restrict discretion under Section 220(6) of the Income-tax Act, 1961.

Analysis: The Court noted that the petitioner had deducted and remitted tax, though belatedly, and that the Supreme Court ruling relied upon by the petitioner indicated that Section 271C does not apply to belated deduction and remittance of tax deducted at source. Without finally deciding the scope or applicability of Section 271C, the Court found a prima facie case in favour of the petitioner. The CBDT instruction and office memoranda were treated as guidelines which did not impose a statutory fetter on the discretion under Section 220(6). Balancing the prima facie case with revenue interest, recovery was stayed subject to aggregate payment of Rs. 4 crore within the prescribed period.

Outcome: Recovery pursuant to the penalty orders was stayed until disposal of the pending appeals and for a further period of two weeks thereafter, subject to payment of Rs. 4 crore. The appeals were directed to be considered expeditiously. No final adjudication was made on the applicability of Section 271C.

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