TaxTMI 
TaxTMI 
2017 (8) TMI 284
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....r the statutory scheme is mandatory in nature in addition to the amount of arrears and amount of interest etc. and the respondentassessee after timely deduction defaulted in depositing the amount of tax deducted at source to the credit of the Central Government Account within the time prescribed under Rule 30 of the Income Tax Rules, 1962 read with Section 200 of the Income Tax Act, 1961?" (b)Whether on the facts and in the circumstances of the case Hon'ble ITAT is right in law in applying second proviso to Section 221 of the Income Tax Act, 1961 while holding that the ignorance and lack of proper understanding of Indian Tax Law on behalf of the respondent-assessee constitutes good and sufficient reason for not levying any penalty under the aforesaid section of the Act? (c) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in law in deleting the penalty under Section 221 of the Income Tax Act, 1961 by holding that the respondent-assessee has paid the amount of tax deducted at source to the credit of the Central Government Account along with due interest ignoring the true intent and import of the provision inserted in the Explanat....
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....ow cause notice dated 16.07.2010 under Section 201 read with Section 221(1) of the Act. Vide order dated 10.08.2010, Annexure A.1, the Assessing Officer held that respondentassessee was deemed to be an 'assessee in default' under Section 201 of the Act and imposed penalty of Rs. 25,00,000/- upon the respondentassessee under Section 221 of the Act. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] against the order of penalty under Section 221(1) of the Act read with Section 201(1) of the Act. The appeal was filed after the expiry of the period of limitation. Vide order dated 14.03.2011, Annexure A.2, the CIT(A) condoned the delay in filing the appeal and allowed the appeal filed by the assessee holding that the issue of tax deducted at source from the salary of non-residents expatriated to India was a debatable issue which was finally concluded by the Apex Court in the case of Commissioner of Income Tax Vs. Eli Lilly and Co. (India) Private Limited [2009] 312 ITR 225. It was held that no penalty was leviable as the Apex Court had also quashed the penalty proceedings under Section 271C of the Act. Since the issue was debata....
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....enalty under Section 22(1) of the Act is subject to the satisfaction of the Assessing Officer and reasonable cause for non compliance. Section 221 of the Act reads thus:- "Penalty payable when tax in default. 221. (1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as the Assessing Officer may direct, and in the case of a continuing default, such further amount or amounts as the Assessing Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears : Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard : Provided further that where the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section. Explanation.-For the removal of doubt, it is hereby declared that an assessee shall not cease to be liabl....
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....essee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section. The proviso to Section 201(1) also lays down that no penalty shall be charged under Section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. Thus, the levy of penalty under Section 221(1) is subject to the satisfaction of the Assessing Officer and reasonable cause for non compliance. The learned counsel has relied upon the decision of Hon'ble Supreme Court in the case of Hindustan Steel Limited Vs. State of Orissa (83 ITR 26), wherein the Hon'ble Apex Court has held that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasicriminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. However, recently, it has been held by the Hon'ble Supreme court in the case of Amit Mohan Bindal (317 ITR 1) that the pena....
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....parent employer in Japan in their home country but the services by the expatriate employees were rendered in India by virtue of the joint venture arrangement with L&T Group. It is for these reasons of uncertainty and difficulties involved in several cases that the Hon'ble Supreme Court has quashed penalty proceedings under Section 271C initiated for default of non deduction of tax at source by the Indian joint venture partners. The Hon'ble Court has specifically restricted the action only to the charging of interest for non compliance to the provisions relating to the TDS. Para 38 of the order is reproduced below: "38. For the reasons mentioned hereinabove, however, no penalty proceedings under Section 271C shall be taken in any of these cases as the issue involved was a nascent issue. Accordingly, we quash the penalty proceedings under Section 271C". When penalty under Section 271C has not been held to be leviable in these facts and circumstances of several cases (104 appeals) involved in the case of Elli Lilly & Co. (India) Private Limited, the default of non payment of TDS is subsequent to the default of non deduction. The Assessing Officer has mentioned in the....