TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 1299
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....ed an order u/s 201(1)/201(1A) on 30/7/2013 raising the demand and treating the assessee as an 'assessee-in-default'. Thereafter, the assessee had remitted the entire TDS and the interest and did not file an appeal against that order. Subsequently, the AO initiated proceedings u/s 221 for levy of penalty for the failure on the part of the assessee to remit the TDS in time, heard the assessee, found from the assesee's books of account, inter alia, that its statement that faced financial crunch was bogus and, on the other hand, it had consciously avoided remitting the tax deducted at source in time and made the remittance only when it was visited with a survey, it had deliberately delayed the remittance of the TDS amounting to Rs. 2.05 crores etc and then levied penalty at Rs. 77,95,155/-, @ 5% pm on the defaulted TDS. 03. Aggrieved, the assessee filed an appeal before the CIT(A)-13, Bengaluru. The CIT(A) held, inter alia, that consequent to the order passed u/s 201(1), the assessee was served with a demand notice u/s 156 dated 30/7/2013 providing 30 days time to make the payment and it paid the said tax within four days from the date of demand notice, perusal of the as....
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....ome-tax Act, 1961. 06. Since the assessee did not violate the conditions in paras 4 and 5 in Form no.7, above, he pleaded that the levy of penalty u/s.221 is not in accordance with the Act. Further, he submitted that as per the sub-section (4) of section 220, if the amount is not paid within the time limited under sub-section (1) of section 220 only the assessee shall be deemed to be in default. In its case, since it paid within four days of the demand notice, the AO cannot treat it as an assessee in default and relied on the CIT (A) order. 07. In his rejoinder, the Ld. DR submitted that the assessee is in default as per section 201(1) and its case is clearly covered within the scope of Explanation to Section 221. 08. We have perused the materials and heard the rival contentions. The facts are that (a) the assessee has deducted the tax at the time of making the payment of salaries, dividends, interest as also on the payment made to contractors. (b) it has delayed in depositing the amounts of tax deducted in (a) above with the Revenue ;(c) There is no dispute about the quantum of tax deducted which has been deposited late with the Revenue ; and (d) the quantum of tax deducted ....
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....d to deduct and pay tax" of the proviso is contrasted with the words "fails to pay the tax as required by or under this Act" found in section 201(1) as well as section 201(1A) of the Act. In view of this difference in the language, it is submitted that the proviso would have no application where an assessee has paid the tax even if the same is paid beyond the period provided under the Act. This is contested by the Revenue on the ground that the proviso applies only in case of a person who has failed to satisfy both the condition therein, i.e., fails to deduct and also fails to pay the tax. This interpretation is also supported by the words found in sub-section (1) of section 201 of the Act which provides "... principal officer of the company does not deduct or after deducting fails to pay the tax as required by or under this Act". In this case, the tax has been deducted but there is a failure in depositing the tax with the Revenue. Parliament treats a person who has deducted the tax and fails to pay it to the Revenue as a class different from a person who has not deducted the tax and also not deposited the tax with the Revenue. This is for the reason that in the first class of case....
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....section 221(1) of the Act commencing with the words "where an assessee is in default or is deemed to be in default" cannot stand in the face of the Explanation which clarifies that merely because the tax has been paid/deposited before the levy of penalty, would also take in all acts, from the imposition of the charge up to/till the entire process of raising demand and collecting the same. The construction sought to be put on the Explanation does not allow full amplitude to the words "levy". Besides purposive interpretation also supports the above view as otherwise the construction as suggested by the appellant would enable an assessee to deduct tax at source from the payment being made and not deposit it with the Revenue within time prescribed. Therefore, utilise the amount in effect till such time just before the notice under section 221 of the Act is issued. 25. It must be borne in mind that the assessee continues to be in default in case the tax has not been deposited with Revenue within the time prescribed under the Act. Tax deposited, thereafter, but before penalty proceedings are initiated would not cleanse the assessee from being in default. The penalty is imposed upon th....
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....reference to the timely remittance of the taxes already deducted from amounts paid/payable to parties. The appellant was found to have received a sum of Rs. 2.69 crores in April 2013, which could have been used for remitting the TDS but it had failed to do so. 3) Whether the assessee had cleared other statutory dues ? The appellant had paid service tax amounting to Rs. 83.75 lakhs out of Rs. 91.96 lakhs collected by it and remitted PF of Rs. 15-odd lakhs out of Rs. 16.26 lakhs collected by it. The AO submitted as under: 1. In the financial year the assessee had received funds to the tune of 159 crores. The claim of non-receipt of money from clients is not true. 2. The payments made to various parties to the extent of 164 crores disprove the claim of financial difficulty. 3. The payments made for investment in land/site, vehicles and as loans and advances to private parties without purpose and to group concern, declare loudly and in unambiguous terms that the assessee had no financial difficulty whatsoever. 4. The assessee had cleared other statutory dues on regular basis, as it had no financial difficulty etc. 11. The assessee submitted inter alia as under: ....