2021 (8) TMI 148

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.... to as "the Act") relevant to the Assessment Year 2015-2016. 2. The assessee has raised the following grounds of appeal: 1. In law and in the facts and circumstances of the appellant's case, the ld.AO as well as the ld.C.I.T(A) has erred in law and has passed the penalty order u/s.271C of the Act imposing penalty on the appellant amounting to Rs. 22,23,512. The penalty passed by the ld.AO and confirmed by the ld.CIT(A), is bad in law and therefore deserves to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the Ld.CIT(A), has erred in confirming the penalty levied by the ld.AO amounting to Rs. 22,23,512/- When no such penalty is leviable on the appellant, the penalty imposed by the ld.AO....

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....f section 271C of the Act are attracted in a situation where there is a default in deducting the TDS under the provisions of chapter XVIIB of the Act. The assessee has deducted the TDS but failed to deposit the same within the due date to the account of Government exchequer on account of some financial difficulty. As there was no default as far as deduction of TDS is concerned, therefore the penalty cannot be attracted under the provisions of section 271C of the Act. 4.3 However, the AO disregarded the contention of the assessee by observing that the assessee is exigible to the penalty under section 271C of the Act even it fails to deposit the amount of TDS to the account of Government exchequer within the due date after deducting the sa....

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....elow. 9. We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of clause 'a' specified under section 271C of the Act has a direct bearing on the issue on hand which reads as under: Penalty for failure to deduct tax at source. ^10 271C. ^11[(1) If any person fails to- (a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXX then, such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid.] 9.1 A plain reading of the pr....

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....ents advanced by the learned AR for the assessee with respect to deduction of TDS on the expenses as discussed above. Accordingly we reached to the conclusion that the assessee has deducted the TDS on the expenses as discussed above but failed to deposit the same in the account of Government exchequer account within the specified time. Thus in such a situation, the penalty under section 271C of the Act is not attracted. 9.4 We also note that the judgments relied by the authorities below in reaching to the conclusion that the assessee is subject to the penalty under the provisions of section 271C of the Act have been reversed by the subsequent judgment of the Hon'ble Kerala High Court of Full Bench in the case of Lakshadweep development C....