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TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 418
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....) (or belated remittance of the TDS), the respective assessees have preferred the present appeals. CIVIL APPEAL NO. 7934/2011 2. The facts leading the present appeal in a nutshell are as under: 2.1 From 01.04.2002 to February, 2003, the appellant - assessee, engaged in a software development business at Techno Park, Trivandrum which employed about 700 employees, deducted tax at source (TDS) in respect of salaries, contract payments, etc., totalling Rs. 1,10,41,898/for the Page 2 of 31 assessment year (AY) 2003-04. In March, the assessee remitted part of the TDS being Rs. 38,94,687/and balance of Rs. 71,47,211/was remitted later. Thus, the period of delay ranged from 05 days to 10 months. On 10.03.2003, a survey was conducted by the Revenue at assessee's premises and it was noted that TDS was not deposited within the prescribed dates under Income Tax Rules (IT Rules). On 02.06.2003, Income Tax Officer (ITO) vide order under Section 201(1A) of the Act, 1961 levied penal interest of Rs. 4,97,920/for the period of delay in remittance of TDS. On 09.10.2003, the Additional Commissioner of Income Tax issued a show cause notice proposing to levy penalty under Section 271C of the amount....
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....levy of penalty under Section 271C of the Act, 1961 is not justifiable at all. It is submitted that in the facts and circumstances of the case there shall not be any penalty leviable under Section 271C of the Act, 1961. 5.1 It is further submitted by Shri Arijit Prasad, learned Senior Advocate appearing on behalf of the assessee that here is the case of late remittance of the TDS and not a case of nondeduction of TDS at all. It is submitted that therefore, at the most, the assessee shall be liable to pay the penal interest leviable under Section 201(1A) of the Act, 1961. It is submitted that however, there shall not be any levy of penalty under Section 271C of the Act, 1961 on mere late remittance of the TDS though deducted. 5.2 It is further submitted by Shri Arijit Prasad, learned Senior Advocate appearing on behalf of the assessee that Section 271C would be applicable only in case of nondeduction of whole or any part of the tax [Section 271C(1) (a)]. It is submitted that Section 271C(1)(a) shall be applicable in case of nondeduction of whole or any part of the tax as required by or under the provisions of Chapter XVIIB. It is submitted that in the present case Section 271C(1)(....
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....271C of the Act. It is submitted that therefore, wherever, the Parliament wanted to provide for the consequences on nonpayment of the TDS, the same is provided like Section 276B of the Act. It is submitted that therefore, thus the words in Section 271C and Section 276B are different and distinct. 5.7 It is further submitted by Shri Arijit Prasad, learned Senior Advocate appearing on behalf of the assessee that even otherwise, the impugned judgment and order passed by the High Court has been subsequently overruled by the Full Bench of the Kerala High Court in the case of Lakshadweep Development Corporation Ltd. Vs. Additional Commissioner of Income Tax (TDS) and Anr. (2019) 411 ITR 213 (FB). 5.8 It is further submitted by learned counsel appearing on behalf of the respective assessees in respective appeals that even otherwise in exercise of powers under Section 273B, no penalty shall be imposed on the person or the assessee, for any failure, if he proves that there was a reasonable cause for the said failure. Reliance is placed on the decision of this Court in the case of CIT Vs. Bank of Nova Scotia (2016) 15 SCC 81. 5.9 It is submitted that in the case of Civil Appeals Nos. 1258....
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.... 7. Heard learned counsel appearing on behalf of the respective parties at length. 7.1 The short question which is posed for the consideration of this Court is in case of belated remittance of the TDS after deducting the TDS whether such an assessee is liable to pay penalty under Section 271C of the Act, 1961? 7.2 The question which is also posed for the consideration of this Court is what is the meaning and scope of the words "fails to deduct" occurring in Section 271C(1)(a) and whether an assessee who caused delay in remittance of TDS deducted by him, can be said a person who "fails to deduct TDS"? 7.3 In order to appreciate the rival contentions and to answer the aforesaid questions, it is necessary to have analysis of Statutory provisions. 7.4 The relevant provisions are as under: " Section 201(1A) of the Act Without prejudice to the provisions of subsection (1), if any such person, principal officer or company as is referred to in that subsection does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest, - (i) at one per cent for every month or part of ....
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.... XVIIB; or (b) the tax payable by him, as required by or under,- (i) subsection (2) of Section 115-O; or (ii) the second proviso to Section 194B, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine." 7.5 At the outset, it is required to be noted that all these cases are with respect to the belated remittance of the TDS though deducted by the assessee and therefore, Section 271C(1)(a) shall be applicable. At the cost of repetition, it is observed that it is a case of belated remittance of the TDS though deducted by the assessee and not a case of nondeduction of TDS at all. 7.6 As per Section 271C(1)(a), if any person fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVIIB then such a 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. So far as failure to pay the whole or any part of the tax is concerned, the same would be with respect to Section 271C(1)(b) which is not the case here. Therefore, Section 271C(1)(a) shall be applicable ....
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....educting the same. At this stage, it is required to be noted that Section 271C has been amended subsequently in the year 1997 providing Sections 271C(1)(a) and 271C(1)(b). As observed hereinabove, fails to pay the whole or any part of the tax would be falling under Section 271C(1)(b) and the word used between 271C(1)(a) and 271C(1)(b) is "or". At this stage, it is required to be noted that Section 276B provides for prosecution in case of failure to "pay" tax to the credit of Central Government. The word "pay" is missing in Section 271C(1)(a). 8. Now so far as the reliance placed upon the CBDT's Circular No. 551 dated 23.01.1998 by learned ASG is concerned, at the outset, it is required to be noted that the said circular as such favours the assessee. Circular No. 551 deals with the circumstances under which Section 271C was introduced in the Statute, for levy of penalty. Paragraph 16.5 of the above Circular reads as follows: "16.5: Insertion of a new section 271C to provide for levy of penalty for failure to deduct tax at sourceunder the old provisions of Chapter XXI of the Income Tax Act no penalty was provided for failure to deduct tax at source. This default, however, attracte....