TaxTMI 
TaxTMI 
2024 (5) TMI 596
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.... had initially been entertained since the principal question of whether External Development Charges would be covered under Section 194C was pending consideration before this Court. 2. That question has since been duly examined and a final decision has been rendered on 13 February 2024. We note that in Puri Construction Pvt. Ltd. vs. ACIT & Ors. [2024 SCC OnLine Del 939], while dealing with the aspect of penalty, we had observed as follows:- "84. However, while this may have conceivably been a valid ground to interdict some of the impugned show-cause notices, we find no justification to invoke our prerogative writ powers on this score since the petitioners have, in the course of these proceedings, been afforded more than an ample and ade....
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.... or 271C not being an inevitable corollary in case of default. This position is made explicit by the second proviso to section 221 as well as section 273B. The imposition of penalty where a question with respect to taxability had remained unclear or where an assessee had good and sufficient cause to not deposit the tax were lucidly explained by the Supreme Court in CIT v. Eli Lilly and Co. (India) (P.) Ltd. [(2009) 312 ITR 225 (SC); (2009) 15 SCC 1; 2009 SCC OnLine SC 628.] in the following terms (page 251 of 312 ITR): "91. A bare reading of section 201(1) shows that interest under section 201(1A) read with section 201(1) can only be levied when a person is declared as an assessee-in-default. For computation of interest under section 201....
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....and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason. 95. In each of the 104 cases before us, we find that non-deduction of tax at source took place on account of controversial addition. The concept of aggregation or consolidation of the entire income chargeable under the head "Salaries" being exigible to deduction of tax at source under section 192 was a nascent issue. It has not been considered by this court before. Further, in most of these cases, the tax deductor-assessee has not claimed deduction under section 40(a)(iii) in computation of its business income. This is one more reason for not imposing penalty under section 271C because by not claiming deducti....
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....he Tribunal came to the right conclusion that the tax once again could not be recovered from the appellant (dedutor-assessee) since the tax has already been paid by the recipient of income.... 9. Be that as it may, Circular No. 275/201/95IT(B), dated January 29, 1997 issued by the Central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares "no demand visualized under section 201(1) of the Income-tax Act should be enforced after the tax deductor has satisfied the officer in charge of tax deduction at source, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(1A) of the Act till the date of payment ....
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.... paid. If, in any case, interest accrues for the aforestated period and if it is not paid then the adjudicating authority shall take steps to recover interest for the aforestated period under section 201(1A)." It appears to us that if the recipient of income on which tax at source has not been deducted, even though it was liable to such deduction under the Income-tax Act, has already included that amount in its income and paid taxes on the same, the assessee can no longer be proceeded against for recovery of the short fall in tax deducted at source. However, it would be open to the Revenue to seek payment of interest under section 201(1A) for the period between the date of default in deduction of tax at source and the date on which the r....
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....ce. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason. 95. In each of the 104 cases before us, we find that non-deduction of tax at source took place on account of controversial addition. The concept of aggregation or consolidation of the entire income chargeable under the head "Salaries" being exigible to deduction of tax at source under section 192 was a nascent issue... The tax-deductor-assessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/head office and, consequently, we are of the vie....