2021 (4) TMI 28 - HC - Income Tax

Penalty u/s 271C (1) (a) - delayed deposit of the TDS deducted by the assessee - HELD THAT - We are pursuaded that the questions falling for consideration in the instant tax appeals are no more remain res integra and covered by the Full Bench judgment in Lakshadweep Development Corporation Ltd 2019 (3) TMI 333 - KERALA HIGH COURT in favour of the assessee as held once the burden is discharged by the person/assessee as to the existence of good and sufficient reason for not complying with the stipulation under Section 271C, it is for the authorities to consider with proper application of mind, whether the penalty is to be waived or reduced, based on the facts and circumstances. Section 271C of the Income Tax Act is quite categoric. Its scope and extent of application is discernible from the provision itself, in unambiguous terms. When the non-deduction of the whole or any part of the tax, as required by or under the various instances/provisions of Chapter XVII-B would invite penalty under Clause 271C(1)(a); only to a limited extent, involving sub-section (2) of Sec.115-O(coming under Chapter XIID) or covered by the 'second proviso' to Section 194B (coming under Chapter XVIIB) alone would constitute an instance where penalty can be imposed in terms of Section 271C(1)(b) of the Act. Since there is no obscurity in the above provision, it is not for the Court to read something more into it, contrary to the intent and legislative wisdom, which stands to be a forbidden field for the Court. It is settled law that the rule of 'strict interpretation' is the relevant one in so far as the fiscal statute is concerned. Hence levy of penalty, for delayed deposit of TDS is not attracted to the case on hand. - Decided in favour of assessee.

Summary

Issues:
- Whether the explanation offered by the appellant could have been considered positively under Sec.273B of the Income Tax Act, 1961?
- Whether the Tribunal failed to appreciate the distinction provided under Sec.273B of the Income Tax Act, 1961 vis-à-vis the cases covered by Sec.271C (1) (a)?
- Whether the imposition of penalty for the delayed deposit of the TDS deducted by the assessee is warranted or not?

Analysis:

1. The appeals raised the question of whether the appellant's explanation could be considered positively under Sec.273B of the Income Tax Act, 1961, and if the Tribunal failed to appreciate the distinction with Sec.271C (1) (a). The order under appeal confirmed the penalty imposed under Sec.271C of the Act, stating that the reasons for the belated deposit of tax deducted at source were not a 'reasonable cause' under Sec.273B. The CIT(A) relied on previous judgments to support this decision.

2. The appellant challenged the imposition of penalty, arguing that the questions raised in the appeals were covered in their favor by a Full Bench judgment. The questions addressed in the Full Bench judgment included whether the failure to deduct or pay tax automatically results in a penalty and if the benefit of Sec.273B could be claimed. The Full Bench clarified that the benefit of Sec.273B can be claimed even in cases of failure to remit tax deducted at source.

3. The Full Bench judgment established that once the burden is discharged by the assessee for not complying with the stipulations under Sec.271C, it is for the authorities to consider waiving or reducing the penalty based on the circumstances. The judgment emphasized the clear scope and application of Sec.271C, highlighting that penalty under Sec.271C(1)(b) can be imposed for failure to remit deducted tax. The Full Bench decision was crucial in determining the applicability of penalty in the case at hand.

4. The Court, following the Full Bench judgment, concluded that the questions raised in the appeals were no longer unresolved and were decided in favor of the assessee. Consequently, the levy of penalty for the delayed deposit of TDS was deemed not applicable in the present case. The impugned orders were set aside, and the appeals were allowed, with no costs imposed.

By meticulously analyzing the issues raised in the appeals and the legal principles applied, the Court ultimately ruled in favor of the assessee based on the interpretation of relevant provisions and established case law, thereby providing a comprehensive resolution to the legal dispute at hand.