2015 (6) TMI 399 - HC - Income Tax

Penalty levied under Section 271C - tax was deducted at source and was remitted belatedly - Held that - It is the admitted case of the parties that the tax was deducted at source and the same was remitted belatedly though with interest. In such a case the provisions of Section 271C are fully applicable. Insertion of a new Section 271C to provide for levy of penalty for failure to deduct tax at source. Under 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 attracted prosecution under the provisions of Section 276B which prescribed punishment for failure to deduct tax at source or after deducting failure to pay the same to the Govt. It was decided that the first part of the default i.e. failure to deduct tax at source should be made liable to liable to levy of penalty while the second part of the default i.e. failure to pay the tax deducted at source to the Govt. which is a more serious offence should continue to attract prosecution. The Amending Act 1987 has accordingly inserted a new section 271C to provide for imposition of penalty on any person who fails to deduct tax at source as required under the provisions of Chapter XVIIB of the Act. The penalty is of a sum equal to the amount of tax which should have been deducted at source. Reading of this paragraph also shows that the provisions thereof have no relevance in so far as the case of the appellant is concerned. The authorities were fully justified in levying penalty under Section 271C and in the facts and circumstances of the case. - Decided against assessee.

Summary

Issues:
Challenge to penalty under Section 271C of the Income Tax Act.

Analysis:
The appellant challenged the penalty upheld by authorities under Section 271C of the Income Tax Act. The questions raised for consideration included the assumption of continuous delay, reasonable cause for delay in tax remittance, limitation on penalty order, applicability of penalty in case of delayed remittance, financial hardship consideration, and correct application of penalty principles. The Senior Counsel for the appellant argued that there was no willful delay justifying the penalty, citing relevant legal provisions and a previous judgment. However, the court found the appellant's case unconvincing as tax was admitted to be deducted at source and remitted belatedly, attracting Section 271C. The court referenced a judgment highlighting that even Section 273B for penalty waiver or reduction does not apply when tax is deducted but not remitted. The court also dismissed the relevance of Circular 551 in the appellant's case, upholding the authorities' decision to levy the penalty under Section 271C.

In conclusion, the court held that the penalty under Section 271C was justified, and no legal questions arose for consideration under Section 260A of the Income Tax Act. Consequently, the appeals challenging the penalty were dismissed.