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TMI Blog2019 (3) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... 71C, 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. We find support from the ruling rendered by the Apex Court in Sneh Enterprises vs. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion Bench of this Court is whether Clause (b) of Sub-Section (1) of Section 271C of the Income Tax Act (hereinafter referred to as 'the Act), stipulating penalty of an equal amount of tax on the failure of the person concerned to deduct or pay the tax, would take in the situation under Clause (a) of sub-section (1) of Section 271C as well; or in other words; are not the above two provisions, clauses (a) and (b), operating in two different spheres, independent of each other, to attract penalty on establishing the specified event?. One step further; does the lapse to deduct the whole or any part of the tax [as required by or under the provisions of Chapter XVIIB of the Act] stipulated under Sec.271C(1)(a) will result in any automatic imposition of penalty, even denying the eligibility to claim the benefit of Section 273B of the Act, as held by a Division Bench of this Court in U.S.Technologies International Pvt. Ltd. vs. Commissioner of Income Tax [ 2010 KHC 6118 =2010(1)KLT SN 66]? Does the law declared by the Division Bench in U.S.Technologies case(cited supra) and the one in Classic Concepts Home India Pvt. Ltd. vs. Commissioner of Income Tax [(2016)383 ITR 626 (Ker.)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Scheduled Tribes, as per the Presidential order issued in this regard) and they run as many as 6 factories in the Lakshadweep Islands; besides the management and operation of 30 vessels owned by the Union Territory of Lakshadweep. The task as above is undertaken through contractors, who are being paid accordingly. 6. It is seen from Annexure A order that despite several adjournments, no specific reply in writing was submitted by the appellant/assessee. In the said circumstance, placing reliance on the verdict passed by the Division Bench of this Court in U.S. Technologies (cited supra), an equal amount of tax in respect of the financial year concerned, (Rs.1,32,034/-) was mulcted upon the assessee under Section 271C of the Act (in I.T.Appeal.No.36 OF 2016); whereas in the second case (I.T.Appeal.No.37 of 2016), it was to an extent of ₹ 15,02,859/-. Placing reliance on the very same verdict of the Division Bench of this Court cited supra, benefit of Section 273B of the Act was also denied, as it was held by this Court that Section 273B would not be attracted in an instance covered by Section 271C of the Act involving failure in payment of the recovered tax, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is entitled to have the benefit of Section 273B of the Act, whereby the penalty could be waived in toto or reduced to substantial extent, considering the particular facts and circumstances, which is a statutory right and the same cannot be denied, referring to the gravity of the lapse under Section 271C(1)(b) of the Act. As such, the legal position declared by the Division Bench in U.S. Technologies and in Classic Concept's cases requires to be re-considered. The learned counsel also points out that, if under any circumstance, action is necessary for non-remittance of the tax deducted at source, it can only be by way of prosecution, as envisaged under Section 276B of the Act. The scope of incorporation of Section 271C, as clarified by the CBDT (Central Board of Direct Taxes) vide their Circular No.551 is also pressed into service in support of the challenge raised against Annexures A,B and C orders. 10. Mr. Christopher Abraham, the learned Standing Counsel for the Department submits that there is no obscurity in the legal provision and in particular, under Section 271C of the Act. Mere payment of interest under Section 201(1A) of the Act is not by itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-O; or (ii) second proviso to section 194B. Obviously, except for the failure with respect to the above two instances, no other instance is mentioned under clause (b) to attract payment of penalty. 14. Let us now analyze the mandate of sub-section (2) of Section 115-O as well as the 'second proviso' to Section 194B, for which the said provisions are extracted below: 115-O Tax on distributed profits of domestic companies: xxxx xxxx (2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on distributed profits under subsection( 1) shall be payable by such company. xxx xxx xxx 194B-Winnings from lottery or crossword puzzle : The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding 'ten thousand rupees shall, at the time of payment thereof, deduct income tax thereon at the rates in force: Provided that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Chapter XVIIB; or (b) the tax payable by him, as required by or under:- (i) sub-section (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. 18. Even in a case where there is some delay in effecting payment of tax, if proper and sufficient reasons are shown for the delay involved, the mitigating circumstances can very well be considered by the competent authority, who can waive the penalty (wherever penalty can be legally imposed) or reduce the same to an appropriate extent. This is the mandate of Section 273B, which is extracted below: 273B . Penalty not to be imposed in certain cases: Notwithstanding anything contained in the provisions of [Clause (b) of sub-Section(1) of Section 271, Section 271A, Section 271AA,Section 271B, Section 271BA, Section 271BB, Section 271C, section 271CA, Section 271D, Section 271E, Section 271F, Section 271FA, Section 271FAB, Section 271FB, section 271G, Section 271GA, Section 271GB, Section 271H, Section 271-I, Section 271J, clause (c) or clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71C, explanation was offered with reference to paucity of funds and such other aspects. The objection was turned down and penalty was imposed by the assessing officer, which came to be confirmed by the Commissioner of Appeals and later by the Tribunal as well. 22. This was sought to be challenged before this Court raising mainly two substantial questions of law under Section 260A of the Income Tax, i.e., whether penalty could be levied under Section 271C for failure to pay deducted tax and alternately, whether the assessee has reasonable cause for the non-payment or belated payment of tax deducted at source. The contention raised by the assessee/appellant in the said case was more or less similar as raised in the present appeals. After analysing the rival contentions and making a reference to Section 271C of the Act, it was held that the failure to pay the whole or any part of tax as required, takes in the tax deducted under clause (a) under any of the provisions of Chapter XVIIB and so much so, the failure to deduct or failure to remit the recovered tax, both will attract penalty under Section 271C of the Act. 23. The finding as contained in paragraph '3' is reproduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng only 'two' specific provisions for imposing penalty with regard to the failure to pay the deducted tax, while deciding to impose penalty in respect of all instances of failure to deduct tax, under Chapter XVII-B, are not at all considered or discussed anywhere in the said judgment. In the said circumstance, the doubt expressed by the Bench who passed the Order of Reference is well justified. We find it very difficult to accept the findings given in U.S.Technologies case (supra), as the same is not supported by any reasoning and further since the provision of law is quite specific, which cannot be re-written by this Court and we have to take as it is. 26. The question came up for consideration again before a Division Bench of this Court in Classic Concepts Home India Pvt. Ltd. vs. Commissioner of Income Tax [(2016)383 ITR 626 (Ker.)]. The appeal preferred by the assessee challenging the verdict passed by the Tribunal upholding the penalty under Section 271C of the Income Tax Act for belated payment of tax deducted at source, was almost on similar grounds as raised in U.S.Technologies case. Apart from relying on some of the observations in U.S. Technologies ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 29. The said Circular has been issued by none other than the CBDT. If there is any delay in remitting the tax, it will attract payment of interest under Section 201(1A) of the Act and because of the gravity of the mischief involved, it may involve prosecution proceedings as well, under Section 276B of the Act. If there is any omission to deduct the tax at source, it may lead to loss of Revenue and hence remedial measures have been provided by incorporating the provision to ensure that tax liability to the said extent would stand shifted to the shoulders of the party who failed to effect deduction, in the form of penalty. While stipulating payment of amount (by way of penalty under Section 271C of the Act) to an extent equal to the amount payable as tax, it does not say that the 'penalty' is over and above the tax liability; which was omitted to be deducted/paid. In other words, the probable loss of Revenue because of non-deduction of the tax at source is sought to be plugged, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he penalty imposed on the assessee was held as unsustainable, in turn allowing the appeal preferred by the Revenue. As observed in the Order of Reference, the said decision is not having any application in the instant case, as it was in respect of the omission to deduct the tax, for which penalty is stipulated under Sec.271C(1)(a) and not an instance covered by Section 271C(1)(b). 33. The next point to be considered is with regard to the observation/finding rendered by the Bench in U.S. Technologie s case, holding that failure to remit the tax after deducting the same, will constitute a more grievous default than the omission to deduct the tax under Section 271C(1)(a) and hence it cannot come within the purview of Section 273B for claiming the benefit of waiver or reduction of penalty for good and sufficient reason. The said finding has also been noted as not acceptable in the Order of Reference and hence it requires to be dealt with. 34. Section 273B of the Income Tax Act stipulates that no penalty shall be imposed on the person or the assessee, as the case may be, for any failure referred to in the provisions mentioned therein, if he proves that there was reasonable cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith proper application of mind, whether the penalty is to be waived or reduced, based on the facts and circumstances. 37. 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. We find support from the ruling rendered by the Apex Court in Sneh Enterprises vs. Commissioner of Customs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in categorical terms, that where the language of a statute is clear and unambiguous, there is no room for application either of the doctrine of 'casus omissus' or of pressing into service any external aid. 41. The said principle was reiterated by the Apex Court in the subsequent decisions such as Trutuf Safety Glass Industries vs. Commissioner of Salestax, U.P. [ 2007(3)KLT 1013], Union of India vs. Dharmendra Textiles Processors [(2008)13 SCC 369], Singarni Collieries Co. Ltd. vs. Vemuganti Ramakrishna Rao [(2013)8 SCC 789] and lastly in State of Uttar Pradesh vs. Subhash Chandra Jaiswal and others [(2017)5 SCC 163] asserting that the 'power to legislate' has not been conferred on Courts and therefore the Court cannot add words to a statute or read words into it, which are not there. 42. Coming back to the case in hand, despite the fact that Section 271C(1)(b) is quite clear and unambiguous, the learned Judges, while declaring law in U.S.Technologies case (cited supra) simply read 271C (1)(a) into Section 271C(1)(b), which is not correct and stands contrary to the dictum laid down by the Apex Court. 43. In the light of the above discussion, the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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