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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 ..... 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.)] reflect the correct position of law? These are the points to be clarified by this Court in the appeals preferred by the assessee, raising substantial questions of law under Section 260A of the Act. 2. As observed by the Bench in the Reference Order, there may not be much scope for discussion on facts. However, to have an exhaustive analysis, it will be worthwhile to note down the 'gist' of the factual matrix as well. 3. The orders under challenge in the above two appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance 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 Rs. 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 a more serious lapse/offence when compared with non-deduction of tax at source. 7. Though the appellant/assessee took up the matter in appeal, interference was declined by the first appellate authority as per Annexure B order. Further challenge made before the Tribunal also ended up in failure as revealed from Annexur C order. Existence of 'substantial question of law' is brought out from the observation made by the Division Bench of this Court in the Reference Order, pointing out that cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 enough to mitigate the lapse/default on the part of the assessee in not remitting the tax deducted at source. The instance of non-payment of tax deducted is a more serious offence than the lapse in not deducting the tax at source. When the non deduction of tax at source warrants penalty under Section 271C(1)(a), non-payment of the tax, after such deduction (which is of more serious in nature) definitely will attract penalty and that clause (a) can be read into clause(b) of subsection (1) of Section 271C. The learned Standing Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdance 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 sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings." 15. Section 115-O stands compiled as part of Chapter XIID and it does not come within the purview of any deduction under Chapter XVIIB envisaged under Clause (a) of Section 271C(l). Section 194B, on the other hand, definitely comes under Chapter XVIIB. The said Chapter contains various instances of deduction of tax at source. An immediate reference will be apposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty 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 clause (d) of sub-section (1) or sub-section(2)of section 272A, sub-section (1) of section 272AA or Section 272B or sub section (1) or sub-section (1A) of section 272BB or sub-section (1) of Section 272BBB or clause (b) of subsection (1) or clause (b) or clause(c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.] 19. In so far as a taxing statute is concerned, it is an arena where the rules of 'strict interpretation' a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reproduced below for proper and effective appreciation: "3. Counsel for the appellant has drawn a distinction between clauses (a) and (b) of Section 271C (1) of the Act. According to him penalty under clause (a) is only for failure to deduct tax as required under any of the provisions of Chapter XVIIB. It is argued that in the survey conducted by the department what was noticed was that deductions have been made and the violation was only delayed remittance of part of the deducted amount and non-remittance of balance amount. However, the contention of counsel for the assessee is that since there is no provision for penalty for non-remittance of tax deducted at source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 case, the assessee/appellant sought to place reliance on Section 276B of the Income Tax Act and also on the Circular bearing No.551 dated 23.01.1990. Without much discussion, the Bench held that in view of the admitted case that the tax deducted at source was remitted belatedly, though with interest, it was liable to attract penalty under Section 271C of the Income Tax Act. 27. With regard to the case projected by the assessee/appellant that the beenfit of reduction/waiving of penalty in appropriate cases was possible, in view of the observation made by the Bench in U.S. Technologies case (with reference to Section 273B of the Act), it was turned down holding that the benefit of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, insisting the defaulter who omitted to deduct the tax to pay the same in the form of penalty. 30. On deduction of tax, if there is delay in remitting the amount to Revenue, it has to be satisfied with interest as payable under Section 201(1A) of the Act as mentioned above, besides the liability to face the prosecution proceedings, if launched in appropriate cases, in terms of Section 276B of the Act. This alone has been sought to be explained in the said Circular issued by the CBDT. 31. Even according to the CBDT, no penalty is envisaged under Section 271C of the Income Tax Act for non payment of the tax deducted at source. Inspite of taking note of the said Circular, the Division Bench in Classic Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cause for the failure. The said provision has already been extracted. One among the provisions mentioned therein is Section '271C'. To put it more clear, the whole provision of Section 271C is reckoned as such, and no segregation has been effected unlike the limited extent of reckoning clause (b) of sub-section (1) of Section 271. In other words, clause (b) of sub-section (1) of Section 271C (dealing with failure to remit the deducted tax) is not excluded or the benefit is not confined to the instance covered by Section 271C(1)(a)alone. Section 273B itself starts with a 'non-obstante clause' saying that the benefit is to be extended, to the extent as specified therein, notwithstanding anything contained in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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, New Delhi [(2006)7 SCC 714]. 38. The Division Bench of this Court in U.S Technologies case, despite the specific extent and application stipulated under Section 271C(1)(a) and 271C(1)(b) for imposition of penalty for omission (i) to deduct tax at source and (ii) in not remitting the tax deducted at source separately, to the specified extent and within the boundaries mentioned therein held that the circumstances under Section 271C(1)(a) can be read into Section 271C(1)(b). Whether such 'reading into' the provision is possible or permissible in a 'fiscal statute' is an important question. 39. It has been held by a Larger Bench of the Apex Court in A.V. Fernandez vs. State of Kerala [AIR 1957 SC 657] more than six decades ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 Reference is answered as follows: 1. The finding of the Division Bench in U.S.Technologies International Pvt. Ltd. vs. Commissioner of Income Tax [2010 KHC 6118 ] and Classic Concepts Home India Pvt. Ltd. vs. Commissioner of Income Tax [(2016)383 ITR 626 (Ker.)] to the effect that Section 271C(1)(b) will take in Section 271C(1)(a) as well, to attract penalty for non-payment of the tax deducted at source, does not reflect the correct provision of law. They stand overruled. 2. The finding and reasoning in U.S.Technologies International Pvt. Ltd vs. Commissioner of Income Tax [2010 KHC 6118 ] and Classic Concepts Home India Pvt. Ltd. vs. Commissioner of Income Tax [(2016)383 ITR 626 (Ker.)] that the benefit of waiver/reduction of penalty [once good and sufficient reason is established in terms of Section 273 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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