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TMI Blog2016 (10) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not paying it to the Revenue. Otherwise, it would amount to using somebody else's money for the purposes of one's business. In such circumstances, the question of financial stringency, to our mind, hardly gives rise to a good and sufficient reason for not depositing tax which was an amount otherwise payable to the payee or on behalf of the payee to the Revenue. Assessee s plea cannot be accepted as good and sufficient reason for not depositing tax within time - levy made by the AO at the rate of 5% per month on the defaulted TDS is unreasonable. We consider that levy of penalty u/s.221 @ 10% on the unpaid TDS at ₹ 2,05,55,731/- would meet the ends of justice. Hence the AO is directed to restrict the levy to ₹ 20,55,573/- in the place of ₹ 77,95,155/-. - Decided partly in favour of revenue - I.T.A No. 1303/Bang/2015 - - - Dated:- 27-10-2016 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI. S. JAYARAMAN, ACCOUNTANT MEMBER For the Assessee: Shri. C. Eranna, JCIT For the Revenue: Dr. C. P. Ramaswami, Advocate ORDER PER S. JAYARAMAN, ACCOUNTANT MEMBER: This is an appeal filed by the Revenue against the order of the CIT(A)-13, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws mentioned in the grounds of appeal submitted that levy of penalty u/s 221 is proper. The AO examined the assessee s books of accounts raising certain questions viz 1) Whether the assessee did not receive any money from the cl ients during the year ended 31.03.2012 ?, 2) Whether all payments made by the assessee. during the period when it remained unpaid, were towards keeping the business going? and 3) Whether the assessee had cleared other statutory dues ? etc., and found that the assessee did not have good and sufficient reasons. Further, he submitted that this is a case of serious violation of the trust reposed by the Government on the deductor. By such defiance of law, the assessee has caused problems to the payees from whom tax was deducted as they were not getting credit for the tax paid by them by way of TDS, etc., 05. The Ld. AR submitted that consequent to the order u/s.201 /201(1A), the AO sent the demand notice dt 30.7.2013 u/s.156 in Form no.7. Under sub-section (1) of Section 220, any amount otherwise than by way of advance tax, specified as payable in a notice of demand u/s.156 shall be paid within thirty days of the service of the notice at the place and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute that the assessee is in default. Moreover, in terms of section 221 of the Act, the only condition precedent to impose of penalty upon the assessee is that it should be in default or deemed to be in default. In the present facts this position is not disputed. De hors, the above, one more feature to be noticed is that section 201(1) of the Act itself provides that where there is failure of an assessee to deduct tax and pay to the Revenue, such an assessee is deemed to be in default. The failure to deposit in time is accepted/ admitted position. There is no dispute about the questions. Thus, the appellant is deemed to be in default. Therefore, it cannot be said that the penalty proceedings are without jurisdiction under section 221 of the Act................... 21. It was next submitted on behalf of the appellant that penalty under section 221 of the Act would be payable only when the same is in addition to the arrears of payment of tax deducted. This, according to them, is the plain reading of the words. We do not find so. Parliament has specifically provided for the words in addition to the amount of arrears along with the amount of interest payable be liable for penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch assessee to satisfy the Assessing Officer that as they have good and sufficient reasons no penalty is imposable. It is in the above view that in the first class of assessees, Parliament has provided for prosecution under section 276B of the Act for failing the pay the tax deducted at source. Therefore, the first class of assessee to which the appellant belongs would be liable for prosecution. Thus, the proviso would only apply in respect of the second class of assessee, i.e., such class of assessee who have not deducted the tax and, consequently, failed to pay the tax. 23. Therefore, in our view, the proviso under section 201 would have no application to the facts of the present case. The Legislature did not provide for the words by or under this Act in the proviso as in the absence of deducting tax, the occasion to deposit it within time as provided in the Rules would not apply. This is so as the time begins to run from the date of the deducting of tax as is evident also from section 200 of the Act which provides that any person deducting any sum shall pay it within the prescribed time, the sum so deducted to the Central Government. 24. It was next submitted on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..................... Thus, we find no merit in the appellant's above submission that no penalty can be imposed as there was no default at the time when penalty proceedings were initiated. . From the above, it is clear that the levy made under section 221 is in accordance with law and hence the Department s ground is sustained in this regard. 09. The next question is whether, the appellant made out good and sufficient reasons for not levy of penalty. In this regard, the AO s findings are briefly extracted as under: 1) Whether the assessee did not receive any money from the clients during the year ended 31.03.2012 ? Ans: Examination of the OD Account No.54037922670 with the State Bank of Mysore, Madhavnagar, Bengaluru showed that the amounts received and payments made during the year ended 31.03.2012 amounted to ₹ 159,01,93,866/- and ₹ 161,33,36,880/-. The appellant had surplus of ₹ 7,85,71,805/-. This disproved the appellant s stand before the AO that it had received payments from its clients. 2) Whether all payments made by the assessee. during the period when it remained unpaid, were towards keeping the business going? Examination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property owned by him as collateral security for obtaining B. G. Limits of ₹ 30 crores and Term loan limits of ₹ 3 crores by the assessee company. Further, the payment made was out of the term loan obtained but not out of the business receipts of the assessee. (iv) payments made to meet operating expenses and other business compulsions, which were inevitable to ensure that the very survival of the company was not in danger. 12. We have perused the materials and heard the rival contentions. Nonpayment of TDS in time is a serious violation of the Trust reposed by the Government on the deductor. Such an action causes serious problems to the payees as they were not getting credit for the tax paid by them by way of TDS. In fact the AO records that the Department received complaint from the assessee for not issuing TDS certificates despite repeated request. The delay in remittances are in the range of four months to fifteen months. The Hon ble Bombay High Court in the decision relied on supra, inter alia held that the obligation to deduct and pay tax upon the assessee is unconditional under the Act. It is the responsibility of the assessee to deduct taxes and to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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