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TMI Blog2021 (8) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... sment Year 2015-2016. 2. The assessee has raised the following grounds of appeal: 1. In law and in the facts and circumstances of the appellant's case, the ld.AO as well as the ld.C.I.T(A) has erred in law and has passed the penalty order u/s.271C of the Act imposing penalty on the appellant amounting to Rs. 22,23,512. The penalty passed by the ld.AO and confirmed by the ld.CIT(A), is bad in law and therefore deserves to be quashed. 2. In law and in the facts and circumstances of the appellant's case, the Ld.CIT(A), has erred in confirming the penalty levied by the ld.AO amounting to Rs. 22,23,512/- When no such penalty is leviable on the appellant, the penalty imposed by the ld.AO shall be deleted. 3. The appellant craves leave to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efault in deducting the TDS under the provisions of chapter XVIIB of the Act. The assessee has deducted the TDS but failed to deposit the same within the due date to the account of Government exchequer on account of some financial difficulty. As there was no default as far as deduction of TDS is concerned, therefore the penalty cannot be attracted under the provisions of section 271C of the Act. 4.3 However, the AO disregarded the contention of the assessee by observing that the assessee is exigible to the penalty under section 271C of the Act even it fails to deposit the amount of TDS to the account of Government exchequer within the due date after deducting the same from the expenses subjected to TDS under chapter XVIIB of the Act. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials available on record. The provisions of clause 'a' specified under section 271C of the Act has a direct bearing on the issue on hand which reads as under: Penalty for failure to deduct tax at source. 10 271C. 11[(1) If any person fails to- (a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXX then, such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid.] 9.1 A plain reading of the provisions as discussed above clearly reveals that the penalty can be attracted under section 271C of the Act only in a situati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that the assessee has deducted the TDS on the expenses as discussed above but failed to deposit the same in the account of Government exchequer account within the specified time. Thus in such a situation, the penalty under section 271C of the Act is not attracted. 9.4 We also note that the judgments relied by the authorities below in reaching to the conclusion that the assessee is subject to the penalty under the provisions of section 271C of the Act have been reversed by the subsequent judgment of the Hon'ble Kerala High Court of Full Bench in the case of Lakshadweep development Corporation Ltd (supra). The relevant extract of the judgment is reproduced as under: "43. In the light of the above discussion, the Reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or by this Court since the verdict passed by the departmental authorities and the Tribunal (copies of which have been produced as Annexures A, B and C) stand contrary to the declaration as above. The said orders stand set aside. The appeals are allowed accordingly."
9.5 In view of the above, we hold that the assessee cannot be visited with the penalty under the provisions of section 271C of the Act on account of failure on his part to deposit the amount of TDS deducted on the expenses as discussed above within the time specified under the statute. Accordingly the assessee succeeds in its grounds of appeal.
10. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Court on 23/06/2021 at Ahmedabad. X X X X Extracts X X X X X X X X Extracts X X X X
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