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TMI Blog2023 (4) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have the consequences of nonpayment and/or belated remittance/payment of the TDS, the Parliament/Legislature has provided the same like in Section 201(1A) and Section 276B of the Act. As observed hereinabove, fails to pay the whole or any part of the tax would be falling under Section 271C(1)(b) and the word used between 271C(1)(a) and 271C(1)(b) is or . At this stage, it is required to be noted that Section 276B provides for prosecution in case of failure to pay tax to the credit of Central Government. The word pay is missing in Section 271C(1)(a). Now so far as the reliance placed upon the CBDT s Circular No. 551 dated 23.01.1998 by learned ASG is concerned, at the outset, it is required to be noted that the said circular as such favours the assessee. - Even the CBDT has taken note of the fact that no penalty is envisaged under Section 271C of the Income Tax Act for nondeduction TDS and no penalty is envisaged under Section 271C for belated remittance/payment/deposit of the TDS. Even otherwise, the words fails to deduct occurring in Section 271C(1)(a) cannot be read into failure to deposit/pay the tax deducted. No penalty - Decided in favor of assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d levying the penal interest of Rs. 22,015/. On 10.11.2003, the Additional Commissioner of Income Tax (ACIT) vide order under Section 271C levied a penalty of Rs. 1,10,41,898/equivalent to the amount of TDS deducted for AY 2003-04. That order of Additional CIT levying the penalty under Section 271C came to be confirmed by the High Court by the impugned judgment and order. The High Court vide impugned judgment and order has dismissed the appeal preferred by the assessee by holding that failure to deduct/remit the TDS would attract penalty under Section 271C of the Act, 1961. 2.2 Feeling aggrieved and dissatisfied with the levy of interest/penalty under Section 271C of the Income Tax Act, 1961 on late remittance of TDS is the subject matter of preferred appeal(s). CIVIL APPEAL NOS. 12581260/ 2019 3. The facts leading to the present appeals in a nutshell are under: 3.1 By order(s) dated 26.09.2013, the ACIT by way of orders under Section 271C levied penalty equivalent to the amount of TDS deducted for AYs 2010-11, 2011-12 and 2012-13 on the ground that there was no good and sufficient reason for not levying penalty. 3.2 The CIT (Appeals) dismissed the assessees ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy of penalty of a sum equal to the amount of tax in case of failure on the part of the concerned person who fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVIIB. It is submitted that in case of belated remittance of the TDS, there shall not be any levy of interest under Section 271C of the Act, 1961. 5.3 It is submitted that as per the cardinal principle of law, a penal provision is required to be construed strictly and literally and nothing is to be added in the Section and the penalty provisions are required to be read as they are. 5.4 It is submitted that so far as the belated remittance of the TDS is concerned, the Statute provides for penal interest under Section 201(1A) of the Act, 1961. It is submitted that the penal interest levied under Section 201(1A) is compensatory in nature. It is submitted that therefore, when the Parliament thought it fit to levy the penal interest on late remittance of the TDS for the belated period, there shall not be any levy of the penalty under Section 271C for belated remittance of the TDS. 5.5 It is submitted that if the stand taken by the Revenue and the views taken by the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TDS belatedly. It is submitted that once the ITAT found the case falling under Section 273B, the same was not required to be interfered with by the High Court as the same cannot be said to a substantial question of law. 5.10 Making the above submissions, it is prayed to allow the present appeals and to hold that for late remittance of the TDS, there shall not be any penalty leviable under Section 271C of the Act, 1961. 6. All these appeals are vehemently opposed by Shri Balbir Singh, learned ASG assisted by Ms. Monica Benjamin, learned counsel, appearing on behalf of the Revenue. 6.1 Shri Balbir Singh, learned ASG appearing on behalf of the Revenue has vehemently submitted that Section 271C of the Act has been inserted in the year 1987. It is submitted that the object and purpose of inserting Section 271C is to levy the penalty for failure to deduct tax at source. It is submitted that under the old provision of Chapter XXI of the Income Tax Act, no penalty was provided for failure to deduct tax at source though, this default, however, attracted prosecution under the provisions of Section 276B, which prescribed punishment for failure to deduct tax at source or after deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich such tax is deducted; and (ii) at one and onehalf per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of subsection (3) of Section 200:] Section 271C of the Act 271C. Penalty for failure to deduct tax at source. (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 XVIIB; or (b) pay the whole or any part of the tax as required by or under, (i) subsection (2) of Section 115O; or (ii) the second proviso to Section 194B; 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.] (2) Any penalty imposable under subsection (1) shall be imposed by the Joint Commissioner. Section 273B of the Act 273B. Penalty not to be imposed in certain cases. Notwithstanding anything contained in the provisions of clause (b) of subsection (1) of Section 271, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lure on the part of the concerned person/assessee to deduct the whole of any part of the tax as required by or under the provisions of Chapter XVIIB. The words used in Section 271C(1)(a) are very clear and the relevant words used are fails to deduct. It does not speak about belated remittance of the TDS. As per settled position of law, the penal provisions are required to be construed strictly and literally. As per the cardinal principle of interpretation of statute and more particularly, the penal provision, the penal provisions are required to be read as they are. Nothing is to be added or nothing is to be taken out of the penal provision. Therefore, on plain reading of Section 271C of the Act, 1961, there shall not be penalty leviable on belated remittance of the TDS after the same is deducted by the assessee. 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 nondeduction of the whole or any part of the tax, as required by or under the various instances/provisions of Chapter XVIIB would invite penalty under Clause 271C(1)(a); only a limited text, involving subsec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution 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 Government. It was decided that the first part of the default, i.e., failure to deduct tax at source should be made liable to levy of penalty, while the second part of the default, i.e., failure to pay the tax deducted at source to the Government 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. On fair reading of said CBDT s circular, it talks about the levy of penalty on failure to deduct tax at source. It also takes note of the fact that 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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