2017 (10) TMI 1210 - AT - Income Tax

Penalty u/s 271(1)(c) - non-deduction of tax at source and non-remittance to Government of India account - assessee in default - assessee submitted that due to financial crisis, deducted TDS was not paid to the Government account and so far non-deduction of TDS, it is submitted that due to mistake of the Finance Manager, TDS is not deducted - Held that - Section 271C applies to both the situations where assessee failure to deduct tax at source and failure to remit the recovered tax. Accordingly, the argument advanced by the assessee s representative is rejected. See M/s. US TECHNOLOGIES INTERNATIONAL PVT Versus CIT 2009 (6) TMI 966 - KERLA HIGH COURT Insofar as, non-deduction of TDS is concerned CIT(A) has observed in his order that default committed by the assessee was pointed out during the survey in January, 2013, but assessee did not choose to make payment immediately, some amounts have been paid only after passing of the order under section 201(1) & 201(1A) of the Act on 27/02/2013. Only thereafter in the month of March, further payments have been made. The corresponding interest under section 201(1A) has not been paid till date. The survey was conducted on 22/01/2013, the assessee only paid the amounts in the month of March after passing of the order under section 201(1) & 201(1A) and therefore, it cannot be considered that non-deduction of tax by oversight of the Finance Manager, even it came to the notice of the assessee, it has paid only after two months. Therefore, we find no infirmity in the order passed by the ld. CIT(A) and accordingly interference is not called for. Accordingly, appeal filed by the assessee is dismissed.

Summary

Issues Involved:
1. Non-remittance of TDS deducted by the assessee.
2. Non-deduction of TDS on specific payments.
3. Applicability of penalty under section 271C for non-remittance of TDS.
4. Reasonable cause for non-remittance of TDS.
5. Mitigating circumstances for non-deduction and non-remittance of TDS.

Detailed Analysis:

1. Non-remittance of TDS deducted by the assessee:
The case involved a survey conducted under section 133A of the Income Tax Act, 1961, where it was found that the assessee had deducted tax at source amounting to ?1,18,91,009/- during the financial year 2012-13 but had not remitted the same to the Government account. The Assessing Officer initiated proceedings under sections 201(1) and 201(1A), resulting in a demand of ?1,36,94,034/- and ?11,09,603/- respectively.

2. Non-deduction of TDS on specific payments:
The survey also revealed that TDS was not deducted on several payments, including berth hire charges, advertisement charges, legal expenses, remuneration to directors, and taxi hire charges, amounting to a total of ?18,06,745/-.

3. Applicability of penalty under section 271C for non-remittance of TDS:
The JCIT issued a notice for penalty under section 271C, which the assessee contested, arguing that section 271C applies only to non-deduction of TDS, not to non-remittance. However, the JCIT, following the judgment of the Hon'ble Kerala High Court in the case of US Technologies International P. Ltd., held that section 271C applies to both failure to deduct and failure to remit TDS. The penalty of ?1,36,94,034/- was levied.

4. Reasonable cause for non-remittance of TDS:
The assessee argued that the non-remittance was due to a financial crisis caused by changes in the shipping industry and privatization of port operations. However, the JCIT did not find this explanation satisfactory and proceeded with the penalty.

5. Mitigating circumstances for non-deduction and non-remittance of TDS:
The assessee also argued that the non-deduction of TDS was due to oversight by the Finance Manager and not due to any malafide intention. The CIT(A) observed that even after the survey in January 2013, the assessee did not make immediate payments, and some amounts were paid only after the order under sections 201(1) and 201(1A) was passed in February 2013. The CIT(A) confirmed the penalty, stating that the assessee did not provide sufficient evidence of financial crunch and did not remit the interest liability.

Conclusion:
The Tribunal, after hearing both sides and reviewing the material on record, upheld the orders of the authorities below. It was held that section 271C applies to both failure to deduct and failure to remit TDS. The Tribunal rejected the assessee's argument that section 271C applies only to non-deduction and not to non-remittance. The Tribunal also found no merit in the argument that the non-deduction was due to oversight, as the payments were made only after significant delay. The appeal filed by the assessee was dismissed, confirming the penalty under section 271C.