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2009 (6) TMI 966 - HC - Income TaxLevy of penalty u/s 271C - delay in deposit of Tax deducted at source (TDS) - belated remittance of the TDS - Quantum of penalty which in this case is above ₹ 1.1 crore - Counsel for the appellant has drawn a distinction between clauses (a) and (b) of Section 271C (1). According to him penalty under clause (a) is only for failure to deduct tax as required under any of the provisions of Chapter XVIIB. HELD THAT:- We are unable to accept the contention because the first part of clause (b) of Section 271C(1) i.e. failure to pay whole or any part of tax as required, takes in the tax deducted under clause (a) under any of the provisions of Chapter XVIIB. In our view, failure to deduct or failure to remit recovered tax, both will attract penalty u/s 271C. the contention of the appellant fails and we uphold the finding of the Tribunal dismissing the challenge against levy of penalty. Quantum of penalty - The Tribunal has not considered challenge against quantum of penalty in so much details probably because in the penalty order it is stated that only minimum penalty is levied. So far as failure on the part of the assessee to remit the tax recovered at source is concerned, we do not think there can be any justifying circumstance for delay in remittance because assessee cannot divert tax recovered for the Government towards working capital or any other purpose. Defence available u/s 273B does not cover failure in payment of recovered tax. However, if there is failure to remit on account of failure to recover for any reason whatsoever, then the case calls for reduction of penalty, if not waiver. Similarly, we feel recovery and remittance of tax, though with delay but with interest, before detection is certainly a mitigating circumstance for waiver or reduction of penalty. Further, if full amount of tax with interest was paid before levy of penalty, we feel quantum reduction is called for by the AO. Therefore, we direct AO to reconsider the quantum of penalty. The appeal is accordingly disposed of upholding the order of the Tribunal on the levy of penalty, but with direction to the AO to grant further reduction in penalty, if any new fact or circumstance is brought to the notice
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