1999 (5) TMI 574 - HC - Income Tax

Summary

Issues Involved:
The petitioner challenged an order for penalty imposed by the Assistant Commissioner of Income-tax for failure to deposit T.D.S. within the prescribed time. The main issue was whether the Assistant Commissioner had the jurisdiction to impose the penalty under section 221 of the Income-tax Act.

Jurisdiction of Assistant Commissioner to Impose Penalty:
The Assistant Commissioner imposed a penalty of Rs. 3 crores under section 221 of the Income-tax Act, 1961. The appellant argued that the Assistant Commissioner lacked jurisdiction to impose this penalty, as regular Assessing Officers are the ones who charge interest under section 201 of the Act.

Notification Empowering Assistant Commissioner:
The Revenue's counsel contended that the Chief Commissioner empowered the Assistant Commissioner to pass penalty orders under section 221, citing notifications conferring such powers. The Chief Commissioner's notification dated May 23, 1991, granted the Assistant Commissioner jurisdiction over matters related to T.D.S. deductions and penalties.

Validity of Penalty Imposition:
The appellant argued that the Chief Commissioner could not empower the Assistant Commissioner to impose penalties under section 221, as section 271C designates the joint Commissioner for such penalties. However, the Explanation to section 221 clarifies that payment of tax does not absolve liability for penalties.

Difference Between Sections 221 and 271C:
A comparison of sections 221 and 271C revealed that they address different defaults related to T.D.S. deductions. Section 221 applies when the deducted tax is not deposited within the prescribed time, while section 271C pertains to failures in deducting or paying the tax.

Imposition of Penalty Despite Interest Payment:
The judgment clarified that even if interest is paid for default, penalties under section 221 can still be imposed. The appellant's argument that financial constraints led to the delay in depositing T.D.S. was dismissed, emphasizing that the T.D.S. amount must be deposited timely regardless of business circumstances.

Conclusion:
The High Court dismissed the appeal, upholding the Assistant Commissioner's imposition of the penalty under section 221. The judgment emphasized that the T.D.S. amount must be deposited within the prescribed time, irrespective of the financial situation of the assessee. The observations made were stated not to prejudice either party's interests before the single judge.

Outcome:
The appeal and applications were dismissed, and the request for a stay on the order's operation was rejected. All parties were instructed to act based on a signed copy of the order.