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2015 (6) TMI 399 - KERALA HIGH COURT

2015 (6) TMI 399 - KERALA HIGH COURT - [2016] 383 ITR 626 - Penalty levied under Section 271C - tax was deducted at source and was remitted belatedly - Held that:- It is the admitted case of the parties that the tax was deducted at source and the same was remitted belatedly, though with interest. In such a case, the provisions of Section 271C are fully applicable.

Insertion of a new Section 271C to provide for levy of penalty for failure to deduct tax at source. Under the old provisio .....

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pay the tax deducted at source to the Govt. 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.

Reading of this paragraph also shows that the provisions thereof .....

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e appeals are filed by the appellant challenging the orders concurrently passed by the authorities under the Income Tax Act including the Tribunal upholding levy of penalty under Section 271C of the Income Tax Act. In this background, the appellant has raised the following questions of law under Section 260A of the Income Tax Act, 1961 forconsideration of this Court: "i) did not the Appellate Tribunal err in law in proceeding on the assumption that there was continuous delay of four years a .....

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inordinate delay? iv) should not the Appellate Tribunal have found that the judgment in the case of M/S U.S.Technologies International (P) Ltd.'s case no penalty is exigible u/s 271C when the entire TDS amount and interest was remitted before initiation of penalty proceedings? v) did not the Appellate Tribunal err in law in failing to consider the financial hardship urged before the Statutory Authority and the Appellate Tribunal and consider the reasonable cause urged before it? vi) did not .....

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at source and was remitted belatedly. It was in such a factual background that proceedings were initiated and penalty was levied under Section 271C of the Income Tax Act. In order to sustain the appeals filed, the learned Senior Counsel for the appellant referred us to the provisions of Section 271C and contented that there was no willful or deliberate delay attracting the penalty provisions under Section 271C. He also placed reliance on the judgment of this Court in U.S. Technologies Internatio .....

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ct are fully applicable. In so far as the judgment of this Court in the U.S. Technologies International Private Limited (supra) is concerned, what is relevant is paragraph 4 thereof which reads thus: "The next question to be considered is the quantum of penalty which in this case is above ₹ 1.1 crore. Counsel for the appellant referred to Section 273B of the Act authorising the officer to waive or reduce the penalty if the defaulted assessee proves that there was reasonable cause for .....

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s 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. So much so, in our view, defence available under Section 273B does not cover failure in payment of recovered tax. However, if there is failure to remit on account of .....

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opportunity to the assessee to furnish facts in the light of our observations above. 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 of the AO based on observations above or otherwise in terms of Section 273B of the Act." 5. Reading of the above paragraph shows that even Section 273B, providing for waiver or reduction .....

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