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TMI Blog2019 (8) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... . 271C. In response, the assessee vide letter dated 27/02/2014 has submitted that "assessee is in the business of trading of Granite Blocks. The assessee is regularly deducting the tax as and when the payment made to the contractors and commission agents. The assessee generally prepares his books of account on a periodical system the TDS liability, if any, he will be paid immediately after passing the necessary entries in the books of accounts. The assessee has made the payment in late, for which he has paid the interest along with the payment of tax deducted at source but not failed to deduct tax. The penalty u/sec. 271C is not applicable since there is no failure to deduct tax under the Act. During the course of inspection, the statement of the tax deduction has been submitted by the assessee to the inspecting officials and accordingly the tax was paid within the timeframe requested by the assessee on the date of inspection. Hence, requested for not to levy penalty u/sec. 271C of the Act." The Addl. CIT(TDS) has considered the explanation of the assessee and not accepted the same and by following the decision of the Hon'ble Kerala High Court in the case of US Technologies Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Tribunal in the case of M/s. Esskay Shipping Pvt. Ltd. Vs. JCIT in ITA No. 631/VIZ/2014, dated 18/10/2017 and the Tribunal by considering the judgment of the Hon'ble Kerala High Court in the case of US Technologies P. Ltd. (supra) has held that the provisions of section 271C are applicable not only failure to deduct tax but also failure to remit the tax deducted to the Government account. The relevant portion of the order is extracted as under:- "10. We have heard both the sides, perused the material available on record and orders of the authorities below. 11. A search was conducted in the case of the assessee and it is found that the assessee has deducted TDS of Rs. 1,18,91,009/- but not deposited in the Government account and also noted that the assessee failed to deduct TDS amount of Rs. 18,06,745/- The Assessing Officer after following due procedure, order was passed by raising demand of Rs. 1,36,94,034/- under section 201(1) and Rs. 11,09,603/- under section 201(1A). Subsequently, the JCIT (TDS) issued a show-cause notice why penalty should not be levied under section 271C of the Act. In response, assessee submitted that due to financial crisis, deducted TDS was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted tax and the provision under section 276B only authorised prosecution for violation. However, section 271C was introduced by the Direct Laws (Amendment) Act, 1987 with effect from 1-4-1989 providing for penalty for failure to deduct or remit tax under Chapter XVII-B, sub-section (2) of section 115-O and section 194B of the Act. For easy reference we extract hereunder section 271C. "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 XVII-B; or (b ) pay the whole or any part of the tax as required by or under- (i )sub-section (2) of section 115-O; 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 sub-section (1) shall be imposed by the Joint Commissioner."? 3. Counsel for the appellant has drawn a distinction between clauses (a) and (b) of section 271C(1) of the Act. According to him penalty under clause (a) is only for failure to deduct tax as required under any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer. Therefore, we direct the Assessing Officer to reconsider the quantum of penalty by giving one more 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 Assessing Officer to grant further reduction in penalty, if any, new fact or circumstance is brought to the notice of the Assessing Officer based on observations above or otherwise in terms of section 273B of the Act."? 11. Therefore, respectfully following the judgment of the Hon'ble Kerala High Court in the above referred to case, we hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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