{"id":289244,"date":"2023-04-12T09:00:44","date_gmt":"2023-04-12T03:30:44","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=289244"},"modified":"2023-04-13T16:41:22","modified_gmt":"2023-04-13T11:11:22","slug":"no-tds-penalty-for-late-payment-under-section-271-c-of-it-actsc-legal-research-legal-news-updates-taxation-supreme-court-justice-mr-shah-tax-deduction","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/04\/12\/no-tds-penalty-for-late-payment-under-section-271-c-of-it-actsc-legal-research-legal-news-updates-taxation-supreme-court-justice-mr-shah-tax-deduction\/","title":{"rendered":"No penalty leviable under Section 271-C of Income Tax Act on mere belated remittance of TDS by assessee: Supreme Court"},"content":{"rendered":"<p><script type=\"text\/javascript\">\n\u00a0\u00a0\u00a0 document.title = 'No TDS penalty for late payment under Section 271 C of IT Act: SC | SCC Blog'\n\u00a0\u00a0\u00a0 document.querySelector('meta[name=\"description\"]').setAttribute(\"content\", \"Supreme Court held that TDS penalty for late payment should not be levied under Section 271 C of Income Tax Act but attracts payment of interest.\");\n<\/script><\/p>\n<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><b>Supreme Court:<\/b> In a set of civil appeals, against the order of Kerala High Court confirming the levy of interest\/penalty under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559682\" target=\"_blank\" rel=\"noopener\">271-C<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\" rel=\"noopener\">Income Tax Act, 1961<\/a> (&#8216;IT Act&#8217;) on assessee&#8217;s failure to deposit the tax deducted at source (TDS) or belated remittance of the TDS, the Division Bench of <b>M.R Shah<\/b>* and C.T Ravikumar quashed the High Court&#8217;s order and held that on mere belated remittance of the TDS after deduction by the assessee , no penalty shall be levied under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559682\" target=\"_blank\" rel=\"noopener\">271-C<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\" rel=\"noopener\">IT Act<\/a>.<\/p>\n<h4 style=\"color: #632423;\">Factual Background<\/h4>\n<p style=\"margin-bottom: 3%;\">In the matter at hand, from 01.04.2002 to February 2003, the assessee engaged in a software development business deducted TDS in respect of salaries, contract payments, etc., totaling Rs. 1,10,41,898\/- for the assessment year (&#8216;AY&#8217;) 2003-04. In March, the assessee remitted part of the TDS being Rs. 38,94,687 and balance of Rs. 71,47,211 were remitted later. Thus, the period of delay ranged from 05 days to 10 months. On 10.03.2003, a survey was conducted by the Revenue at assessee premises, and it was noted that TDS was not deposited within the prescribed dates under Income Tax Rules (&#8216;IT Rules&#8217;). The Additional Commissioner of Income Tax (ACIT) vide order under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559682\" target=\"_blank\" rel=\"noopener\">271-C<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\" rel=\"noopener\">IT Act<\/a> levied a penalty of Rs. 1,10,41,898 equivalent to the amount of TDS deducted for AY 2003-04 due to the delay in remittance of TDS. That order of ACIT levying the penalty under Section 271-C came to be confirmed by the High Court by the impugned judgment and order.<\/p>\n<h4 style=\"color: #632423;\">Supreme Court&#8217;s Analysis<\/h4>\n<p><b><i>Whether belated remittance of the TDS subjects the appellant to pay penalty under Section 271-C of IT Act?<\/i><\/b><\/p>\n<p style=\"margin-bottom: 3%;\">The Court noted that wherever the Parliament wanted to have the consequences of non-payment or belated remittance of the TDS, it has provided the same in Section 201(1A) and Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559709\" target=\"_blank\" rel=\"noopener\">276-B<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\" rel=\"noopener\">IT Act<\/a>. The Court interpreted Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559682\" target=\"_blank\" rel=\"noopener\">271-C<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\" rel=\"noopener\">IT Act<\/a> and held that there shall be no penalty leviable under Section 271-C on belated remittance of the TDS after the same is deducted by the assessee.<\/p>\n<p style=\"margin-bottom: 3%;\">Further placing its reliance on Central Board of Direct Taxation&#8217;s (&#8216;CBDT&#8217;) circular No. 551 dated 23-01-1998, the Court said that the circular clearly mentions that if there is any delay in remitting the tax, it will attract payment of interest under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559503\" target=\"_blank\" rel=\"noopener\">201(1A)<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\" rel=\"noopener\">IT Act<\/a>. Therefore, no penalty is envisaged under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559682\" target=\"_blank\" rel=\"noopener\">271-C<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\" rel=\"noopener\">IT Act<\/a> for belated remittance of the TDS on the assessee.<\/p>\n<p><b><i>What is the meaning and scope of the words &#8220;fails to deduct&#8221; in Section 271-C(1)(a) of IT Act?<\/i><\/b><\/p>\n<p style=\"margin-bottom: 3%;\">The Court noted that the words used in Section 271-C(1)(a) are very clear and relevant, the words used are &#8220;fails to deduct&#8221;, it does not speak about belated remittance of the TDS, it plainly says that if any person fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B 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. The words &#8220;fails to deduct&#8221; occurring in Section 271-C(1)(a) cannot be read into &#8220;failure to deposit\/pay the tax deducted&#8221;. Further, the Court said that Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559682\" target=\"_blank\" rel=\"noopener\">271-C<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\" rel=\"noopener\">IT Act<\/a> is quite categoric and its scope and extent of application is evident from the provision itself, in unambiguous terms.<\/p>\n<p style=\"margin-bottom: 3%;\">The Court said that as per the settled position of law, the penal provisions are required to be construed strictly and literally. As per the cardinal principle of interpretation of statute and particularly the penal provisions are required to be read as they are, nothing is to be added or nothing is to be taken out of the penal provision.<\/p>\n<p style=\"margin-bottom: 3%;\">Thus, the assessee&#8217;s appeals were allowed, and the impugned orders of the High Court were quashed and set aside.<\/p>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\">US Technologies International Pvt. Ltd. v. The Commissioner of Income Tax, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/04P60Pb2\" target=\"_blank\" rel=\"noopener\">2023 SCC OnLine SC 387<\/a>, decided on 10-04-2023<\/span>]<\/p>\n<p style=\"text-indent: 18pt;\"><strong><span style=\"color: #000080;\">*Judgment Authored by: Justice M.R. Shah<\/span><\/strong><\/p>\n<blockquote class=\"wp-embedded-content\" data-secret=\"YWJseMMCVj\"><p><a href=\"https:\/\/www.scconline.com\/blog\/post\/2022\/05\/16\/know-thy-judge-justice-m-r-shah\/\">Know Thy Judge | Justice M. R. Shah<\/a><\/p><\/blockquote>\n<p><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;Know Thy Judge | Justice M. R. Shah&#8221; &#8212; SCC Blog\" src=\"https:\/\/www.scconline.com\/blog\/post\/2022\/05\/16\/know-thy-judge-justice-m-r-shah\/embed\/#?secret=RPtp3cHlo9#?secret=YWJseMMCVj\" data-secret=\"YWJseMMCVj\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p><i>The Supreme Court observed that the consequences on nonpayment or belated remittance of the TDS would be under Section 201(1A) and Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001559709\" target=\"_blank\" rel=\"noopener\">276-B<\/a> of <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002955939\" target=\"_blank\" rel=\"noopener\">Income Tax Act, 1961<\/a>.<\/i><\/p>\n","protected":false},"author":67011,"featured_media":289258,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,9],"tags":[56714,13081,30630,47213,2523,56715,5363,17181,48081],"class_list":["post-289244","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-supremecourt","tag-belated-remittance-of-tds","tag-income-tax-act","tag-it-act","tag-justice-mr-shah","tag-Kerala_High_Court","tag-penal-provisions-under-income-tax-act","tag-supreme-court","tag-tax-deduction","tag-taxation-laws"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>No penalty leviable under Section 271-C of Income Tax Act on mere belated remittance of TDS by assessee: Supreme Court | SCC 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Chawla, JJ. dismissed Revenue\u2019s appeal holding that Income Tax Appellate Tribunal (ITAT) was right in holding that the assessee was not liable to penalty under Section 271(1)(c) of Income Tax Act, 1961. The assessee, manufacturers of TV parts,\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":271202,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/08\/05\/estimating-tax-deduction-at-source-an-unending-controversy\/","url_meta":{"origin":289244,"position":2},"title":"Estimating Tax Deduction at Source: An Unending Controversy","author":"Bhumika Indulia","date":"August 5, 2022","format":false,"excerpt":"by Tarun Jain\u2020 Cite as: 2022 SCC OnLine Blog Exp 60","rel":"","context":"In &quot;Experts Corner&quot;","block_context":{"text":"Experts Corner","link":"https:\/\/www.scconline.com\/blog\/post\/category\/experts_corner\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/08\/11_MicrosoftTeams-image-400.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/08\/11_MicrosoftTeams-image-400.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/08\/11_MicrosoftTeams-image-400.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/08\/11_MicrosoftTeams-image-400.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/08\/11_MicrosoftTeams-image-400.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":271627,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/08\/15\/whether-the-interest-paid-on-late-payment-of-tds-after-deduction-can-be-claimed-as-expenditure-for-determining-the-taxable-income-itat-examines-and-elucidates\/","url_meta":{"origin":289244,"position":3},"title":"Whether the interest paid on late payment of TDS after deduction can be claimed as expenditure for determining the taxable income? ITAT examines and elucidates","author":"Prachi Bhardwaj","date":"August 15, 2022","format":false,"excerpt":"Income Tax Appellate Tribunal (ITAT): While deciding the instant appeal wherein the relevant question arose that whether the interest paid on late payment of TDS after deduction can be claimed as expenditure for determining the taxable income; the Bench of A.D. Jain (Vice President) and Dr B.R.R Kumar (Accountant Member)\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Income Tax Appellate Tribunal","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/11\/ITAT.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/11\/ITAT.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/11\/ITAT.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/11\/ITAT.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/11\/ITAT.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":338156,"url":"https:\/\/www.scconline.com\/blog\/post\/2024\/12\/30\/penalty-delay-filing-audit-report-kerala-high-court\/","url_meta":{"origin":289244,"position":4},"title":"Penalty for delay in filing audit report before assessing authority under IT Act can be avoided by demonstrating reasonable cause: Kerala High Court","author":"Editor","date":"December 30, 2024","format":false,"excerpt":"\u201cIt merits notice that the phraseology used in Section 273B of the IT Act is such that no penalty can be imposed on an assessee under Section 271B for breach of the provisions, if he proves that there was \u2018reasonable cause\u2019 for the said failure.\u201d","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Kerala High Court","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/Kerala-High-Court-1.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/Kerala-High-Court-1.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/Kerala-High-Court-1.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/Kerala-High-Court-1.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":229877,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/05\/20\/madras-hc-in-view-of-the-conflict-around-the-issue-of-applicability-of-tds-on-interest-in-motor-accident-claims-matter-referred-to-a-larger-bench-for-resolution\/","url_meta":{"origin":289244,"position":5},"title":"Madras HC | In view of the conflict around the issue of applicability of TDS on interest in Motor Accident Claims, matter referred to a Larger Bench for resolution","author":"Bhumika Indulia","date":"May 20, 2020","format":false,"excerpt":"Madras High Court: In the instant case where the issue revolved around the applicability of TDS on interest in Motor Accident Claims; the Single Judge Bench of N. Anand Venkatesh, J., while observing that the issue has become complicated owing to the fact that there are conflicting decisions on the\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/289244","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67011"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=289244"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/289244\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/289258"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=289244"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=289244"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=289244"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}