US Technologies International Pvt. Ltd. Vs. The Commissioner of Income Tax - (Supreme Court) (10 Apr 2023)

No penalty is leviable under Section 271C of IT Act on mere delay in remittance of TDS after it is deducted by assessee.

MANU/SC/0340/2023

Direct Taxation

Assessees have preferred the present appeals feeling aggrieved and dissatisfied with the impugned judgment passed by the High Court confirming the levy of interest/penalty Under Section 271C of the Income Tax Act, 1961 (IT Act) on failure of the respective Assessees to deposit the tax deducted at source (TDS) (or belated remittance of the TDS).

The short question which is posed for the consideration of this Court is in case of belated remittance of the TDS after deducting the TDS whether such an Assessee is liable to pay penalty Under Section 271C of the Act, 1961?

Section 271C(1)(a) of IT Act shall be applicable in case of a failure on the part of the concerned person/Assessee to "deduct" the whole of any part of the tax as required by or under the provisions of Chapter XVIIB. The words used in Section 271C(1)(a) of IT Act are very clear and the relevant words used are "fails to deduct." It does not speak about belated remittance of the TDS. As per settled position of law, the penal provisions are required to be construed strictly and literally.

On plain reading of Section 271C of the IT Act, there shall not be penalty leviable on belated remittance of the TDS after the same is deducted by the Assessee. Section 271C of the IT Act is quite categorical. Its scope and extent of application is discernible from the provision itself, in unambiguous terms. When the non-deduction of the whole or any part of the tax, as required by or under the various instances/provisions of Chapter XVIIB would invite penalty under Clause 271C(1)(a); only a limited text, involving Sub-section (2) of Section 115O or covered by the second proviso to Section 194B alone would constitute an instance where penalty can be imposed in terms of Section 271C(1)(b) of the Act, namely, on non-payment. It is not for the Court to read something more into it, contrary to the intent and legislative wisdom.

The words "fails to deduct" occurring in Section 271C(1)(a) cannot be read into "failure to deposit/pay the tax deducted." Therefore, on true interpretation of Section 271C, there shall not be any penalty leviable Under Section 271C on mere delay in remittance of the TDS after deducting the same by the concerned Assessee. The consequences on non-payment/belated remittance of the TDS would be Under Section 201(1A) and Section 276B of the Act, 1961.

In all these cases, as the respective Assessees remitted the TDS though belatedly and it is not case of non-deduction of the TDS at all they are no liable to pay the penalty Under Section 271C of the Income Tax Act. Therefore, any question on applicability of Section 273B of the Act is not required to be considered any further.

Impugned judgment passed by the High Court are quashed and set aside and the question of law on interpretation of Section 271C of the Income Tax Act is answered in favour of the Assessee(s) and against the Revenue and it is specifically observed and held that, on mere belated remitting the TDS after deducting the same by the concerned person/Assessee, no penalty shall be leviable Under Section 271C of the IT Act. Present appeals are accordingly allowed.

Tags : REMITTANCE TDS DELAY