Case Law (SC) -- Mere delay in remittance/deposit of the TDS after deducting the same by the concerned assessee shall not attract any penalty leviable u/s Section 271C of the Act.

 "On fair reading of said CBDT’s circular, it talks about the levy of penalty on failure to deduct tax at source. It also takes note of the fact that if there is any delay in remitting the tax, it will attract payment of interest under Section 201(1A) of the Act and because of the gravity of the mischief involved, it may involve prosecution   proceedings   as   well,   under Section   276B   of   the   Act.   If   there   is   any omission to deduct the tax at source, it may lead to loss of Revenue and hence remedial measures   have   been   provided   by incorporating the provision to ensure that tax liability to the said extent would stand shifted to the shoulders of the party who failed to effect deduction, in the form of penalty. deduction of tax, if there is delay in remitting the amount to Revenue, it has to be satisfied with   interest   as   payable   under Section 201(1A) of   the   Act,   besides   the liability to face the prosecution proceedings, if launched in appropriate cases, in  terms of Section 276B of the Act. Even the CBDT has taken note of the fact that no penalty is envisaged under Section 271C   of   the   Income   Tax   Act   for   non-deduction TDS and no penalty is envisaged under   Section   271C   for   belated remittance/payment/deposit of the TDS.  

8.1 Even otherwise, the words “fails to deduct” occurring in  Section 271C(1)(a) cannot be read   into   “failure   to   deposit/pay   the   tax deducted.” 

8.2 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. As observed hereinabove,   the   consequences   on   nonpayment/belated   remittance   of   the   TDS would be under Section 201(1A) and Section 276B of the Act, 1961. 

9.In view of the above in all these cases as the respective assessees remitted the TDS though belatedly and it is not case of non­deduction of the TDS at all they are no liable to pay the penalty   under   Section   271C   of   the   Income Tax   Act."

US TECHNOLOGIES INTERNATIONAL PVT. LTD v. CIT, C.A. No.-7934/2011 dated 10.04.2023

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