Law:

Section:

Section 221, read with section 201, of the Income-tax Act, 1961 - Collection and recovery of tax - Penalty payable when tax in default - Assessment years 1985-86 and 1987-88 - Whether giving of a notice and/or passing an order under section 201 for determining that assessee is in default or deemed to be in default would not arise when it is admitted position between parties that assessee is in default; in such case, a common order can be passed under sections 201 and 221 - Held, yes - Whether penalty under section 221 is in addition to amount of arrears along with amount of interest and, therefore, payment of amount of arrears and interest payable would, by itself, not wipe away liability to penalty under section 221 - Held, yes - Whether proviso to section 201(1), which bars imposition of penalty under section 221 unless Assessing Officer is satisfied that failure to deduct and pay tax was without good and sufficient reasons, would apply only in respect of assessee who had not deducted tax and, consequently, failed to pay same; proviso would have no application where assessee had deducted tax but fails to pay - Held, yes - Whether penalty is imposed upon assessee under section 221 for default in not having paid tax deducted at source within time provided under Act; tax deposited after time-limit but before initiation of penalty proceedings would not cleanse assessee from being in default - Held, yes - Whether even where assessee has paid part tax after deducting same from payee, provisions of section 201(1) would continue to apply - Held, yes - Whether obligation to deduct and pay tax upon assessee is unconditional under Act and financial stringency would not justify deducting tax from amount paid to payee and not paying it to revenue - Held, yes [Paras 19 to 30] [In favour of revenue] FACTS â–  The assessee had manufacturing facilities and offices situated at different/diverse places in India. â–  During relevant assessment year, the assessee, while making payment to its shareholders, debenture holders, contractors and employees, deducted the tax at source, but there was a delay in paying same in accordance with the Act to the revenue. â– …