Law: Income Tax Act, 1961

Section: 221,271

Income-tax----Deduction of tax at, source---Delay in depositing TDS----Penalty---Levy of penalty justified though TDS deposited before levy of penalty---Liable to pay interest as well as penalty---Loss in business of assessee nothing to do with deposit of TDS amount---Indian Income Tax Act, 1961, S.221. The Explanation to section 221 of the Income Tax Act, 1961, provides that an assessee shall not cease to be liable to any penalty under this subsection merely by reason of the fact that before the levy of such penalty he has paid the tax. Once he failed to deposit TDS (tax deducted at source) amount in time, he is liable to pay penalty under section 221 of the Income-tax Act. Section 221 of the Act relates to cases where the assessee had deducted the tax but failed to deposit that amount within the prescribed time­ limit. Section 271C, the clause (a), applies where a person fails to deduct the whole or any part of the taxi as required by or under the provisions of Chapter XVIIB. The assessee had deducted tax from interest other than interest on security in the financial year 1996-67 .to the tune of Rs.9,67,94,972 but that had not been deposited to the account of the Central Government within the time allowed under the statute. The delay varied from one month to twelve months in respect of different deposits. For that failure on the part of the assessee, the Assistant Commissioner of Income-tax imposed penalty of Rs.3 crores under section 221 of the Income-tax Act. Held, (i) that the Chief Commissioner had conferred power: on the Assistant Commissioner of Income-tax (TDS), Circle 21(1), who had imposed penalty under section 221 of the Act, and; therefore, it could not be said that the Assistant Commissioner of. Income-tax (TDS) had no power to impose penalty under section 221 of the Income Tax Act, 1961. (ii) That whether the assessee had paid interest or not was immaterial. When it was found in default in depositing the amount of TDS within the time limit prescribed, it was liable to pay interest as well as penalty. Any loss or profit in the business of the assessee had nothing to do with deposit of. THIS JUDGMENT DELIVERED BY: As agreed upon by the both learned…

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