Penalties for Default in TDS/ TCS

Provisions for levying penalty for defaults in deduction of tax at source and its deposit with the  Government…..

No.	Section	Particulars
1.	Section 271C	Failure to deduct TDS under Chapter XVII-B
2.	Section 271CC	Failure to collect tax at source under Chapter XVII-BB
3.	Section 272A(2)( C )	Failure to comply with requirements of filing statements or returns u/s 206 and/or section 206C
4.	Section 272A(2)(g)	Failure to supplyTDS certificate u/s203
5.	Section 272A(2)(i)	Failure to furnish a statement u/s192(2C)
6.	Section  272A(2)(j)	Failure to deliver a copy of declaration u/s 206C(1A)
7	Section  272A(2)(k)	Failure to deliver quarterly statement u/s 200(3) or the proviso to section206C(3). [The Finance Act, 2012 has w.e.f. 01-07-2012, dispensed with this penalty and instead has introduced a fine under new section 234E]
8.	Section  272A(2)(I)	Failure to deliver quarterly statement u/s206A(1)
9.	Section  272BB	Failure to comply with the provisions of section 203A regarding allotment of TAN or Tax collection account number in challans, certificates,returns,etc. Penalty of Rs. 10,000/- is leviable (w.e.f. 1.10.2004)
10.	Section  272BBB	Failure to comply with the provisions of section 206CA for tax collection account number. Penalty leviable w.e.f.1-10-2004 is u/s.272BB
11.	Section  221	In case of non-deduction and non-payment of interest worked and u/s201(1A)
12.	Interest u/s 201(1A)	If the assessee is deemed to be in default u/s 201(1) for not paying the tax deductible or deducted. Interest is leviable at 12% of tax in arrear for the period of default.
13.	Interest u/s 206 C(7)	In case of default in collecting the tax u/s 206C, interest is leviable at 1% p.m. on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid.

—





























Section 271C : Penalty for Failure to TDS  
If any person fails to—

a)       deduct the whole or any part of the tax as required by or under the provisions of ChapterXVII-B;or

b)       pay the whole or any part of the tax as required by or under—

(i)sub-section(2)ofsection115-O;or (ii)thesecondprovisotosection194B,

—  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 as aforesaid.

Note: Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.

Section 271 CA - Penalty for failure to collect tax at source Inserted by the Finance Act, 2006, w.e.f. 1-4-2007

If any person fails to collect the whole or any part of the tax as required by or under the provisions of Chapter XVII-BB  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 collect as aforesaid.

Note: Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.

Q:can the Penalty be levied on issuing TDS certificate belatedly under a bona fide belief ?

CIT (TDS) v. Excel Industries Ltd. [2014] 51 taxmann.com 247 (Gujarat)

No penalty u/s 272 of the Act is levied in case issue TDS certificate belatedly under a bona fide belief that a consolidated TDS certificate was to be issued to deductees  after closing of relevant financial year.

Q: If the TDS not deducted under a bona fide belief can assessee held liable u/s 201(1A )?

CIT v. I.T.C. Ltd. [2013] 38 taxmann.com 11 (Allahabad) Where Tribunal found that action of assessee for not deducting tax at source on conveyance allowance paid

to its employees was based on bona fide belief, assessee could not be treated as assessee in default liable to interest under section 201(1A)

Q: If tax had already been paid by deductee, thereafter tax can be recovered again by treating deductor to be assessee-in-default..?

CIT v. D. P.Vekaria [2014] 48 taxmann.com 249 (Gujarat) Where deductee, recipient of income, has already paid taxes on amount received from deductor, department

once again cannot recover tax from deductor on same income by treating deductor to be assessee-in-default for shortfall in its amount of tax deducted at source.

• The liability of deductor for interest is required to be considered/determined considering date of payment of tax by concerned tax deductees

Q: If depositors furnished declaration requesting deductor not to deduct TDS, then deductor can be penalize?

Dy. CIT v. Vijaya Bank [2014] 48 taxmann.com 244 (Visakhapatnam - Trib.)  Where depositors had furnished declaration in prescribed manner requesting deductor not to deduct tax at source, deductor was under a statutory obligation

not to deduct tax and in aforesaid circumstances,deductor could not be penalized for not deducting tax at source

Q: Can the Assessee Appeal if  he did not dispute show-cause notice issued u/s 201 ?

ING Vysya Bank Ltd. v. Asstt. CIT [2015] 53 taxmann.com 460 (Bangalore - Trib.)

• As assessee did not dispute show cause notice issued by AO, he treated assessee as assessee in default u/s 201 and determined TDS and interest liability.

• On appeal, assessee contended that it had made various provisions during its banking business for which it was not supposed to deduct TDS and whenever payment was made, it had deducted TDS.

• Even if assessee did not contest issue before AO, it had a right to appeal and it could apprise higher authorities about unsustainability of demand in law.

Q: Is there any time limit to declared as an assessee in default u/s 201 of the Act?

Director of Income-tax (International Taxation) v. Mahindra & Mahindra Ltd. [2014] 48 taxmann.com 150 (Bombay)

• Even though section 201 does not prescribe any limitation period for assessee being declared as an assessee in default yet revenue will have to exercise power in that regard within a reasonable time. [Also see: Bhura Exports Ltd. v. ITO [2011] 13 taxmann.com 162 (Cal.)]

• An order passed u/s 201 (1) or (1A) can not be held as barred by limitation merely on ground that it has not been passed within four years from end of relevant F.Y.

Q:What is the time limit for proceedings u/s 201/ 201(1A)?

Cit v. Hutchison Essar Telecome Ltd. [2010] 323 ITR 230 (DELHI)

• Proceedings u/s 201 and 201(1A), initiated after period of four years from end of financial year in question, were barred by limitation.

• It is clear from the decision in the case of CIT v. NHK Japan Broadcasting Corpn. [2008] 305 ITR 137 (Delhi), that the proceedings u/s 201/201(1A), can be initiated only within three

years from the end of the A.Y. or within four years from the end of the relevant F.Y.

Q: Can the Invocation of provisions u/s 201(1) be made only in case of loss to the revenue?

Allahabad Bank v. ITO [2014] 46 taxmann.com 200 (Agra - Trib.)

• Recovery provisions u/s 201(1) can be invoked only when loss to revenue is established and that can only be established when it is demonstrated that recipient of income has liability to pay tax and has not paid due taxes.

Q: If the bank credit the tax deposit in other account then assessee can be maid liable?

DCM Shriram Consolidated Ltd. v. ITO [2014] 50 taxmann.com 423 (Lucknow - Trib.)

• If the bank credited tax deposited by assessee within time to CBEC account instead of CBDT account, for such a mistake committed by bank, assessee could not be held liable and interest imposed by revenue was not justified.

Q: can the order u/s 201(1)/ 201(1A) be passed where an action against payee is not initiated by the department u/s 147?

Dy. Director of Income-tax (International Taxation) v. Videsh Sanchar Nigam Ltd. [2014] 48 taxmann.com 108 (Mumbai - Trib.)

• No order u/s 201(1)/201(1A) can be passed where revenue has not taken any action against payee and further time limit for taking action against payee u/s 147 has also expired.

Q: Can the Assessee be considered as Assessee in default  for failure of deduction of Tax even is he has sufficient and good reasons for non deduction of tax?

CIT v. American Express Bank Ltd. [2012] 18 taxmann.com 21 (Delhi)

• Proviso to section 201(1) (No Penalty to be levied u.s 221 if the Assessee has good and sufficient reasons for failure of deduction of tax) is to be applied only to negate possibility of imposition of penalty u/s 221 and it would not absolve an assessee from being considered as an assessee in default. Thus he is liable for Interest u/s 201(1A)

Q:Is there any requirement of issuing Notice u/s 156 in case provisions of section 201(1) is applicable?

PILCOM v. CIT [2011] 11 taxmann.com 103. (Cal.)

• U/s 201, a person is ‘deemed to be an assessee in default’ in view of statutory provision contained therein and in such a case, there is no scope of giving further notice of demand under section 156 which is applicable only in cases ‘when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act’.

• In a case where section 201(1) is attracted there is no need of giving any notice u/s 156 and if any such notice is given the same should be held to be redundant.