IMPORTANT POINT
There shall not be any penalty leviable under Section 271C of Income Tax Act, 1961 on mere delay in remittance of TDS after deducting the same by concerned assessee.

JUDGMENT :

M.R. Shah, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment(s) and order(s) passed by the High Court of Kerala at Ernakulam in confirming the levy of interest/penalty under Section 271C of the Income Tax Act, 1961 (hereinafter referred to as the Act) on failure of the respective assessees to deposit the tax deducted at source (TDS) (or belated remittance of the TDS), the respective assessees have preferred the present appeals.

CIVIL APPEAL NO. 7934/2011

2. The facts leading the present appeal in a nutshell are as under:-

2.1 From 01.04.2002 to February, 2003, the appellant – assessee, engaged in a software development business at Techno Park, Trivandrum which employed about 700 employees, deducted tax at source (TDS) in respect of salaries, contract payments, etc., totalling Rs.1,10,41,898/- for the assessment year (AY) 2003-04. In March, the assessee remitted part of the TDS being Rs.38,94,687/- and balance of Rs.71,47,211/- was remitted later. Thus, the period of delay ranged from 05 days to 10 months. On 10.03.2003, a survey was conducted by the Revenue at assessee’s premises and it was noted that TDS was not deposited within the prescribed dates under Income Tax Rules (IT Rules). On 02.06.2003, Income Tax Officer (ITO) vide order under Section 201(1A) of the Act, 1961 levied penal interest of Rs.4,97,920/- for the period of delay in remittance of TDS. On 09.10.2003, the Additional Commissioner of Income Tax issued a show cause notice proposing to levy penalty under Section 271C of the amount equal to TDS. That the assessee replied to the said show cause notice vide reply dated 28.10.2003. That on 06.11.2003, another order under Section 201(1A) was passed levying the penal interest of Rs.22,015/-. On 10.11.2003, the Additional Commissioner of Income Tax (ACIT) vide order under Section 271C levied a penalty of Rs.1,10,41,898/- equivalent to the amount of TDS deducted for AY 2003-04. That order of Additional CIT levying the penalty under Section 271C came to be confirmed by the High Court by the impugned judgment and order. The High Court vide impugned judgment and order has dismissed the appeal preferred by the assessee by holding that failure to deduct/remit the TDS would attract penalty under Section 271C of the Act, 1961.

2.2 Feeling aggrieved and dissatisfied with the levy of interest/penalty under Section 271C of the Income Tax Act, 1961 on late remittance of TDS is the subject matter of preferred appeal(s).

CIVIL APPEAL NOS. 1258-1260/2019

3. The facts leading to the present appeals in a nutshell are under:-

3.1 By order(s) dated 26.09.2013, the ACIT by way of orders under Section 271C levied penalty equivalent to the amount of TDS deducted for AYs 2010-11, 2011-12 and 2012-13 on the ground that there was no good and sufficient reason for not levying penalty.

3.2 The CIT (Appeals) dismissed the assessees’ appeals. By common order dated 01.06.2016, the Income Tax Appellate Tribunal (ITAT) allowed the assessees’ appeals by holding that imposition of penalty under Section 271C was unjustified and reasonable causes were established by the assessee for remitting the TDS belatedly. By the impugned common judgment and order the High Court has allowed the Revenue’s appeals relying upon its earlier judgment (which is the subject matter of Civil Appeal No. 7934/2011 as above). The impugned judgment and order passed by the High Court is the subject matter of present appeals being Civil Appeals Nos. 1258-1260/2019.

4. Shri Arijit Prasad and Shri C.N. Sreekumar, learned Senior Advocates have appeared on behalf of the respective assessees and Shri Balbir Singh, learned ASG assisted by Ms. Monica Benjamin, learned counsel has appeared on behalf of the Revenue.

5. Shri Arijit Prasad, learned Senior Advocate appearing on behalf of the assessee in Civil Appeal No. 7934/2011 has vehemently submitted that in the facts and circumstances of the case, the levy of penalty under Section 271C of the Act, 1961 is not justifiabl