Penalty for delay in remittance of TDS

Shyam Lal Naik (Querist) 09 December 2009 This query is : Resolved
Dear Members,

Please reply with reference to statutory provisions and judicial pronouncement.

Whether a deductor can be treated as an assessee in default u/s 201 for delay in remittance of TDS? In this case, the amount which remain to be paid is interest only.

If the answer to above is in affirmative, whether the deductor can be subjected to penal provisions u/s 221(1)?

Whether the case law, "Shreeniwas And Sons Versus Income-Tax Officer, 'B' Ward, Asansol, And Others.[1974] 96 ITR 562, will come to the rescue of the deductor?

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Vineet (Expert) 09 December 2009
The provisions of section 201 are pretty clear on the issue. The assessee is deemed to be in default if he fails to deduct or if TDS deducted, fails to pay the amount to the Govt as per provisions of the Act.

The mere fact that interest u/s 201(2) is payable proves that fact that assessee has defaulted in making payment of TDS within prescribed time and therefore there is sufficient cause to presume that assessee was in default of payment of tax.

The facts of Sreenivas case were different. In that case interest u/s 220(2) was levied after the demand was paid in instalments. Hence the fresh demand notice u/s 156 was only for payment of interest which was upheld by court. Only it was held that since the demand pertained to interest, non payment of same cannot be treated as default in respect of Tax and hence penalty u/s 221 cannot be levied.

In the instant case the assessee has defaulted in timely payment of TDS amount itself, the revenue can initiate penalty proceedings u/s 221 immaterial of the fact that such amount has subsequently been paid and only interest is payable.