Penalty for non-payment of TDS

Case Details: Deccan Charters (P.) Ltd. v DCIT - [2022] 135 taxmann.com 128 (Bangalore - Trib.)

Judiciary and Counsel Details

• • N.V. Vasudevan, Vice President and Chandra Poojari, Accountant Member
  • Suresh Muthukrishnan, CA for the Appellant. 
  • Priyadarshi Mishra, Addl. CIT (DR) for the Respondent.

Facts of the Case

The assessee was engaged in the business of chartered flying of small aircraft. It had not remitted the amount collected by TDS to the government during the relevant assessment year. The Assessing Officer (AO) passed an order under section 201 treating the assessee as an assessee-in-default. Further, the assessee did not file any appeal against the order under section 201 and remitted tax deducted at the source along with interest.

Later, the AO initiated a penalty proceeding under section 221. Assessee responded that it was facing severe financial hardship, and the same constitutes a ‘good & sufficient reason’ for not levying a penalty.

On appeal, CIT(A) upheld the order of AO. The aggrieved assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that penalty under section 221 could be warded off only if the assessee could show that the default was for good and sufficient reasons. The financial difficulties of the assessee may not be very relevant unless the assessee also proves, with facts and figures, why it was not able to pay the payments in time.

There was no doubt that a mere default is not sufficient for the levy of penalty; however, the assessee used the TDS amount to meet various business commitments. Further, it was continuously making default of payment of TDS to the government account, which is very serious in nature.

One can understand the financial difficulties the assessee was facing if it was in defaulter for a short period. But in the instant case, the assessee’s conduct was that it continuously defaulted the payment of the TDS amount to the government account.

The only reason the assessee stated for non-payment of TDS was financial difficulties, which under these circumstances, did not appear to be sufficient. Accordingly, the levy of penalty was confirmed.