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The Jodhpur Bench of the ITAT in 109TAX284 (mag.) discharged the assessee from levy of penalty u/s 221 for failure to deposit tax deducted at source within time. In this case the assessee voluntarily deposited tax alongwith interest u/s 201(1A) without any show cause notice or reminder. In the show cause notice u/s 221 the assessee pleaded that the default is on account of financial stringency and heavy losses incurred in his business. The Bench held that in this case the assessee was prevented by reasonable and sufficient cause to pay the amount of TDS.


The Kolkata bench in similar situation 80 ITD 25 brushed aside the plea that the assessee had paid the entire amount of TDS without any notice or reminder from the department in view of the provisions of section 200 which enjoin a duty on the person making any deduction of tax at source to pay the same within the time as prescribed in rule 30 of the Rules. Also it rejected argument of the assessee that the assessee was passing through financial crisis for last few years as a result of loss suffered by the assessee. the assessee. However for the fact that he had voluntarily paid the tax deducted at source together with the due interest thereon and considering the small delay of 27 days only it found it just and proper to reduce penalty u/s 221 to almost a third of the amount imposed.


These cases therefore leave no reason for the assessee to default in deposit of taxes at source and one must be reminded of them all the time.

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