US Technologies International Pvt Ltd Vs CIT (Kerala High Court)
Kerala High Court reviewed the appeal by US Technologies International Pvt Ltd against the Income Tax Appellate Tribunal’s decision upholding the penalty under Section 271C of the Income Tax Act. The penalty was levied for the company’s failure to remit tax deducted at source (TDS) for the financial year 2002-03. A survey conducted by the Income Tax Department under Section 133A revealed that while the company had deducted Rs.1.1 crore as TDS on salaries, contractor payments, and professional fees, only Rs.38.94 lakh had been remitted on time, with the balance being paid after the survey. The Additional Commissioner of Income Tax, citing repeated non-compliance, imposed a penalty equal to the delayed TDS amount.
The assessee contested the penalty before the CIT (Appeals), arguing that Section 271C applies only to failure to deduct tax, not to delays in remittance. The company also cited financial constraints as a reason for the delay. However, the CIT (Appeals) dismissed these arguments, finding that the company had used the funds for investments and other business purposes rather than making timely TDS payments. The tribunal also upheld the penalty, ruling that Section 271C covers both failure to deduct and failure to remit TDS. The assessee then approached the High Court, contending that the provision does not penalize delayed remittance unless it relates to Section 115(O) or Section 194B.
