Income Tax Act, 1961 – s. 271C – Interpretation of – Belated remittance of the TDS after deduction, such assessee if liable to pay penalty u/s. 271C – Held: No – s. 271C(1)(a) shall be applicable in case of failure on the part of the concerned person/assessee to “deduct” the whole or any part of the tax as required by or under the provisions of Chapter XVIIB – Words used in s. 271C(1)(a) are ‘fails to deduct’ – It does not speak about belated remittance of the TDS – Thus, there shall not be any penalty leviable u/s. 271C on mere delay in remittance of the TDS after the same is deducted by the concerned assessee.

Income Tax Act, 1961 – ss. 201(1A) and 276B – Held: Consequences on non-payment/belated remittance of the TDS would be u/ss. 201(1A) and 276B.

Interpretation of Statutes – Penal provisions – Construction of – Held: Penal provisions are required to be construed strictly and literally – They are to be read as they are, nothing is to be added or taken out of them.

Circulars/Notices – CBDT’s Circular No.551 dated 23.01.1998 – Reliance was placed by Revenue on the said Circular and it was contended that over and above the prosecution, the person who has deducted tax at source but not remitted the same to the Government shall also be liable to pay penalty and that is why s. 271C was inserted – Held: The Circular favours the assessee – Even the CBDT has taken note of the fact that no penalty is envisaged u/s. 271C for belated remittance/payment/deposit of the TDS – Income Tax Act, 1961 – s. 271C. 

Words & Phrases – ”fails to deduct” in s. 271C(1)(a), 1961 Act – Meaning and scope of – Discussed – Income Tax Act, 1961 – s. 271C(1)(a).