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Penalty for late payment of TDS

Sujit Talukder (service) (719 Points)

12 January 2010

The fact of the case is given below:

Tax deducted during May 2007 (Fin. Yr 2007-08) is submitted and accepted by bank on 7th June 2007. However, the bank has cleared the cheque on 8th June 2007. In the etds return for the relevant qtr., the challan date is written is 8th June 2007. Amount of TDS is 340000/-.

Now the Dept. has issued a notice to pay the interest for the late paymentof TDS. The assesse has paid the interest without any contest.

Now the dept. has asked the assesse to appear for the penalty ie the Department wants to impose penalty equal to TDS amount ie Rs 340000/-.

Can penalty be imposed given that the assesse has already paid the tax and that it is the fault on the bank side for delay in crediting the TDS to the Central govt. a/c ?

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10 Replies

Amir (Learner) (4016 Points)
Replied 12 January 2010

Dear Sujit,

Penalty can be imposed u/s 271C...

But if U satisfy the officer that u had reasonable cause then penalty cannot be imposed..

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Tushar Mahendru (Learner) (125 Points)
Replied 12 January 2010

Hi Sujit,

If the TDS is deposited by Cheque then the date to be accounted for is the "DATE OF PRESENTATION" of challan and cheque in the bank. If you observe bank always stamps two date i.e date of presentation and date of clearing. For tax purpose the relevance is for date of presentation since the client himself has entered a wrong date tthen department can proceed with the penalty. You can produce a copy of challan deposited by you in support of your arguement n therby youur penalty may be waived off.

CA Radhika Arde (Chartered Accountant) (67 Points)
Replied 12 January 2010

Penalty is levible U/s. 201 and 221 ; See these section.

201 Consequences of Failure to deduct or pay and

221 Penalty payable when Tax in default

Provided that no penlaty shall be charged under section 221 from such person, unless the A.O is satisfied that such person without good and sufficient reasons, has failed to deduct and pay such tax.

So you have to satisfy officier with reasons.......

CA Radhika Arde (Chartered Accountant) (67 Points)
Replied 12 January 2010

wat Tushar says is also correct.........Date of presentation of challan to the bank is to be consideded ........

Amir (Learner) (4016 Points)
Replied 12 January 2010

Dear Tushar & Radhika,

What u r saying that Date of presentation of cheque is considered as date of payment...This concepts works in Indirect Taxes because of a specific circular, but I don't think there is any such circular in Income Tax..

Further clear reading of Sec 200 says that date of clearing will be date of payment

200. ⁴[(1)] ⁵Any person deducting any sum in accordance with ⁶[the foregoing provisions of this Chapter] shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs.

⁷[(2) Any person being an employer, referred to in sub-section (1A) of section 192 shall pay, within the prescribed time, the tax to the credit of the Central Government or as the Board directs.]

⁸[(3) Any person deducting any sum on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in sub-section (1A) of section 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time, ^8a[prepare such statements for such period as may be prescribed], and deliver or cause to be delivered to the prescribed income-tax authority⁹ or the person authorised by such authority such statement in such form¹⁰ and verified in such manner and setting forth such particulars and within such time as may be prescribed.]

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CA Radhika Arde (Chartered Accountant) (67 Points)
Replied 12 January 2010

Well Aamir section u quote is correct.......its credit to the central govt.......the day we submit challan to the bank it gets credited to the govt subject to clearence of cheque............so tender date is to be consider....Correct me if i m wrong........

Amir (Learner) (4016 Points)
Replied 12 January 2010

Dear Friends,

Read this-

TAX DEDUCTION AT SOURCE - SOME COMMON DOUBTS :: The Supreme Court in the case of CIT v. Ogale Glass Works Ltd. [1954] 25 ITR 529 held that the cheques not having been dishonoured but having been cashed, the payment related back to the dates of receipt of the cheques and in law the dates of payments were the dates of the delivery of the cheques, The same is the postition as per rules 79 and 80 of the Central Treasury Rules. However, with effect from June 1, 1983, rule 20 of the Central Government Account (R & P) Rules, 1983 has been substituted for the Central Treasury Rules in respect of all transactions pertaining to the Central Government. This said rule reads as under : Government dues tendered in the form of a cheque or draft which is accepted under the provisions of rule 19 and is honoured on presentation shall be deemed to have been paid - where the cheque or draft is tendered to the bank - on the date on which it was cleared and entered on the receipt scroll. The AAR in P.No. 2 of 1994 in Advance Ruling No. P. 2 of 1994, In re. [1996] 221 ITR has upheld the applicability of C.G. Account (R & P) Rules to income-tax payments., [2001] 116 TAXMAN 16