09 April 2012
When you are following the cash method of accounting it is obligatory on your part to deduct the TDS at the time of payment which you are doing hence there is no fault and no penalty or interest to be levied on you.
09 April 2012
The penalty will be interest @1% per month (Sanjay is right that @1.5% per month is applicable for non-depositing after the deduction already made-which is not the case here). It is further clarified that there is no system of income tax on cash basis BUT accounting system is allowed either on Cash or Mercantile basis, to be followed consistently. It would be pertinent to note further that in the instant case since Credit has been done it means mercantile basis of accounting system does prevail and accordingly consequence of penalty does apply even in that view too.
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