penalty on tax

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This query is : Resolved

vijay kumar (Querist)

23 November 2009 Dear sir,
My client is a contractor. He constructed a building for a college and received some amount. The college being deductor of TDS failed to deduct TDS. Now my client has given me notice levying penallty of twice the TDS that would have been payable. Is levy of penalty is justifiable or Can the assessee defend in any other way that he is not liable to pay penalty
Please help me on this

Zainul Tawawalla

Zainul Tawawalla (Expert)

23 November 2009 I think that the department cannot levy penalty on your client as he is not responsible to deduct TDS. The college should have deducted the TDS.
Therefore, it is not justified that the department can levy a penalty on your client.

shakuntala chhangani

shakuntala chhangani (Expert)

23 November 2009 Hi Vijay, sec. 271C is applicable in your case. it says that if the assessee fails to deduct TDS or after deducting the same , fails to deposit the same then penalty can be levied which is equal to amount of tax. In your case, the assessee liable to deduct the tax is the college and not the contractor. hence the penalty can be levied upon college and not the contractor. you can argue the same with your AO. Regards,
CA Shakuntala Chhangani

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