penalty u/s 221 and 271C

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CA Balakrishna Bhat (Querist)
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16 March 2009 for the non deduction of tax at source under chapter XVII-B penalty provisions prescribed under both section 221 and 271C. what is the need of two penalty sections for a default and what is the difference between these two sections (221 & 271C) which one will prevail?
Thank you,
Balakrishna

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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16 March 2009 Section 221 - When an assessee is in DEFAUT or is deemed to be in default in making a payment of tax, he shall in addition to the amount of the arrear of tax, interest u/s 220(2), by way of penalty, such amount as the AO may direct.

271C - If any person fails to deduct or fails to pay whole or any part of tax deducted at source, then such person shall be liable to pay penalty a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid.

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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16 March 2009 Please note that penalty under both these sections can not be imposed at the same time. Difference between both these sections are as below:

1. Penalty u/s 221 is imposed by AO while by Joint Comm. u/s 271C.

2. Section 221 comes into play only when there is a defaul in payment while 271C comes into force both at the time of failure to deduct and payment.

3. penalty u/s 271C is automatic while u/s 221 is only at the direction of AO.

CA Balakrishna Bhat

CA Balakrishna Bhat (Querist)
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17 March 2009 Thank you Mr.CA Tilak Raj Sharma.

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