Suppose there is contractual payment to sub contractor of Rs. 50 lacs. The TDS amount is Rs. 5 lakhs. There is a delay of 10 day in remittance. The deductor remitted the TDS amount along with interest.
Under section 221(1) the assessing officer can impose penalty of Rs. 5 lakh on the deductor, notwithstanding the fact that the deductor has suomotto paid the interest and there is voluntary compliance.
The only option left with the poor deductor is to bribe the officer, so that the officer invokes his power to impose lesser penalty.
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