International Pvt. Ltd v. As Observed By The Bench In The Referenceorder, There May Not Be Much Scope For Discussion Onfacts. However, To Have An Exhaustive Analysis, It Willbe Worthwhil

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN and THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA,1940 ITA.No. 36 of 2016 AGAINST THE ORDER/JUDGMENT IN ITA 308/2015 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 15-10-2015 APPELLANT/APPELLANT: LAKSHADWEEP DEVELOPMENT CORPORATION LTDG 406, PANAMPILLY NAGAR, KOCHI 682036 REPRESENTED BY ITS FINANCIAL CONSULTANT LIJO JOHNSON BY ADVS.SRI.V.V.ASOKAN (SR.)SRI.K.I.MAYANKUTTY MATHERSRI.R.JAIKRISHNA RESPONDENTS/RESPONDENT AND ANOTHER: 1ADDITIONAL COMMISSIONER OF INCOME TAX (TDS)KOCHI 682018KOCHI 682018 2COMMISSIONER OF INCOME TAXCENTRAL, KOCHI 682015.CENTRAL, KOCHI 682015. BY ADVS.SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENTSRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 19.12.2018, ALONG WITH ITA.37/2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN and THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN WEDNESDAY,THE 19TH DAY OF DECEMBER 2018 / 28TH AGRAHAYANA,1940 ITA.No. 37 of 2016 AGAINST THE ORDER/JUDGMENT IN ITA 309/2015 ofI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/APPELLANT: LAKSHADWEEP DEVELOPMENT CORPORATION LTDG 406, PANAMPILLY NAGAR, KOCHI- 682 036, REPRESENTED BY ITS FINANCIAL CONSULTANT, LIJO JOHNSON. BY ADVS. SRI.V.V.ASOKAN (SR.)SRI.K.I.MAYANKUTTY MATHERSRI.R.JAIKRISHNA RESPONDENTS/RESPONDENT & ANOTHER: 1ADDITIONAL COMMISSIONER OF INCOME TAX KOCHI- 682 018. 2COMMISSIONER OF INCOME TAXCENTRAL, KOCHI- 682 015. BY ADVS. SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENTSRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 19.12.2018, ALONG WITH ITA.36/2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT P.R. Ramachandra Menon, J. The pertinent question sought to be answered as perthe Reference Order dated 06.12.2017 passed by aDivision Bench of this Court is whether Clause (b) ofSub-Section (1) of Section 271C of the Income Tax Act(hereinafter referred to as 'the Act), stipulatingpenalty of an equal amount of tax on the failure of theperson concerned to deduct or pay the tax, would takein the situation under Clause (a) of sub-section (1) ofSection 271C as well; or in other words; are not theabove two provisions, clauses (a) and (b), operating intwo different spheres, independent of each other, toattract penalty on establishing the specified event?.One step further; does the lapse to deduct the wholeor any part of the tax [as required by or under theprovisions of Chapter XVIIB of the Act] stipulatedunder Sec.271C(1)(a) will result in any automaticimposition of penalty, even denying the eligibility toclaim the benefit of Section 273B of the Act, as heldby a Division Bench of this Court in U.S.Technologies International Pvt. Ltd. vs. Commissioner of Income Tax[2010 KHC 6118 =2010(1)KLT SN 66]? Does the lawdeclared by the Division Bench in U.S.Technologiescase(cited supra) and the one in Classic Concepts HomeIndia Pvt. Ltd. vs. Commissioner of Income Tax[(2016)383 ITR 626 (Ker.)] reflect the correct positionof law? These are the points to be clarified by thisCourt in the appeals preferred by the assessee, raisingsubstantial questions of law under Section 260A of theAct. 2. As observed by the Bench in the ReferenceOrder, there may not be much scope for discussion onfacts. However, to have an exhaustive analysis, it willbe worthwhile to note down the 'gist' of the factualmatrix as well. International Pvt. Ltd. vs. Commissioner of Income Tax[2010 KHC 6118 =2010(1)KLT SN 66]? Does the lawdeclared by the Division Bench in U.S.Technologiescase(cited supra) and the one in Classic Concepts HomeIndia Pvt. Ltd. vs. Commissioner of Income Tax[(2016)383 ITR 626 (Ker.)] reflect the correct positionof law? These are the points to be clarified by thisCourt in the appeals preferred by the assessee, raisingsubstantial questions of law under Section 260A of theAct. 2. As observed by the Bench in the ReferenceOrder, there may not be much scope for discussion onfacts. However, to have an exhaustive analysis, it willbe worthwhile to note down the 'gist' of the factualmatrix as well. 3. The orders under challenge in the above twoappeals are those passed by the assessing authority,first appellate authority and also by the Income TaxAppellate Tribunal(hereinafter referred to as 'theTribunal') in the further appeals filed by theassessee; copies of which have been produced as Annexures A, B and C respectively. The issue projectedin both the appeals, the finding and reasoning given bythe authorities/Tribunal concerned and the nature ofchallenge raised by the assessee are exactly similar.The difference is only with regard to the assessmentyear in question. 4. There occurred some delay in paying the taxdeducted at source from the bills of the contractors.In the first case, i.e., I.T.A. 36 of 2016, the maximumdelay was upto 39 days, whereas in the second case,i.e., ITA No.37 of 2016, it was upto 32 days. On comingacross the lapse on the part of the assessee, noticewas issued under Section 274 of the I.T.Act r/w.Section 271C, proposing to impose penalty by the Addl.Commissioner of Income Tax (TDS) Cochin. According tothe assessee/appellant, it was only a 'short delay',because of administrative exigencies and shortage ofstaff. The situation arose when certain invoices/billsof contract works corresponding to the financial yearin question were received after that financial year.It was asserted that the TDS was recovered at the time ITA.No. 36 & 37 of 2016 6 of effecting payment to such contractor. But thereoccurred an inadvertent omission in remitting the sameto the Government, which however was cleared withinterest payable under Section 201(1A) of the Act. 5. On receipt of the notice, though the positionwas sought to be explained, it was not properlyappreciated by the authority concerned. Theappellant/assessee is a 100% Government of Indiaundertaking, incorporated under the Companies Act,1956. Its operation is mainly for the general welfareof the people of the Lakshadweep Islands (who areScheduled Tribes, as per the Presidential order issuedin this regard) and they run as many as 6 factories inthe Lakshadweep Islands; besides the management andoperation of 30 vessels owned by the Union Territory ofLakshadweep. The task as above is undertaken throughcontractors, who are being paid accordingly. 6. It is seen from Annexure A order that despiteseveral adjournments, no specific reply in writing wassubmitted by the appellant/assessee. In the saidcircumstance, placing reliance on the verdict passed by the Division Bench of this Court in U.S. Technologies(cited supra), an equal amount of tax in respect of thefinancial year concerned, (Rs.1,32,034/-) was mulctedupon the assessee under Section 271C of the Act (inI.T.Appeal.No.36 OF 2016); whereas in the second case(I.T.Appeal.No.37 of 2016), it was to an extent ofRs.15,02,859/-. Placing reliance on the very sameverdict of the Division Bench of this Court citedsupra, benefit of Section 273B of the Act was alsodenied, as it was held by this Court that Section 273Bwould not be attracted in an instance covered bySection 271C of the Act involving failure in paymentof the recovered tax, which was a more seriouslapse/offence when compared with non-deduction of taxat source. the Division Bench of this Court in U.S. Technologies(cited supra), an equal amount of tax in respect of thefinancial year concerned, (Rs.1,32,034/-) was mulctedupon the assessee under Section 271C of the Act (inI.T.Appeal.No.36 OF 2016); whereas in the second case(I.T.Appeal.No.37 of 2016), it was to an extent ofRs.15,02,859/-. Placing reliance on the very sameverdict of the Division Bench of this Court citedsupra, benefit of Section 273B of the Act was alsodenied, as it was held by this Court that Section 273Bwould not be attracted in an instance covered bySection 271C of the Act involving failure in paymentof the recovered tax, which was a more seriouslapse/offence when compared with non-deduction of taxat source. 7. Though the appellant/assessee took up thematter in appeal, interference was declined by thefirst appellate authority as per Annexure B order.Further challenge made before the Tribunal also endedup in failure as revealed from Annexur C order.Existence of 'substantial question of law' is brought out from the observation made by the Division Bench ofthis Court in the Reference Order, pointing out thatclause (a) of sub-section (1) of Section 271Cprescribes penalty in respect of non-deduction of tax(there is no violation under this head in the instantcase, the tax having been deducted), whereas clause (b)of sub-section (1) of Section 271C envisages penalty inrespect of the failure to paythe tax deducted eitherwhole or in part, only with reference to sub-section(2) of Section 115-O or the 'second proviso' to Section194B of the Act and nothing more or less. In otherwords, the specific instance of deduction made by theappellant/assessee from the contractors' bills comingwithin the purview of Section 194C of the Act is notcited as an instance,to entail payment of penaltyunder Section 271C. 8. Shri Mayankutty Mather, the learned counselappearing for the appellant points out that there is nodispute with regard to the sequence of events. It isstated that there is absolutely no failure on the partof the appellant/assessee in deducting the tax from contractors' bills, which in fact were submitted onlyafter expiry of the financial year in question. Becauseof some administrative reasons, including shortage ofstaff, there occurred a short delay of 32 to 39 days inpaying the tax deducted. It was subsequently paid withinterest underSection 201(1A)of the Act andabsolutely no loss has been resulted to the Income TaxDepartment. It is pointed out that, in the matter ofimposition of penalty, various aspects are to beconsidered, particularly whether it is wilful, so as toconstitute an offence. The nature of the establishment,being a 100% Central Government Company, is also arelevant matter to be looked into. Payment of penaltyis not automatic, whenever there is an instance ofdelay, that too of negligible extent, as in the instantcase, submits the learned counsel. appellant/assessee is entitled to have the benefit ofSection 273B of the Act, whereby the penalty could bewaived in toto or reduced to substantial extent,considering the particular facts and circumstances, which is a statutory right and the same cannot bedenied, referring to the gravity of the lapse underSection 271C(1)(b) of the Act. As such, the legalposition declared by the Division Bench in U.S.Technologies and in Classic Concept's cases requires tobe re-considered. The learned counsel also points outthat, if under any circumstance, action is necessaryfor non-remittance of the tax deducted at source, itcan only be by way of prosecution, as envisaged underSection 276B of the Act. The scope of incorporation ofSection 271C, as clarified by the CBDT (Central Boardof Direct Taxes) vide their Circular No.551 is alsopressed into service in support of the challenge raisedagainst Annexures A,B and C orders. which is a statutory right and the same cannot bedenied, referring to the gravity of the lapse underSection 271C(1)(b) of the Act. As such, the legalposition declared by the Division Bench in U.S.Technologies and in Classic Concept's cases requires tobe re-considered. The learned counsel also points outthat, if under any circumstance, action is necessaryfor non-remittance of the tax deducted at source, itcan only be by way of prosecution, as envisaged underSection 276B of the Act. The scope of incorporation ofSection 271C, as clarified by the CBDT (Central Boardof Direct Taxes) vide their Circular No.551 is alsopressed into service in support of the challenge raisedagainst Annexures A,B and C orders. 10. Mr. Christopher Abraham, the learned StandingCounsel for the Department submits that there is noobscurity in the legal provision and in particular,under Section 271C of the Act. Mere payment of interestunder Section 201(1A) of the Act is not by itselfenough to mitigate the lapse/default on the part of theassessee in not remitting the tax deducted at source. The instance of non-payment of tax deducted is a moreserious offence than the lapse in not deducting the taxat source. When the non deduction of tax at sourcewarrants penalty under Section 271C(1)(a), non-paymentof the tax, after such deduction (which is of moreserious in nature) definitely will attract penalty andthat clause (a) can be read into clause(b) of sub-section (1) of Section 271C. The learned StandingCounsel adds that the prosecution proceedings underSection 276B is of general in nature which could be pursued in appropriate cases and that the same does notplace any bar in realising penalty in terms of Section271C of the Act, which is more of civil in nature. 11. In order to appreciate the rival contentions and to answer the question referred, it is necessary tohave an analysis of the relevant statutory provisions. Section 271C reads as follows: ITA.No. 36 & 37 of 2016 attracted under two different circumstances;- (i) inrespect of the failure to deduct whole or part of thetax under clause (a) of sub-section (1) of Section 271Cin respect of failure to pay the whole or any part ofthe tax under sub-clauses (i) or (ii), under clause (b)of the very same provision. 13. Coming to the first clause i.e. clause (a),penalty is for failure to deduct tax at source, asrequired by or under the provisions of Chapter XVIIBand under no other circumstances. Under the secondclause, i.e. clause (b),penalty is for failure to pay the whole or any part of the tax, as further clarifiedby the words which follow the said stipulation, i.e.,“as required by or under,- (i) sub-section (2) of Section 115-O; or(ii) second proviso to section 194B.” Obviously, except for the failure with respect to theabove two instances, no other instance is mentionedunder clause (b) to attract payment of penalty. 14. Let us now analyze the mandate of sub-section(2) of Section 115-O as well as the 'second proviso' toSection 194B, for which the said provisions are extracted below: “115-O Tax on distributed profits ofdomestic companies:xxxxxxxx (2)Notwithstanding that no income-taxis payable by a domestic company onits total income computed in accordancewith the provisions of this Act, thetax on distributed profits under sub-section(1) shall be payable by suchcompany.xxxxxxxxx” ITA.No. 36 & 37 of 2016 “194B-Winningsfromlotteryorcrossword puzzle: Obviously, except for the failure with respect to theabove two instances, no other instance is mentionedunder clause (b) to attract payment of penalty. 14. Let us now analyze the mandate of sub-section(2) of Section 115-O as well as the 'second proviso' toSection 194B, for which the said provisions are extracted below: “115-O Tax on distributed profits ofdomestic companies:xxxxxxxx (2)Notwithstanding that no income-taxis payable by a domestic company onits total income computed in accordancewith the provisions of this Act, thetax on distributed profits under sub-section(1) shall be payable by suchcompany.xxxxxxxxx” ITA.No. 36 & 37 of 2016 “194B-Winningsfromlotteryorcrossword puzzle: The person responsible for payingto any person any income by way ofwinnings from any lottery or crosswordpuzzle or card game and other game ofany sort in an amount exceeding 'tenthousand rupees shall, at the time ofpayment thereof, deduct income taxthereon at the rates in force:Provided that in a case where thewinnings are wholly in kind or partly incash and partly in kind but the part incash is not sufficient to meet theliability of deduction of tax in respectof whole of the winnings, the personresponsible for paying shall, beforereleasing the winnings, ensure that taxhas been paid in respect of thewinnings.” 15. Section 115-O stands compiled as part of Chapter XIIDand it does not come within the purview ofany deduction under Chapter XVIIB envisaged underClause (a) of Section 271C(l). Section 194B, on theother hand, definitely comes under Chapter XVIIB. Thesaid Chapter contains various instances of deductionof tax at source. An immediate reference will be apposite to the specific instances covered by the casein hand. As mentioned at the beginning, paymenteffected by the petitioner Corporation (owned by theCentral Government) was to the contractors engaged forundertaking various works, who had submitted the billsonly after expiry of the relevant financial year. Thedelay in remittance of the tax deducted at source wasonly for a maximum period of 39 days and the amountdeducted was paid with interest under Section 201(1A).The deduction in such cases, from the amount payable tothe contractors, is specifically covered under Section194C of the Act. 16. In so far as the law makers have taken aconscious decision to identify only Section 194B ofChapter XVIIB of the Act [leaving the payment of taxdeducted in respect of other instances in the very sameChapter] to be mulcted with penalty, the instancescovered by clause (a) of Section 271C(1) cannot be readinto clause (b) of Section 271C(1). In other words, itis never for the Court to re-write the law or questionthe legislative wisdom of the law makers in this regard. However,a doubt may arise as to whether therewas any intent on the part of the law makers to leavethe defaulters to go scot free, if penalty cannot bemulcted upon them for non payment even after deductionof tax, which is a more serious offence/lapse than thefailure to deduct tax. 17. The situation has been taken care of by theParliament, when they have incorporated Section 276Bin the Act, providing for prosecution in specific circumstances. The said section reads as follows: “276B; Failure to pay tax to thecredit of Central Government underChapter XII-D or XVII-B: If a personfails to pay to the credit of theCentral Government:-(a) the tax deducted at source by himas required by or under the provisionsof Chapter XVIIB; or(b) the tax payable by him, as requiredby or under:-(i) sub-section (2) of Section 115-O;or (ii) the second proviso to section194B,he shall be punishable with rigorousimprisonment for a term which shall not be less than three months but which mayextend to seven years and with fine. 17. The situation has been taken care of by theParliament, when they have incorporated Section 276Bin the Act, providing for prosecution in specific circumstances. The said section reads as follows: “276B; Failure to pay tax to thecredit of Central Government underChapter XII-D or XVII-B: If a personfails to pay to the credit of theCentral Government:-(a) the tax deducted at source by himas required by or under the provisionsof Chapter XVIIB; or(b) the tax payable by him, as requiredby or under:-(i) sub-section (2) of Section 115-O;or (ii) the second proviso to section194B,he shall be punishable with rigorousimprisonment for a term which shall not be less than three months but which mayextend to seven years and with fine. 18. Even in a case where there is some delay ineffecting payment of tax, if proper and sufficientreasons are shown for the delay involved, themitigating circumstances can very well be considered by the competent authority, who can waive the penalty(wherever penalty can be legally imposed) or reduce thesame to an appropriate extent. This is the mandate ofSection 273B, which is extracted below: “273B. Penalty not to be imposed in certain cases: Notwithstanding anything containedin the provisions of [Clause (b) ofsub-Section(1) of Section 271, Section271A, Section 271AA,Section 271B, Section 271BA, Section 271BB, Section271C, section 271CA, Section 271D, Section 271E, Section 271F, Section271FA, Section 271FAB, Section 271FB,section 271G, Section 271GA, Section271GB, Section 271H, Section 271-I,Section 271J, clause (c) or clause (d)of sub-section (1) or sub-section(2)ofsection 272A, sub-section (1) ofsection 272AA or Section 272B or sub- section (1) or sub-section (1A) ofsection 272BB or sub-section (1) ofSection 272BBB or clause (b) of sub-section (1) or clause (b) or clause(c)of sub-section (2) of section 273, nopenalty shall be imposable on theperson or the assessee, as the case maybe, for any failure referred to in thesaid provisions if he proves that therewas reasonable cause for the saidfailure.] 19. In so far as a taxing statute is concerned, itis an arena where the rules of 'strict interpretation'are to be followed. We find support from the rulingrendered by the Apex Court in Sneh Enterprises vs. Commissioner of Customs, New Delhi [(2006)7 SCC 714].Even in other cases, the gap/lacuna, if at all any, ina statutory provision, cannot be filled up by theCourt, in view of the principle of casus omissus asmade clear by the Apex Court in Smt. Kanta Devi vs.Union of India and another 20. Now it is the turn for analysis of theprecedents, which have been referred to in thereference order, doubting the correctness of thefinding as to the mandate of Section 271C, interpreting the same in favour of the Revenue. 21. The first and foremost verdict is the onerendered by a Division Bench of this Court inU.S.TechnologiesInternationalPvt.Ltd.vs. Commissioner of Income Tax [2010 KHC 6118=2010(1)KLT SN66]. It was a case where the appellant/assessee haddeducted massive amount of tax at source underdifferent heads; such as salary, payment tocontractors, professional fees for technical services,rent etc., but retained without remitting the same tothe Department. This was revealed in a survey conductedunder Section 133A of the Act, by the Survey Team ofthe Income Tax Department, in the premises of theassessee, which brought such deduction of tax to anextent of Rs. 1,10,41,898/- for the financial year2002-03 (the relevant assessment year being 2003-04),in respect of which only a sum of Rs.38,94,687/- wasremitted as on the date of search and the balance wasremitted only after the survey in May, 2003. It wasnoted that the tax deducted at source in respect of thepreceding financial year 2001-02 was also remitted only belatedly. On proposing to impose penalty under Section271C, explanation was offered with reference topaucity of funds and such other aspects. The objectionwas turned down and penalty was imposed by theassessing officer, which came to be confirmed by theCommissioner of Appeals and later by the Tribunal aswell. 22. This was sought to be challenged before thisCourt raising mainly two substantial questions of lawunder Section 260A of the Income Tax, i.e., whetherpenalty could be levied under Section 271C for failureto pay deducted tax and alternately, whether theassessee has reasonable cause for the non-payment orbelated payment of tax deducted at source. Thecontention raised by the assessee/appellant in the saidcase was more or less similar as raised in the presentappeals. After analysing the rival contentions andmaking a reference to Section 271C of the Act, it washeld that the failure to pay the whole or any part oftax as required, takes in the tax deducted under clause(a) under any of the provisions of Chapter XVIIB and so 21 much so, the failure to deduct or failure to remit therecovered tax, both will attract penalty under Section271C of the Act. 23. The finding as contained in paragraph '3' isreproduced below for proper and effective appreciation: “3. Counsel for the appellant has drawna distinction between clauses (a) and(b) of Section 271C (1) of the Act.According to him penalty under clause(a) is only for failure to deduct taxas required under any of the provisionsof Chapter XVIIB. It is argued that inthe survey conducted by the departmentwhat was noticed was that deductionshave been made and the violation wasonly delayed remittance of part of thededucted amount and non-remittance ofbalance amount. However, the contentionof counsel for the assessee is thatsince there is no provision for penaltyfor non-remittance of tax deducted atsource under the provisions of ChapterXVIIB, the levy of penalty isunauthorised. Counsel contended thatpenalty under Section 271C(1) for non-remittance is only of tax, whetherrecovered or not, under sub-section (2)of Section 115(O) or second proviso to Section 194B of the Act. We are unableto accept this contention because thefirst part of clause (b) of Section271C(1) i.e. failure to pay whole orany part of tax as required, takes inthe tax deducted under clause (a)underany of the provisions of Chapter XVIIB.So much so, in our view, failure todeduct or failure to remit recoveredtax, both will attract penalty underSection 271C of the Act. So much so,the contention of the appellant failsand we uphold the finding of theTribunal dismissing the challengeagainst levy of penalty.”24. It is relevant to note that the said findinghas been rendered by the Bench, just in one sentence,after taking note of the specific contentions raised bythe appellant/assessee and obviously, there is no muchdiscussion at all. In other words, the reasons for thefinding is not discernible from the judgment. Whenclause (a) is in respect of non-deduction of whole orany part of the tax as required by or under theprovisions of Chapter XVII-B, the second instance (toimpose penalty under clause (b) dealing with 'payment')is only in respect of failure with reference to sub- section (2) of Section 115-O (which comes under ChapterXII-D of the Act) and the other instance is only inrespect of the 'second proviso' to Section 194B, whichcomes under Chapter XVII-B of the Act. section (2) of Section 115-O (which comes under ChapterXII-D of the Act) and the other instance is only inrespect of the 'second proviso' to Section 194B, whichcomes under Chapter XVII-B of the Act. 25. Why the differentiation, what was theintention of the Parliament, why such a consciousdecision was taken identifying only 'two' specificprovisions for imposing penalty with regard to thefailure to pay the deducted tax, while deciding toimpose penalty in respect of all instances of failureto deduct tax,under Chapter XVII-B, are not at allconsidered or discussed anywhere in the said judgment.In the said circumstance, the doubt expressed by theBench who passed the Order of Reference is welljustified. We find it very difficult to accept thefindings given in U.S.Technologies case (supra), as thesame is not supported by any reasoning and furthersince the provision of law is quite specific, whichcannot be re-written by this Court and we have to takeas it is. 26.The question came up for consideration again before a Division Bench of this Court in ClassicConcepts Home India Pvt. Ltd. vs. Commissioner ofIncome Tax [(2016)383 ITR 626 (Ker.)]. The appealpreferred by the assessee challenging the verdictpassed by the Tribunal upholding the penalty underSection 271C of the Income Tax Act for belated paymentof tax deducted at source, was almost on similargrounds as raised in U.S.Technologies case. Apart fromrelying on some of the observations inU.S. Technologies case, the assessee/appellant sought toplace reliance on Section 276B of the Income Tax Actand also on the Circular bearingNo.551 dated23.01.1990. Without much discussion, the Bench heldthat in view of the admitted case that the tax deductedat source was remitted belatedly, though with interest,it was liable to attract penalty under Section 271C ofthe Income Tax Act. 27. With regard to the case projected by theassessee/appellant that the beenfit of reduction/waivingof penalty in appropriate cases was possible, in viewof the observation made by the Bench inU.S. Technologies case (with reference to Section 273B ofthe Act), it was turned down holding that the benefitof Section 273B will not be attracted in a case wherethe tax already deducted was not remitted to theRevenue and that U.S.Technologies case would notsupport the case of the appellant/assessee in anymanner. After extracting paragraph 16.5 of the CircularNo.551 relied on by the appellant/assessee, the Benchobserved in just 'one sentence', that a reading of thesaid paragraph would show that the provisions thereofhave no relevance in so far as the case of the appellant was concerned. It was accordingly, that thechallenge was repelled and the appeals were dismissed,thus justifying the levy of penalty under Section 271Cof the Act. 28. CircularNo.551 deals with the circumstancesunder which Section 271C was introduced in the StatuteBook, for levy of penalty. Paragraph 16.5 of the aboveCircular reads as follows: “16.5: Insertion of a new section 271C to provide for levy of penalty forfailure to deduct tax at source-under appellant was concerned. It was accordingly, that thechallenge was repelled and the appeals were dismissed,thus justifying the levy of penalty under Section 271Cof the Act. 28. CircularNo.551 deals with the circumstancesunder which Section 271C was introduced in the StatuteBook, for levy of penalty. Paragraph 16.5 of the aboveCircular reads as follows: “16.5: Insertion of a new section 271C to provide for levy of penalty forfailure to deduct tax at source-under the old provisions of Chapter XXI ofthe Income Tax Act no penalty wasprovided for failure to deduct tax atsource.This default, however, attractedprosecution under the provisions ofSection276B,whichprescribedpunishment for failure to deduct tax atsource or after deducting failure topay the same to the Government. It wasdecided that the first part of thedefault, i.e., failure to deduct tax atsource should be made liable to levy ofpenalty, while the second part of thedefault, i.e., failure to pay the taxdeducted at source to the Governmentwhich is a more serious offence, shouldcontinue to attract prosecution. TheAmending Act, 1987 has accordinglyinserted a new Section 271C to providefor imposition of penalty on any personwho fails to deduct tax at source asrequired under the provisions ofChapter XVIIB of the Act. The penaltyis of a sum equal to the amount of taxwhich should have been deducted atsource. 29. The said Circular has been issued by noneother than the CBDT. If there is any delay in remittingthe tax, it will attract payment of interest under Section 201(1A) of the Act and because of the gravityof the mischief involved, it may involve prosecutionproceedings as well, under Section 276B of the Act. Ifthere is any omission to deduct the tax at source, itmay lead to loss of Revenue and hence remedial measureshave been provided by incorporating the provision toensure that tax liability to the said extent wouldstand shifted to the shoulders of the party who failedto effect deduction, in the form of penalty. Whilestipulating payment of amount (by way of penalty underSection 271C of the Act) to an extent equal to theamount payable as tax, it does not say that the'penalty' is over and above the tax liability; whichwas omitted to be deducted/paid. In other words, theprobable loss of Revenue because of non-deduction ofthe tax at source is sought to be plugged, insistingthe defaulter who omitted to deduct the tax to pay thesame in the form of penalty. 30. On deduction of tax, if there is delay inremitting the amount to Revenue, it has to be satisfiedwith interest as payable under Section 201(1A) of the Act as mentioned above, besides the liability to facethe prosecution proceedings, if launched in appropriatecases, in terms of Section 276B of the Act. This alonehas been sought to be explained in the said Circularissued by the CBDT. 31.Even according to the CBDT, no penalty isenvisaged under Section 271C of the Income Tax Act fornon payment of the tax deducted at source. Inspite oftaking note of the said Circular, the Division BenchinClassic Concepts Home India Pvt. Ltd. vs.Commissioner of Income Tax [(2016)383 ITR 626 (Ker.)]simply proceeded to holdin just one sentence(paragraph 7) that on reading paragraph 16.5 of theCircular, it was having no relevance in so far as thecase of the appellant/assessee was concerned, whichobservation/finding apparently is not correct and hencenot acceptable.32. Coming to the case laws referred to in theReference Order and others brought to the notice ofthis Court during the course of hearing, a DivisionBench of this Court in Commissioner of Income Tax(TDS) 31.Even according to the CBDT, no penalty isenvisaged under Section 271C of the Income Tax Act fornon payment of the tax deducted at source. Inspite oftaking note of the said Circular, the Division BenchinClassic Concepts Home India Pvt. Ltd. vs.Commissioner of Income Tax [(2016)383 ITR 626 (Ker.)]simply proceeded to holdin just one sentence(paragraph 7) that on reading paragraph 16.5 of theCircular, it was having no relevance in so far as thecase of the appellant/assessee was concerned, whichobservation/finding apparently is not correct and hencenot acceptable.32. Coming to the case laws referred to in theReference Order and others brought to the notice ofthis Court during the course of hearing, a DivisionBench of this Court in Commissioner of Income Tax(TDS) vs. Muthoot Bankers[(2017) 398 ITR 276 (KER)] has heldthat penalty is leviable in terms of Section 271C ofthe Act for failure to deduct the tax. There is nodispute in this regard. It was a case where theassessing authority had found that the assessee had notdeducted the tax at source under Section 194A of theAct, in respect of the amounts paid as 'interest' tothe sister concerns. The contention raised by theassessee was that non-deduction of the tax was notdeliberate, that the sister concerns had alreadyincluded the interest portion in their returns and paidthe tax thereon and hence there was no loss to theRevenue, by virtue of which, no penalty was liable tobe inflicted. This was turned down by the Bench holdingthat, under Section 271C, the assessee was liable topay penalty unless it could plead and prove that theassessee was prevented from deducting the tax at sourceunder Section 194A with reasonable cause, the burden ofwhich was solely upon the assessee. It was accordingly,that the said contention was repelled and the orderpassed by the Tribunal cancelling the penalty imposed on the assessee was held as unsustainable, in turnallowing the appeal preferred by the Revenue. Asobserved in the Order of Reference, the said decisionis not having any application in the instant case, asit was in respect of the omission to deduct the tax,for which penalty is stipulated under Sec.271C(1)(a)and not an instance covered by Section 271C(1)(b).33.The next point to be considered is with regardto the observation/finding rendered by the Bench inU.S. Technologies case,holding that failure to remitthe tax after deducting the same, will constitute amore grievous default than the omission to deduct thetax under Section 271C(1)(a) and hence it cannot comewithin the purview of Section 273B for claiming thebenefit of waiver or reduction of penalty for good andsufficient reason. The said finding has also been notedas not acceptable in the Order of Reference and henceit requires to be dealt with. 34. Section 273B of the Income Tax Act stipulatesthat no penalty shall be imposed on the person or theassessee, as the case may be, for any failure referred 34. Section 273B of the Income Tax Act stipulatesthat no penalty shall be imposed on the person or theassessee, as the case may be, for any failure referred to in the provisions mentioned therein, if he provesthat there was reasonable cause for the failure. Thesaid provision has already been extracted. One amongthe provisions mentioned therein is Section '271C'. Toput it more clear, the whole provision of Section 271Cis reckoned as such, and no segregation has beeneffected unlike the limited extent of reckoning clause(b) of sub-section (1) of Section 271. In otherwords, clause (b) of sub-section (1) of Section 271C(dealing with failure to remit the deducted tax) is notexcluded or the benefit is not confined to the instancecovered by Section 271C(1)(a)alone. Section 273B itselfstarts with a 'non-obstante clause' saying that thebenefit is to be extended, to the extent as specifiedtherein, notwithstanding anything contained in theprovisions mentioned above, which includes Section 271Cin toto. As it stands so, it is quite open for theperson/assessee concerned to claim the benefit ofSection 273B even in a case covered by Sec.271C(1)(b)(failure to remit the tax deducted at source), despitethe fact that it may be a more serious default, than the failure to deduct the tax at source. 35. The scope of Section 271C, in violation toSection 273B had come up for consideration before the Apex Court in Commissioner of Income Tax, New Delhi vs.M/s. Eli Lilly Company (India) Pvt.Ltd[(2009) 15 SCC1]. The observation as contained in paragraph 93 isquite relevant, which is reproduced below forconvenience of reference: “Section 271C inter alia states that ifany person fails to deduct the whole or anypart of the tax as required by the provisionsof Chapter XVII-B then such person shall beliable to pay, by way of penalty, a sum equalto the amount of tax which such person failedto deduct. In these cases we are concerned withSection 271C(1)(a). Thus Section 271C(1)(a)makes it clear that the penalty leviable shallbe equal to the amount of tax which such personfailed to deduct. We cannot hold this provisionto be mandatory or compensatory or automaticbecause under Section 273B Parliament hasenacted that penalty shall not be imposed incases falling thereunder. Section 271C falls inthe category of such cases.” 36. From the above, it is crystal-clear that, once the burden is discharged by the person/assessee asto the existence of good and sufficient reason for notcomplying with the stipulation under Section 271C, itis for the authorities to consider with properapplication of mind, whether the penalty is to bewaived or reduced, based on the facts andcircumstances. 37. Section 271C of the Income Tax Act is quitecategoric. Its scope and extent of application isdiscernible from the provision itself, in unambiguousterms. When the non-deduction of the whole or any partof the tax, as required by or under the various-instances/provisions of Chapter XVIIBwould invitepenalty under Clause 271C(1)(a); only to a limitedextent, involving sub-section (2) of Sec.115-O(comingunder Chapter XIID) or covered by the 'second proviso'to Section 194B (coming under Chapter XVIIB) alonewould constitute an instance where penalty can beimposed in terms of Section 271C(1)(b) of the Act.Since there is no obscurity in the above provision, itis not for the Court to read something more into it, contrary to the intent and legislative wisdom, whichstands to be a forbidden field for the Court. It issettled law that the rule of 'strict interpretation' isthe relevant one in so far as the fiscal statute isconcerned. We find support from the ruling rendered bythe Apex Court in Sneh Enterprises vs. Commissioner of Customs, New Delhi[(2006)7 SCC 714]. contrary to the intent and legislative wisdom, whichstands to be a forbidden field for the Court. It issettled law that the rule of 'strict interpretation' isthe relevant one in so far as the fiscal statute isconcerned. We find support from the ruling rendered bythe Apex Court in Sneh Enterprises vs. Commissioner of Customs, New Delhi[(2006)7 SCC 714]. 38. The Division Bench of this Court inU.STechnologiescase, despite the specific extent andapplication stipulated under Section 271C(1)(a) and271C(1)(b) for imposition of penalty for omission (i)to deduct tax at source and (ii) in not remitting thetax deducted at source separately, to the specifiedextent and within the boundaries mentioned therein heldthat the circumstances under Section 271C(1)(a) can beread into Section 271C(1)(b). Whether such 'readinginto' the provision is possible or permissible in a'fiscal statute' is an important question. 39. It has been held by a Larger Bench of theApex Court in A.V. Fernandez vs. State of Kerala more than six decades ago, that in determining the liability under a fiscal statute, the'rule of strict interpretation' is the relevant norm.Similar view was expressed by another Larger Bench in Income Tax Officer, Tuticorin vs. T.S.Devinatha Nadar as well, holding that language of astatute imposing a tax, duty or charge must receive astrictinterpretation;addingthatiftheinterpretation of a fiscal enactment is in doubt, theconstruction most beneficial to the subject/assesseeshould be adopted, even if it results in obtaining anadvantage to the subject/assessee. The rule of strictinterpretation in taxing statute was asserted by thesubsequent Benches as well, as borne by the decisions in State of Rajasthan vs. Khandaka Jain Jewellers[(2007)14 SCC 339] and Topman Exports vs. Commissionerof Income Tax[(2012) 3 SCC 593] as well. 40. There may be circumstances, where the Courtmay come across some 'lacuna' in a statute or there maybe defective phrasing in an enactment. A question arosebefore the Apex Court inNalinakhya Bysack vs.Shyamsunder Haldar , wherein it was held that, even if there is some defect in thephraseology used by the legislature, the court cannotaid the legislatures' defective phrasing of an Act oradd, amend or by construction make up the deficiencieswhich are left in the Act. The Bench held that, even ifthere is a 'casus omissus', it is for others, than theCourt to remedy the defect. A Larger Bench of 7Members of the Apex Court held in S.P.Gupta vs. Unionof India and another in categoricalterms, that where the language of a statute is clearand unambiguous, there is no room for applicationeither of the doctrine of 'casus omissus' or ofpressing into service any external aid. 41. The said principle was reiterated by the ApexCourt in the subsequent decisions such as Trutuf SafetyGlass Industries vs. Commissioner of Salestax, U.P.[2007(3)KLT 1013], Union of India vs. DharmendraTextiles Processors [(2008)13 SCC 369], SingarniCollieries Co. Ltd. vs. Vemuganti Ramakrishna Rao[(2013)8 SCC 789] and lastly in State of Uttar Pradeshvs. Subhash Chandra Jaiswal and others [(2017)5 SCC 163] asserting that the 'power to legislate' has notbeen conferred on Courts and therefore the Court cannotadd words to a statute or read words into it, which arenot there. 42. Coming back to the case in hand, despite the fact that Section 271C(1)(b) is quite clear andunambiguous, the learned Judges, while declaring law inU.S.Technologies case (cited supra) simply read 271C(1)(a) into Section 271C(1)(b), which is not correctand stands contrary to the dictum laid down by the ApexCourt. 43. In the light of the above discussion, theReference is answered as follows: 1. The finding of the Division Bench in U.S.Technologies International Pvt. Ltd. vs. Commissioner of Income Tax[2010 KHC 6118 ] and Classic Concepts Home India 163] asserting that the 'power to legislate' has notbeen conferred on Courts and therefore the Court cannotadd words to a statute or read words into it, which arenot there. 42. Coming back to the case in hand, despite the fact that Section 271C(1)(b) is quite clear andunambiguous, the learned Judges, while declaring law inU.S.Technologies case (cited supra) simply read 271C(1)(a) into Section 271C(1)(b), which is not correctand stands contrary to the dictum laid down by the ApexCourt. 43. In the light of the above discussion, theReference is answere