Section 271C of the Income Tax Act
Income-tax Act, 2025: s.448
Section 271C of the Income-tax Act, 1961 corresponds to section 448 (Penalty for failure to deduct tax at source) of the Income-tax Act, 2025.
Read section 448 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 271C is CIT v. NHK Japan Broadcasting Corporation (305 ITR 137), cited in 96 of the 782 judgments on BharatTax that turn on this section.
Leading authorities on Section 271C
When no specific statutory period of limitation exists, proceedings under Section 201(1) and 201(1A) of the Income-tax Act, particularly for payments to non-residents, must be initiated within a reasonable period of four years. This limitation also applies to consequential penalty proceedings under Section 271C.
Penalty under Section 271C for failure to deduct tax at source is not leviable unless contumacious conduct on the part of the assessee is established. Where such conduct is not proven, the High Court upholds the deletion of the penalty.
Penalty under Section 271C for failure to deduct tax is not leviable if the assessee acted under a bona fide belief and without contumacious conduct.
When the High Court admits a substantial question of law concerning an assessee's claim or alleged default, it indicates the assessee's bona fides, thereby preventing the imposition of penalties under sections 271(1)(c) or 271C. The mere disallowance of a claim or an addition by revenue authorities does not automatically lead to a penalty if the issue is debatable and pending appeal.
External Development Charges (EDC) paid by a developer to a government body like Haryana Shahari Vikas Pradhikaran (HSVP) for a development project are contractual payments, making them liable for tax deduction at source under Section 194C of the Income-tax Act, 1961.
Co-operative societies engaged in banking are exempt from deducting tax at source on interest paid to members on time and other deposits, per Section 194A(3)(v).
Penalty under section 272A(2) cannot be levied for mere technical or venial breaches of tax law, especially when the revenue has not suffered any loss due to the assessee's actions.
The assessee is liable for demands raised under sections 201(1) and 201(1A) for failure to deduct TDS, even if interest periods require further verification.