P.R. Ramachandra Menon, J.:— The pertinent question sought to be answered as per the Reference Order dated 06.12.2017 passed by a Division Bench of this Court is whether Clause (b) of Sub-Section (1) of Section 271C of the Income Tax Act (hereinafter referred to as ‘the Act), stipulating penalty of an equal amount of tax on the failure of the person concerned to deduct or pay the tax, would take in the situation under Clause (a) of sub-section (1) of Section 271C as well; or in other words; are not the above two provisions, clauses (a) and (b), operating in two different spheres, independent of each other, to attract penalty on establishing the specified event?. One step further; does the lapse to deduct the whole or any part of the tax [as required by or under the provisions of Chapter XVIIB of the Act] stipulated under Sec.271C(1)(a) will result in any automatic imposition of penalty, even denying the eligibility to claim the benefit of Section 273B of the Act, as held by a Division Bench of this Court in U.S. Technologies International Pvt. Ltd. v. Commissioner of Income Tax [2010 KHC 6118 = 2010 (1) KLT SN 66]? Does the law declared by the Division Bench in U.S. Technologies case (cited supra) and the one in Classic Concepts Home India Pvt. Ltd. v. Commissioner Of Income [(2016) 383 ITR 626 (Ker.)] reflect the correct position of law? These are the points to be clarified by this Court in the appeals preferred by the assessee, raising substantial questions of law under Section 260A of the Act.

2. As observed by the Bench in the Reference Order, there may not be much scope for discussion on facts. However, to have an exhaustive analysis, it will be worthwhile to note down the ‘gist’ of the factual matrix as well.

3. The orders under challenge in the above two appeals are those passed by the assessing authority, first appellate authority and also by the Income Tax Appellate Tribunal(hereinafter referred to as ‘the Tribunal’) in the further appeals filed by the assessee; copies of which have been produced as Annexures A, B and C respectively. The issue projected in both the appeals, the finding and reasoning given by the authorities/Tribunal concerned and the nature of challenge raised by the assessee are exactly similar. The difference is only with regard to the assessment year in question.

4. There occurred some delay in paying the tax deducted at source from the bills of the contractors. In the first case, i.e., I.T.A. 36 of 2016, the maximum delay was upto 39 days, whereas in the second case, i.e., ITA No. 37 of 2016, it was upto 32 days. On coming across the lapse on the part of the assessee, notice was 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 to the assessee/appellant, it was only a ‘short delay’, because of administrative exigencies and shortage of staff. The situation arose when certain invoices/bills of contract works corresponding to the financial year in question were received after that financial year. It was asserted that the TDS was recovered at the time of effecting payment to such contractor. But there occurred an inadvertent omission in remitting the same to the Government, which however was cleared with interest payable under Section 201(1A) of the Act.

5. On receipt of the notice, though the position was sought to be explained, it was not properly appreciated by the authority concerned. The appellant/assessee is a 100% Government of India undertaking, incorporated under the Companies Act, 1956. Its operation is mainly for the general welfare of the people of the Lakshadweep Islands (who are Scheduled Tribes, as per the Presidential order issued in this regard) and they run as many as 6 factories in the Lakshadweep Islands; besides the management and operation of 30 vessels owned by the Union Territory of Lakshadweep. The task as above is undertaken through contractors, who are being paid accordingly.

6. It is seen from Annexure A order that despite several adjournments, no specific reply in writing was submitted by the appellant/assessee. In the said circumstance, 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 the financial year concerned, (Rs. 1,32,034/-) was mulcted upon the assessee under Section 271C of the Act (in I.T. Appeal. No. 36 OF 2016); whereas in the second case (I.T. Appeal. No. 37 of 2016), it was to an extent of Rs. 15,02,859/-. Placing reliance on the very same verdict of the Division Bench of this Court cited supra, benefit of Section 273B of the Act was also denied, as it was held by this Court that Section 273B would not be attracted in an instance covered by Section 271C of the Act involving failure in payment of the recovered tax, which was a more serious lapse/offence when compared with non-deduction of tax at source.

7. Though the appellant/assessee took up the matter in appeal, interference was declined by the first appellate authority as per Annexure B order. Further challenge made before the Tribunal also ended up 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 of this Court in the Reference Order, pointing out that clause (a) of sub-section (1) of Section 271C prescribes penalty in respect of non-deduction of tax (there is no violation under this head in the instant case, the tax having been deducted), whereas clause (b) of sub-section (1) of Section 271C envisages penalty in respect of the failure to pay the tax deducted either whole or in part, only with reference to sub-section (2) of Section 115-O or the ‘second proviso’ to Section 194B of the Act and nothing more or less. In other words, the specific instance of deduction made by the appellant/assessee from the contractors' bills coming within the purview of Section 194C of the Act is not cited as an instance, to entail payment of penalty under Section 271C.

8. Shri. Mayankutty Mather, the learned counsel appearing for the appellant points out that there is no dispute with regard to the sequence of events. It is stated that there is absolutely no failure on the part of the appellant/assessee in deducting the tax from contractors' bills, which in fact were submitted only after expiry of the financial year in question. Because of some administrative reasons, including shortage of staff, there occurred a short delay of 32 to 39 days in paying the tax deducted. It was subsequently paid with interest under Section 201(1A) of the Act and absolutely no loss has been resulted to the Income Tax Department. It is pointed out that, in the matter of imposition of penalty, various aspects are to be considered, particularly whether it is wilful, so as to constitute an offence. The nature of the establishment, being a 100% Central Government Company, is also a relevant matter to be looked into. Payment of penalty is not automatic, whenever there is an instance of delay, that too of negligible extent, as in the instant case, submits the learned counsel.

9. According to the learned counsel, the appellant/assessee is entitled to have the benefit of Section 273B of the Act, whereby the penalty could be waived in toto or reduced to substantial extent, considering the particular facts and circumstances, which is a statutory right and the same cannot be denied, referring to the gravity of the lapse under Section 271C(1)(b) of the Act. As such, the legal position declared by the Division Bench in U.S. Technologies and in Classic Concept's cases requires to be re-considered. The learned counsel also points out that, if under any circumstance, action is necessary for non-remittance of the tax deducted at source, it can only be by way of prosecution, as envisaged under Section 276B of the Act. The scope of incorporation of Section 271C, as clarified by the CBDT (Central Board of Direct Taxes) vide their Circular No. 551 is also pressed into service in support of the challenge raised against Annexures A, B and C orders.

10. Mr. Christopher Abraham, the learned Standing Counsel for the Department submits that there is no obscurity in the legal provision and in particular, under Section 271C of the Act. Mere payment of interest under Section 201(1A) of the Act is not by itself enough to mitigate the lapse/default on the part of the assessee in not remitting the tax deducted at source. The instance of non-payment of tax deducted is a more serious offence than the lapse in not deducting the tax at source. When the non deduction of tax at source warrants penalty under Section 271C(1)(a), non-payment of the tax, after such deduction (which is of more serious in nature) definitely will attract penalty and that clause (a) can be read into clause(b) of subsection (1) of Section 271C. The learned Standing Counsel adds that the prosecution proceedings under Section 276B is of general in nature which could be pursued in appropriate cases and that the same does not place any bar in realising penalty in terms of Section 271C 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 to have an analysis of the relevant statutory provisions.

12. Section 271C reads as follows:

“271C. Penalty for failure to deduct tax at source:

(1) If any person fails to:—

(a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVIIB; or

(b) pay the whole or any part of the tax as required by or under:—

(i) sub-section (2) of section 115-O;

(ii) the second proviso to Section 194B.

then such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid.

(2) Any penalty imposable under subsection (1) shall be imposed by the Joint Commissioner.”

13. Going by the above provisions, the penalty is attracted under two different circumstances;- (i) in respect of the failure to deduct whole or part of the tax under clause (a) of sub-section (1) of Section 271C in respect of failure to pay the whole or any part of the tax under sub-clauses (i) or (ii), under clause (b) of the very same provision.

14. Coming to the first clause i.e. clause (a), penalty is for failure to deduct tax at source, as required by or under the provisions of Chapter XVIIB and under no other circumstances. Under the second clause, i.e. clause (b), penalty is for failure to pay the whole or any part of the tax, as further clarified by 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.”

15. Obviously, except for the failure with respect to the above two instances, no other instance is mentioned under clause (b) to attract payment of penalty.

16. Let us now analyze the mandate of sub-section (2) of Section 115-O as well as the ‘second proviso’ to Section 194B, for which the said provisions are extracted below:

“115-O Tax on distributed profits of domestic companies:

(2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on distributed profits under subsection(1) shall be payable by such company.

xxx xxx xxx”

“194B-Winnings from lottery or crossword puzzle:

The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding ‘ten thousand rupees shall, at the time of payment thereof, deduct income tax thereon at the rates in force:

Provided that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings.”

17. Section 115-O stands compiled as part of Chapter XIID and it does not come within the purview of any deduction under Chapter XVIIB envisaged under Clause (a) of Section 271C(l). Section 194B, on the other hand, definitely comes under Chapter XVIIB. The said Chapter contains various instances of deduction of tax at source. An immediate reference will be apposite to the specific instances covered by the case in hand. As mentioned at the beginning, payment effected by the petitioner Corporation (owned by the Central Government) was to the contractors engaged for undertaking various works, who had submitted the bills only after expiry of the relevant financial year. The delay in remittance of the tax deducted at source was only for a maximum period of 39 days and the amount deducted was paid with interest under Section 201(1A). The deduction in such cases, from the amount payable to the contractors, is specifically covered under Section 194C of the Act.

18. In so far as the law makers have taken a conscious decision to identify only Section 194B of Chapter XVIIB of the Act [leaving the payment of tax deducted in respect of other instances in the very same Chapter] to be mulcted with penalty, the instances covered by clause (a) of Section 271C(1) cannot be read into clause (b) of Section 271C(1). In other words, it is never for the Court to re-write the law or question the legislative wisdom of the law makers in this regard. However, a doubt may arise as to whether there was any intent on the part of the law makers to leave the defaulters to go scot free, if penalty cannot be mulcted upon them for non payment even after deduction of tax, which is a more serious offence/lapse than the failure to deduct tax.

19. The situation has been taken care of by the Parliament, when they have incorporated Section 276B in the Act, providing for prosecution in specific circumstances. The said section reads as follows:

“276B; Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B: If a person fails to pay to the credit of the Central Government:—

(a) the tax deducted at source by him as required by or under the provisions of Chapter XVIIB; or

(b) the tax payable by him, as required by or under:—

(i) sub-section (2) of Section 115-O;

(ii) the second proviso to section 194B,

he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

20. Even in a case where there is some delay in effecting payment of tax, if proper and sufficient reasons are shown for the delay involved, the mitigating circumstances can very well be considered by the competent authority, who can waive the penalty (wherever penalty can be legally imposed) or reduce the same to an appropriate extent. This is the mandate of Section 273B, which is extracted below:

“273B. Penalty not to be imposed in certain cases:

Notwithstanding anything contained in the provisions of [Clause (b) of sub-Section(1) of Section 271, Section 271A, Section 271AA, Section 271B, Section 271BA, Section 271BB, Section 271C, section 271CA, Section 271D, Section 271E, Section 271F, Section 271FA, Section 271FAB, Section 271FB, section 271G, Section 271GA, Section 271GB, Section 271H, Section 271-I, Section 271J, clause (c) or clause (d) of sub-section (1) or sub-section(2) of section 272A, sub-section (1) of section 272AA or Section 272B or sub-section (1) or sub-section (1A) of section 272BB or sub-section (1) of Section 272BBB or clause (b) of subsection (1) or clause (b) or clause(c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.]

21. In so far as a taxing statute is concerned, it is an arena where the rules of ‘strict interpretation’ are to be followed. We find support from the ruling rendered by the Apex Court in Sneh Enterprises v. Commissioner Of Customs, New Delhi . [(2006) 7 SCC 714]. Even in other cases, the gap/lacuna, if at all any, in a statutory provision, cannot be filled up by the Court, in view of the principle of casus omissus as made clear by the Apex Court in Smt. Kanta Devi v. Union of India [(2003) 4 SCC 753 : AIR 2003 SC 3428]

22. Now it is the turn for analysis of the precedents, which have been referred to in the reference order, doubting the correctness of the finding as to the mandate of Section 271C, interpreting the same in favour of the Revenue.

23. The first and foremost verdict is the one rendered by a Division Bench of this Court in U.S. Technologies International Pvt. Ltd. v. Commissioner of Income Tax [2010 KHC 6118=2010 (1) KLT SN 66]. It was a case where the appellant/assessee had deducted massive amount of tax at source under different heads; such as salary, payment to contractors, professional fees for technical services, rent etc., but retained without remitting the same to the Department. This was revealed in a survey conducted under Section 133A of the Act, by the Survey Team of the Income Tax Department, in the premises of the assessee, which brought such deduction of tax to an extent of Rs. 1,10,41,898/- for the financial year 2002-03 (the relevant assessment year being 2003-04), in respect of which only a sum of Rs. 38,94,687/- was remitted as on the date of search and the balance was remitted only after the survey in May, 2003. It was noted that the tax deducted at source in respect of the preceding financial year 2001-02 was also remitted only belatedly. On proposing to impose penalty under Section 271C, explanation was offered with reference to paucity of funds and such other aspects. The objection was turned down and penalty was imposed by the assessing officer, which came to be confirmed by the Commissioner of Appeals and later by the Tribunal as well.

24. This was sought to be challenged before this Court raising mainly two substantial questions of law under Section 260A of the Income Tax, i.e., whether penalty could be levied under Section 271C for failure to pay deducted tax and alternately, whether the assessee has reasonable cause for the non-payment or belated payment of tax deducted at source. The contention raised by the assessee/appellant in the said case was more or less similar as raised in the present appeals. After analysing the rival contentions and making a reference to Section 271C of the Act, it was held that the failure to pay the whole or any part of tax as required, takes in the tax deducted under clause (a) under any of the provisions of Chapter XVIIB and so much so, the failure to deduct or failure to remit the recovered tax, both will attract penalty under Section 271C of the Act.

25. The finding as contained in paragraph ‘3’ is reproduced below for proper and effective appreciation:

“3. Counsel for the appellant has drawn a 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 tax as required under any of the provisions of Chapter XVIIB. It is argued that in the survey conducted by the department what was noticed was that deductions have been made and the violation was only delayed remittance of part of the deducted amount and non-remittance of balance amount. However, the contention of counsel for the assessee is that since there is no provision for penalty for non-remittance of tax deducted at source under the provisions of Chapter XVIIB, the levy of penalty is unauthorised. Counsel contended that penalty under Section 271C(1) for non-remittance is only of tax, whether recovered or not, under sub-section (2) of Section 115(O) or second proviso to Section 194B of the Act. We are unable to accept this contention because the first part of clause (b) of Section 271C(1) i.e. failure to pay whole or any part of tax as required, takes in the tax deducted under clause (a) under any of the provisions of Chapter XVIIB. So much so, in our view, failure to deduct or failure to remit recovered tax, both will attract penalty under Section 271C of the Act. So much so, the contention of the appellant fails and we uphold the finding of the Tribunal dismissing the challenge against levy of penalty.”

26. It is relevant to note that the said finding has been rendered by the Bench, just in one sentence, after taking note of the specific contentions raised by the appellant/assessee and obviously, there is no much discussion at all. In other words, the reasons for the finding is not discernible from the judgment. When clause (a) is in respect of non-deduction of whole or any part of the tax as required by or under the provisions of Chapter XVII-B, the second instance (to impose 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 Chapter XII-D of the Act) and the other instance is only in respect of the ‘second proviso’ to Section 194B, which comes under Chapter XVII-B of the Act.

27. Why the differentiation, what was the intention of the Parliament, why such a conscious decision was taken identifying only ‘two’ specific provisions for imposing penalty with regard to the failure to pay the deducted tax, while deciding to impose penalty in respect of all instances of failure to deduct tax, under Chapter XVII-B, are not at all considered or discussed anywhere in the said judgment. In the said circumstance, the doubt expressed by the Bench who passed the Order of Reference is well justified. We find it very difficult to accept the findings given in U.S. Technologies case (supra), as the same is not supported by any reasoning and further since the provision of law is quite specific, which cannot be re-written by this Court and we have to take as it is.

28. The question came up for consideration again before a Division Bench of this Court in Classic Concepts Home India Pvt. Ltd. v. Commissioner Of Income [(2016) 383 ITR 626 (Ker.)]. The appeal preferred by the assessee challenging the verdict passed by the Tribunal upholding the penalty under Section 271C of the Income Tax Act for belated payment of tax deducted at source, was almost on similar grounds as raised in U.S. Technologies case. Apart from relying on some of the observations in U.S. Technologies case, the assessee/appellant sought to place reliance on Section 276B of the Income Tax Act and also on the Circular bearing No. 551 dated 23.01.1990. Without much discussion, the Bench held that in view of the admitted case that the tax deducted at source was remitted belatedly, though with interest, it was liable to attract penalty under Section 271C of the Income Tax Act.

29. With regard to the case projected by the assessee/appellant that the beenfit of reduction/waiving of penalty in appropriate cases was possible, in view of the observation made by the Bench in U.S. Technologies case (with reference to Section 273B of the Act), it was turned down holding that the benefit of Section 273B will not be attracted in a case where the tax already deducted was not remitted to the Revenue and that U.S. Technologies> case would not support the case of the appellant/assessee in any manner. After extracting paragraph 16.5 of the Circular No. 551 relied on by the appellant/assessee, the Bench observed in just ‘one sentence’, that a reading of the said paragraph would show that the provisions thereof have no relevance in so far as the case of the appellant was concerned. It was accordingly, that the challenge was repelled and the appeals were dismissed, thus justifying the levy of penalty under Section 271C of the Act.

30. Circular No. 551 deals with the circumstances under which Section 271C was introduced in the Statute Book, for levy of penalty. Paragraph 16.5 of the above Circular reads as follows:

“16.5: Insertion of a new section 271C to provide for levy of penalty for failure to deduct tax at source-under the old provisions of Chapter XXI of the Income Tax Act no penalty was provided for failure to deduct tax at source. This default, however, attracted prosecution under the provisions of Section 276B, which prescribed punishment for failure to deduct tax at source or after deducting failure to pay the same to the Government. It was decided that the first part of the default, i.e., failure to deduct tax at source should be made liable to levy of penalty, while the second part of the default, i.e., failure to pay the tax deducted at source to the Government which is a more serious offence, should continue to attract prosecution. The Amending Act, 1987 has accordingly inserted a new Section 271C to provide for imposition of penalty on any person who fails to deduct tax at source as required under the provisions of Chapter XVIIB of the Act. The penalty is of a sum equal to the amount of tax which should have been deducted at source.

31. The said Circular has been issued by none other than the CBDT. If there is any delay in remitting the tax, it will attract payment of interest under Section 201(1A) of the Act and because of the gravity of the mischief involved, it may involve prosecution proceedings as well, under Section 276B of the Act. If there is any omission to deduct the tax at source, it may lead to loss of Revenue and hence remedial measures have been provided by incorporating the provision to ensure that tax liability to the said extent would stand shifted to the shoulders of the party who failed to effect deduction, in the form of penalty. While stipulating payment of amount (by way of penalty under Section 271C of the Act) to an extent equal to the amount payable as tax, it does not say that the ‘penalty’ is over and above the tax liability; which was omitted to be deducted/paid. In other words, the probable loss of Revenue because of non-deduction of the tax at source is sought to be plugged, insisting the defaulter who omitted to deduct the tax to pay the same in the form of penalty.

32. On deduction of tax, if there is delay in remitting the amount to Revenue, it has to be satisfied with interest as payable under Section 201(1A) of the Act as mentioned above, besides the liability to face the prosecution proceedings, if launched in appropriate cases, in terms of Section 276B of the Act. This alone has been sought to be explained in the said Circular issued by the CBDT.

33. Even according to the CBDT, no penalty is envisaged under Section 271C of the Income Tax Act for non payment of the tax deducted at source. Inspite of taking note of the said Circular, the Division Bench in Classic Concepts Home India Pvt. Ltd. v. Commissioner Of Income [(2016) 383 ITR 626 (Ker.)] simply proceeded to hold in just one sentence (paragraph 7) that on reading paragraph 16.5 of the Circular, it was having no relevance in so far as the case of the appellant/assessee was concerned, which observation/finding apparently is not correct and hence not acceptable.

34. Coming to the case laws referred to in the Reference Order and others brought to the notice of this Court during the course of hearing, a Division Bench of this Court in Commissioner Of Income Tax v. Muthoot Bankers [(2017) 398 ITR 276 (KER)] has held that penalty is leviable in terms of Section 271C of the Act for failure to deduct the tax. There is no dispute in this regard. It was a case where the assessing authority had found that the assessee had not deducted the tax at source under Section 194A of the Act, in respect of the amounts paid as ‘interest’ to the sister concerns. The contention raised by the assessee was that non-deduction of the tax was not deliberate, that the sister concerns had already included the interest portion in their returns and paid the tax thereon and hence there was no loss to the Revenue, by virtue of which, no penalty was liable to be inflicted. This was turned down by the Bench holding that, under Section 271C, the assessee was liable to pay penalty unless it could plead and prove that the assessee was prevented from deducting the tax at source under Section 194A with reasonable cause, the burden of which was solely upon the assessee. It was accordingly, that the said contention was repelled and the order passed by the Tribunal cancelling the penalty imposed on the assessee was held as unsustainable, in turn allowing the appeal preferred by the Revenue. As observed in the Order of Reference, the said decision is not having any application in the instant case, as it 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).

35. The next point to be considered is with regard to the observation/finding rendered by the Bench in U.S. Technologies case, holding that failure to remit the tax after deducting the same, will constitute a more grievous default than the omission to deduct the tax under Section 271C(1)(a) and hence it cannot come within the purview of Section 273B for claiming the benefit of waiver or reduction of penalty for good and sufficient reason. The said finding has also been noted as not acceptable in the Order of Reference and hence it requires to be dealt with.

36. Section 273B of the Income Tax Act stipulates that no penalty shall be imposed on the person or the assessee, as the case may be, for any failure referred to in the provisions mentioned therein, if he proves that there was reasonable cause for the failure. The said provision has already been extracted. One among the provisions mentioned therein is Section ‘271C’. To put it more clear, the whole provision of Section 271C is reckoned as such, and no segregation has been effected unlike the limited extent of reckoning clause (b) of sub-section (1) of Section 271. In other words, clause (b) of sub-section (1) of Section 271C (dealing with failure to remit the deducted tax) is not excluded or the benefit is not confined to the instance covered by Section 271C(1)(a) alone. Section 273B itself starts with a ‘non-obstante clause’ saying that the benefit is to be extended, to the extent as specified therein, notwithstanding anything contained in the provisions mentioned above, which includes Section 271C in toto. As it stands so, it is quite open for the person/assessee concerned to claim the benefit of Section 273B even in a case covered by Sec.271C(1)(b) (failure to remit the tax deducted at source), despite the fact that it may be a more serious default, than the failure to deduct the tax at source.

37. The scope of Section 271C, in violation to Section 273B had come up for consideration before the Apex Court in Commissioner of Income Tax, New Delhi v. Eli Lilly Company (India) Pvt. Ltd. [(2009) 15 SCC 1]. The observation as contained in paragraph 93 is quite relevant, which is reproduced below for convenience of reference:

“Section 271C inter alia states that if any person fails to deduct the whole or any part of the tax as required by the provisions of Chapter XVII-B then such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct. In these cases we are concerned with Section 271C(1)(a). Thus Section 271C(1)(a) makes it clear that the penalty leviable shall be equal to the amount of tax which such person failed to deduct. We cannot hold this provision to be mandatory or compensatory or automatic because under Section 273B Parliament has enacted that penalty shall not be imposed in cases falling thereunder. Section 271C falls in the category of such cases.”

38. From the above, it is crystal-clear that, once the burden is discharged by the person/assessee as to the existence of good and sufficient reason for not complying with the stipulation under Section 271C, it is for the authorities to consider with proper application of mind, whether the penalty is to be waived or reduced, based on the facts and circumstances.

39. Section 271C of the Income Tax Act is quite categoric. Its scope and extent of application is discernible from the provision itself, in unambiguous terms. When the non-deduction of the whole or any part of the tax, as required by or under the various instances/provisions of Chapter XVII-B would invite penalty under Clause 271C(1)(a); only to a limited extent, involving sub-section (2) of Sec.115-O(coming under Chapter XIID) or covered by the ‘second proviso’ to Section 194B (coming under Chapter XVIIB) alone would constitute an instance where penalty can be imposed in terms of Section 271C(1)(b) of the Act. Since there is no obscurity in the above provision, it is not for the Court to read something more into it, contrary to the intent and legislative wisdom, which stands to be a forbidden field for the Court. It is settled law that the rule of ‘strict interpretation’ is the relevant one in so far as the fiscal statute is concerned. We find support from the ruling rendered by the Apex Court in Sneh Enterprises v. Commissioner Of Customs, New Delhi . [(2006) 7 SCC 714].

40. The Division Bench of this Court in U.S Technologies case, despite the specific extent and application stipulated under Section 271C(1)(a) and 271C(1)(b) for imposition of penalty for omission (i) to deduct tax at source and (ii) in not remitting the tax deducted at source separately, to the specified extent and within the boundaries mentioned therein held that the circumstances under Section 271C(1)(a) can be read into Section 271C(1)(b). Whether such ‘reading into’ the provision is possible or permissible in a ‘fiscal statute’ is an important question.

41. It has been held by a Larger Bench of the Apex Court in A.V. Fernandez v. State of Kerala [AIR 1957 SC 657] 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 Income Tax Officer, Tuticorin v. T.S Devinath Nadar & Others [AIR 1968 SC 623] as well, holding that language of a statute imposing a tax, duty or charge must receive a strict interpretation; adding that if the interpretation of a fiscal enactment is in doubt, the construction most beneficial to the subject/assessee should be adopted, even if it results in obtaining an advantage to the subject/assessee. The rule of strict interpretation in taxing statute was asserted by the subsequent Benches as well, as borne by the decisions in State of Rajasthan v. Khandaka Jain Jewellers [(2007) 14 SCC 339] and Topman Exports v. Commissioner Of Income Tax, Mumbai . [(2012) 3 SCC 593] as well.

42. There may be circumstances, where the Court may come across some ‘lacuna’ in a statute or there may be defective phrasing in an enactment. A question arose before the Apex Court in Nalinakhya Bysack v. Shyamsunder Haldar [AIR 1953 SC 148], wherein it was held that, even if there is some defect in the phraseology used by the legislature, the court cannot aid the legislatures' defective phrasing of an Act or add, amend or by construction make up the deficiencies which are left in the Act. The Bench held that, even if there is a ‘casus omissus’, it is for others, than the Court to remedy the defect. A Larger Bench of 7 Members of the Apex Court held in S.P. Gupta v. Union of India [1981 Supp SCC 87 : AIR 1982 SC 149] in categorical terms, that where the language of a statute is clear and unambiguous, there is no room for application either of the doctrine of ‘casus omissus’ or of pressing into service any external aid.

43. The said principle was reiterated by the Apex Court in the subsequent decisions such as Trutuf Safety Glass Industries v. Commissioner of Salestax, U.P. [2007 (3) KLT 1013], Union of India v. Dharmendra Textiles Processors [(2008) 13 SCC 369], Singarni Collieries Co. Ltd. v. Vemuganti Ramakrishna Rao [(2013) 8 SCC 789] and lastly in State of Uttar Pradesh v. Subhash Chandra Jaiswal [(2017) 5 SCC 163] asserting that the ‘power to legislate’ has not been conferred on Courts and therefore the Court cannot add words to a statute or read words into it, which are not there.

44. Coming back to the case in hand, despite the fact that Section 271C(1)(b) is quite clear and unambiguous, the learned Judges, while declaring law in U.S. Technologies case (cited supra) simply read 271C (1)(a) into Section 271C(1)(b), which is not correct and stands contrary to the dictum laid down by the Apex Court.

45. In the light of the above discussion, the Reference is answered as follows:

1. The finding of the Division Bench in U.S. Technologies International Pvt. Ltd. v. Commissioner of Income Tax [2010 KHC 6118] and Classic Concepts Home India Pvt. Ltd. v. Commissioner Of Income [(2016) 383 ITR 626 (Ker.)] to the effect that Section 271C(1)(b) will take in Section 271C(1)(a) as well, to attract penalty for non-payment of the tax deducted at source, does not reflect the correct provision of law. They stand overruled.

2. The finding and reasoning in U.S. Technologies International Pvt. Ltd. v. Commissioner of Income Tax [2010 KHC 6118] and Classic Concepts Home India Pvt. Ltd. v. Commissioner Of Income [(2016) 383 ITR 626 (Ker.)] that the benefit of waiver/reduction of penalty [once good and sufficient reason is established in terms of Section 273B of the Income Tax Act] is not attracted in a case covered Section 271C(1)(b) (involving failure as to non-deposit of the tax deducted at source) is not correct. It also stands overruled.

46. Having answered the reference as above, the question is whether anything survives to be considered. It is quite open for this Court to decide the merit as well, by virtue of the specific power conferred under ‘Section 7’ of the Kerala High Court Act, instead of having the case sent back to the same/appropriate Bench for further consideration, after answering the reference. In view of our declaration that non-remittance of tax deducted at source as in the instant case (which comes under Section 194C of Chapter XVIIB of the Act) is not covered by Section 271C(1)(b) of the Act to attract penalty, nothing remains to be considered further, either by the Tribunal or by this Court since the verdict passed by the departmental authorities and the Tribunal (copies of which have been produced as Annexures A, B and C) stand contrary to the declaration as above. The said orders stand set aside. The appeals are allowed accordingly. The parties are to bear the costs.