1. Legal Basis
- Section 206C(6A)empowers tax authorities to impose penalties under Section 221 on sellers who:
- Fail to collect Tax Collected at Source (TCS)as required under Section 206C.
- Collect but fail to deposit TCSto the government within the due date.
2. Applicability of Penalty
| SCENARIO | PENALTY UNDER SECTION 221 |
| Non-collection of TCS | Penalty up to 100% of the TCS amount not collected. |
| Late deposit of TCS | Penalty up to tax in arrears (amount not deposited). |
| Incorrect PAN reporting | Higher TCS (5% or 20%) applies, but no separate penalty under Section 221. |
3. Judicial Precedents
- Titagarh Steels Case (Calcutta ITAT): Penalty under Section 271C(specific to TCS defaults) overrides Section 221 for non-collection/short collection.
- Maduri Rajeswar Case (AP High Court): Penalties under tax laws are not “offenses”under Article 20(2), allowing dual penalties in some cases.
4. Key Exceptions
- No penaltyif TCS is deposited before the quarterly return due date (proposed in Budget 2025).
- No double penalty: If penalized under Section 271CA(for non-collection), Section 221 penalty may not apply.
5. Recent Updates (Budget 2025)
- Prosecution relief: No imprisonment under Section 276BBif TCS is paid by the return due date.
- Section 206CCA removed: Higher TCS rates for non-filers no longer apply, reducing compliance burdens.
Key Points
✔ Penalty = Up to 100% of uncollected/delayed TCS under Section 221.
✔ Section 271CA (specific penalty) may override Section 221 for collection failures.
✔ Budget 2025 eases prosecution risks for delayed deposits.
