Section 201 of Income Tax Act "Consequences of failure to deduct or pay"
201. (1) Where any person, including the principal
officer of a company,-
(a) who is required to deduct any sum in accordance with the
provisions of this Act; or
(b) referred to in sub-section (1A) of section 192, being an
employer,
does not deduct, or does not pay, or after so deducting
fails to pay, the whole or any part of the tax, as required
by or under this Act, then, such person, shall, without
prejudice to any other consequences which he may incur, be
deemed to be an assessee in default in respect of such tax:
Provided that any person, including the principal officer of
a company, who fails to deduct the whole or any part of the
tax in accordance with the provisions of this Chapter on the
sum paid to a 84[payee] or on the sum credited to the
account of a 84[payee] shall not be deemed to be an assessee
in default in respect of such tax if such 84[payee]-
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in
such return of income; and
(iii) has paid the tax due on the income declared by him
in such return of income,
and the person furnishes a certificate to this effect from
an accountant in such form as may be prescribed:
Provided further that no penalty shall be charged under
section 221 from such person, unless the Assessing Officer
is satisfied that such person, without good and sufficient
reasons, has failed to deduct and pay such tax.
(1A) Without prejudice to the provisions of sub-section (1),
if any such person, principal officer or company as is
referred to in that sub-section does not deduct the whole or
any part of the tax or after deducting fails to pay the tax
as required by or under this Act, he or it shall be liable
to pay simple interest,-
(i) at one per cent for every month or part of a month on
the amount of such tax from the date on which such tax was
deductible to the date on which such tax is deducted; and
(ii) at one and one-half per cent for every month or part of
a month on the amount of such tax from the date on which
such tax was deducted to the date on which such tax is
actually paid,
and such interest shall be paid before furnishing the
statement in accordance with the provisions of sub-section
(3) of section 200:
Provided that in case any person, including the principal
officer of a company fails to deduct the whole or any part
of the tax in accordance with the provisions of this Chapter
on the sum paid to a 85[payee] or on the sum credited to the
account of a 85[payee] but is not deemed to be an assessee
in default under the first proviso to sub-section (1), the
interest under clause (i) shall be payable from the date on
which such tax was deductible to the date of furnishing of
return of income by such 85[payee].
(2) Where the tax has not been paid as aforesaid after it is
deducted, the amount of the tax together with the amount of
simple interest thereon referred to in sub-section (1A)
shall be a charge upon all the assets of the person, or the
company, as the case may be, referred to in sub-section (1).
(3) No order shall be made under sub-section (1) deeming a
person to be an assessee in default for failure to deduct
the whole or any part of the tax from a person resident in
India, at any time after the expiry of seven years from the
end of the financial year in which payment is made or credit
is given 86[or two years from the end of the financial year
in which the correction statement is delivered under the
proviso to sub-section (3) of section 200, whichever is
later].
(4) The provisions of sub-clause (ii) of sub-section (3) of
section 153 and of Explanation 1 to section 153 shall, so
far as may, apply to the time limit prescribed in
sub-section (3).
Explanation.-For the purposes of this section, the
expression "accountant" shall have the meaning assigned to
it in the Explanation to sub-section (2) of section 288.
202. The power to recover tax by deduction under the foregoing provisions of this Chapter shall be without prejudice to any other mode of recovery.