Section 271CA — Penalty for Failure to Collect Tax at Source (TCS)
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. The TCS counterpart of section 271C: penalty equal to the amount of tax not collected for failure to collect the whole or any part of the tax as required under Chapter XVII-BB (section 206C). Imposed by the Joint Commissioner; subject to reasonable cause under section 273B.
Finance Act, 2026: No amendment by the Finance Act, 2026.
Mechanism: Failure to collect tax required under section 206C/Chapter XVII-BB → penalty equal to the tax not collected → unless reasonable cause is shown under section 273B.
Litigation profile: Less litigated than section 271C, but governed by the same principles. The recurring issues are reasonable cause, bona fide belief on collectibility, and the buyer’s payment of tax extinguishing the collector’s default.
Section 271CA penalises the failure to collect tax at source under section 206C, with the penalty equal to the tax not collected, imposed by the Joint Commissioner. It mirrors section 271C in structure and defences; the US Technologies logic (penalty for the failure to collect, not for delayed deposit of tax actually collected) applies by parity of reasoning.
Reasonable cause and the buyer’s discharge
Within section 273B, the penalty yields to reasonable cause — a bona fide view that the receipt was outside section 206C, or that the buyer fell within a declaration/exemption. Further, where the buyer/payee has himself paid the tax on the relevant income, the collector’s default is, in substance, made good, and the recovery/penal consequences are mitigated (applying the Hindustan Coca-Cola principle developed under section 201 to the collection regime).
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Penalty for failure to collect tax at source.
271CA. (1) If any person fails to collect the whole or any part of the tax as required by or under the
provisions of Chapter XVII-BB, 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 collect as aforesaid.
(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner:
Provided that any penalty under sub-section (1), on or after the 1st day of April, 2025, shall be imposed
by the Assessing Officer.
C. AUTHORITIES
Authority specific to section 271CA is limited; the candour rule applies, and the closely cognate section 271C / 201 line supplies the governing principles.
1. Scope and reasonable cause
US Technologies International (P) Ltd v. CIT (2023) 453 ITR 644 (SC) (by parity)
Holding A penalty framed for failure to collect/deduct does not extend to delayed deposit of tax in fact collected/deducted; the parallel TCS penalty under section 271CA is similarly confined to the failure to collect.
Use Applied by parity to resist a 271CA penalty for delayed deposit of TCS actually collected.
Principle — bona fide non-collectibility (section 273B)
Proposition A genuine, substantiated belief that the transaction was outside section 206C, or that a valid buyer declaration applied, is reasonable cause and defeats the penalty.
Holding Where the recipient has paid the tax on the income, the deductor/collector is not to be again called upon to pay the same tax; the default is, in substance, made good (developed under section 201, applied by analogy).
Use Mitigates the collector’s exposure where the buyer has discharged the tax.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.
CHAPTER XXI — PENALTIES IMPOSABLE
Section 271CA — Penalty for Failure to Collect Tax at Source (TCS)
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. The TCS counterpart of section 271C: penalty equal to the amount of tax not collected for failure to collect the whole or any part of the tax as required under Chapter XVII-BB (section 206C). Imposed by the Joint Commissioner; subject to reasonable cause under section 273B.
Finance Act, 2026: No amendment by the Finance Act, 2026.
Mechanism: Failure to collect tax required under section 206C/Chapter XVII-BB → penalty equal to the tax not collected → unless reasonable cause is shown under section 273B.
Litigation profile: Less litigated than section 271C, but governed by the same principles. The recurring issues are reasonable cause, bona fide belief on collectibility, and the buyer’s payment of tax extinguishing the collector’s default.
A. COMMENTARY
A mirror of section 271C for TCS
Section 271CA penalises the failure to collect tax at source under section 206C, with the penalty equal to the tax not collected, imposed by the Joint Commissioner. It mirrors section 271C in structure and defences; the US Technologies logic (penalty for the failure to collect, not for delayed deposit of tax actually collected) applies by parity of reasoning.
Reasonable cause and the buyer’s discharge
Within section 273B, the penalty yields to reasonable cause — a bona fide view that the receipt was outside section 206C, or that the buyer fell within a declaration/exemption. Further, where the buyer/payee has himself paid the tax on the relevant income, the collector’s default is, in substance, made good, and the recovery/penal consequences are mitigated (applying the Hindustan Coca-Cola principle developed under section 201 to the collection regime).
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Penalty for failure to collect tax at source.
271CA. (1) If any person fails to collect the whole or any part of the tax as required by or under the
provisions of Chapter XVII-BB, 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 collect as aforesaid.
(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner:
Provided that any penalty under sub-section (1), on or after the 1st day of April, 2025, shall be imposed
by the Assessing Officer.
C. AUTHORITIES
Authority specific to section 271CA is limited; the candour rule applies, and the closely cognate section 271C / 201 line supplies the governing principles.
1. Scope and reasonable cause
US Technologies International (P) Ltd v. CIT (2023) 453 ITR 644 (SC) (by parity)
Holding A penalty framed for failure to collect/deduct does not extend to delayed deposit of tax in fact collected/deducted; the parallel TCS penalty under section 271CA is similarly confined to the failure to collect.
Use Applied by parity to resist a 271CA penalty for delayed deposit of TCS actually collected.
Principle — bona fide non-collectibility (section 273B)
Proposition A genuine, substantiated belief that the transaction was outside section 206C, or that a valid buyer declaration applied, is reasonable cause and defeats the penalty.
Use The principal defence to a 271CA levy.
2. Buyer’s discharge mitigates the default
Hindustan Coca-Cola Beverages (P) Ltd v. CIT (2007) 293 ITR 226 (SC) (by analogy)
Holding Where the recipient has paid the tax on the income, the deductor/collector is not to be again called upon to pay the same tax; the default is, in substance, made good (developed under section 201, applied by analogy).
Use Mitigates the collector’s exposure where the buyer has discharged the tax.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.