Section 221 provides the grounds for charging of penalty in case of non compliance of Section 206C, stating that:

• In case if a person responsible for collecting tax in accordance with the provisions of this section does not collect the whole or any part of the tax or after collecting, fails to pay the tax as required by or under this Act, he shall, without prejudice to any other consequences which be deemed to be an assessee in default in respect of the tax.

However the law states that no penalty shall be charged under Section 221 from such person unless the Assessing Officer is satisfied that the person has without good and sufficient reasons failed to collect and pay the tax