Rule 221 — Form for furnishing certificate of accountant under section 398(2) for person responsible for deduction or collection of tax as per section 394(1) [Table: Sl. Nos. 1 to 5 and 9] not to be deemed to be an assessee in default. Made under s.394, s.398, s.515 of the Income-tax Act, 2025.
Rule 221 gives effect to Section 394, Section 398 and Section 515 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) prescribes the certificate of an accountant, as defined in section 515(3)(b), required under section 398(2). It is to be furnished in Form No. 149 for non-deduction or short deduction of tax, and in Form No. 150 for non-collection or short collection of tax. Sub-rule (2) requires the Form to be furnished to the Director General of Income-tax (Systems) or the person authorised by him.
Section 398(2) spares a deductor or collector from being deemed an assessee in default where the payee or buyer has accounted for the amount and paid the tax, but that is a fact about someone else's return which the Department cannot take on assertion. The rule requires it to be certified by an accountant and fixes separate forms for the deduction side and the collection side, so the two do not get mixed. It also names one addressee for the filing.
The certificate is the price of not being deemed an assessee in default under section 398(2), and it must come from an accountant as defined in section 515(3)(b), not from the payee or from the deductor's own records. The two forms are not interchangeable: a collection shortfall certified in Form No. 149 is on the deduction form. Filing is centralised with the Director General of Income-tax (Systems) or a person authorised by him, so lodging the certificate with the assessing officer handling the deductor is not what sub-rule (2) asks for.
A company fails to deduct tax on a payment covered by section 394(1). The payee has included the amount in its return and paid the tax on it. To rely on section 398(2), the company obtains a certificate from an accountant as defined in section 515(3)(b) in Form No. 149 and furnishes it to the Director General of Income-tax (Systems). Had the shortfall been in collection rather than deduction, the certificate would have had to be in Form No. 150.
You meet it when a demand or proceeding treats you as an assessee in default for tax not deducted or not collected, and the accountant's certificate in Form No. 149 or Form No. 150 is what is filed to answer it.
in Form No. 149, for non-deduction or short deduction of tax
in Form No. 150, for non-collection or short collection of tax