As per section 105 any assessee who fails to collect whole or any part of Securities Transaction Tax (STT) or having collected STT fails to pay such tax to credit of Central Government shall be liable to pay penalty in addition to interest . However, as per section 108, no penalty shall be imposable for any failure referred to in said provision if assessee proves that there was reasonable cause for said failure and as per proviso no order imposing a penalty shall be made unless assessee has been given a reasonable opportunity of being heard . Therefore a conjoint reading of sections 105 and 108 of Securities Transaction Tax (STT) makes it clear that imposition of penalty is to be proceeded separately as a separate proceeding and on a reasonable opportunity being provided and if assessee can prove that there was reasonable cause for such failure, no penalty shall be imposed .
PCIT v. National Stock Exchange (2020) 272 Taxman 144 (Bom.)(HC), Editorial: National Stock Exchange v. Addl. CIT (2016) 158 ITD 850 / 178 TTJ 409 / 136 DTR 49 (Mum.)(Trib.), affirmed .
Securities Transaction Tax (STT) Finance (No. 2) Act, 2004
S. 105 :Penalty for failure to collect or pay securities transaction tax – Penalty not to be imposed inn certain cases – No penalty shall be imposed on assessee for having failed to collect Securities Transaction Tax (STT) or having collected, failed to pay such STT to credit of Central Government without providing it a reasonable opportunity to prove that there was reasonable cause for such failure [ S.108 ]