290. Denial of income-tax clearance certificate to contractors on levy of penalty for concealment and/or conviction – Guidelines therefor
CLARIFICATION 1
1. The Direct Taxes Enquiry Committee in para 2.224 of their final report recommended that Government patronage should be denied to contractors who are found to have evaded taxes and that they should be denied opportunity to earn profits from the Government contracts. The recommendation of the Committee is reproduced hereunder :
“2.224. We have elsewhere recommended that Government patronage should be denied to tax evaders. In conformity with that recommendation, we consider it would be necessary to ensure that contractors who are found to have evaded taxes are denied the opportunity to earn profit from Government contracts. We, therefore, recommend that contractors who have been penalised or convicted for concealment of income/wealth should not be awarded Government contracts for a period of three years. For this purpose, the form of tax clearance certificate applicable to contractors may be suitably amended to include information whether the contractor was penalised or convicted for concealment of income/wealth during the immediately preceding three years.”
2. The recommendation has been accepted by Government. In accordance with this decision, the following guidelines are laid down for the denial of income-tax clearance certificates to contractors on levy of penalty for concealment and/or conviction for the said offence :
1. Income-tax clearance certificates will not be granted to contractors in whose cases on or after April 1, 1975—
(a) a penalty is levied under section 271(1)(c) of the Income-tax Act, 1961 or section 18(1)(c) of the Wealth-tax Act, 1957; or
(b) where a conviction is ordered by a court for an offence under section 277 of the Income-tax Act, 1961, or section 36(2) of the Wealth-tax Act, 1957; or
(c) where a conviction is ordered by a court for an offence under section 199 or section 200 of the Indian Penal Code.
2. Where no appeal is filed by a contractor against the imposition of a penalty under the Income-tax Act, 1961, or the Wealth-tax Act, 1957, referred to above, prohibition against the grant of an Income-tax Clearance Certificate will operate for a period of three years from the date of such order. In cases where the penalty is disputed in appeal by the contractor, the prohibition will operate for a period of three years from the date on which the penalty order is partially or wholly upheld by the Income-tax Appellate Tribunal.
3. In cases where a person is convicted for an offence, referred to above, the prohibition shall operate for a period of three years from the date of the order of conviction by the original court irrespective of the fact whether any appeal has been filed or not.
4. In cases where penal action is taken against the contractor under section 271(1)(c) of the Income-tax Act, 1961, or section 18(1)(c) of the Wealth-tax Act, 1957, and proceedings for conviction are also initiated for the offences referred to above, the prohibition will operate only for a period of three years reckoned from the date of the conviction order or the confirmation of the penalty order by the Tribunal referred to above, whichever is earlier.
3. With a view to ensuring the implementation of the above decision of the Government, the application form for Income-tax Clearance Certificate and the form of certificate to be recorded by the Income-tax Officer have been suitably modified. Application to be made on or after April 1, 1975 should be in the amended form enclosed herewith. Necessary instructions may kindly be issued to all the officers working under your charge on the lines indicated above.
Circular: No. 162 [F.No. 221/21/73-IT(A-II), dated 24-3-1975 as amended by Circular No. 186 [F.No. 221/21/75-IT(A-II), dated 23-12-1975.
CLARIFICATION 2
1. The undersigned is directed to refer to this Ministry’s Office Memorandum No. 221/21/73-IT (A-II), dated 24-3-1975 (circulated to all Ministries) with which the revised form of Income-tax Clearance Certificate was brought to their notice. This form was subsequently amended vide Circular No. 186 [F.No. 221/21/75-IT (A-II)], dated 23-12-1975, by introducing a new item No. V(c) therein. It is found that the existing proforma does not provide for certain essential information, e.g., income returned, details of partners of a firm and details of contract payments received in the last five years. In order, therefore, to make it more useful, the Board have decided to modify the proforma so as to incorporate the above information.
2. Besides, the existing certificates have also been simplified and certificates at B(i) and B(ii) have been completely dropped.
3. A copy of the revised proforma is enclosed [printed here as Annex]. Applications to be made on or after June 1, 1981 would be accepted only in the amended form.
4. All the Ministries are requested to bring this revised form of Income-tax Clearance Certificate for strict compliance to the notice of all attached and subordinate offices and Public Sector Undertakings associated with them. This form equally applies to Directorate General of Supplies & Disposal and Central Public Works Department and the concerned Departments are requested to see that these agencies do insist on the production of Income-tax Clearance Certificate in the amended form before grant of any contract, order, etc.
Letter : F. No. 221/34/76-IT(A-II), dated 7-4-1981.
ANNEX – REVISED PROFORMA OF INCOME-TAX CLEARANCE CERTIFICATE
1. Name and style ( of the company, firm, HUF or individual) in which the applicant is assessed or assessable to income-tax and address for the purpose of assessment.
2. Name and address of all companies, firms or association of persons in which the applicant is substantially interested in his individual or fiduciary capacity.
Note : For the purpose of para 2 above, the words “substantially interested” would have the same meaning as in Explanation to section 40A(2).
3. ( a) The Income-tax Circle/Ward/District in which the applicant is assessed to income-tax and the permanent account number
(b ) In case of partnership firm :
| Name of the | Address | Permanent Account No. | Income-tax circle/ |
| partner | ward where assessed | ||
| 1 | 2 | 3 | 4 |
- The following particulars are to be furnished concerning the income-tax assessments for the preceding five years :
| Year | Total income | Tax demanded | *Tax paid | ‡Balance due |
| assessed | ||||
| 1 | 2 | 3 | 4 | 5 |
*Tax in columns 3 and 4 of para 4 include all items, viz., I.T., S.T., Surcharge, etc.
‡If any tax remains unpaid, reasons should be explained in an attached statement.
- ( a) Whether any penalty for concealment has been imposed under the provisions of the Income-tax Act, 1961 or the Wealth-tax Act, 1957 on or after April 1, 1975 :
(i) If the answer is in affirmative, give the date, amount of penalty imposed and section under which imposed.
(ii) Whether any appeal has been filed against the penalty order before the Appellate Assistant Commissioner of Income-tax or before the Income-tax Appellate Tribunal. If so, the result thereof along with the date of the appellate order.
(b) Whether convicted for an offence within the meaning of section 277 of the Income-tax Act, 1961 or under section 36(2) of the Wealth-tax Act, 1957 or under section 199/200 of the Indian Penal Code. If so, the date of the conviction order.
(c) Details of total contract amount received by the applicant, whose name is mentioned against (1), above, during the preceding five accounting years :
| Date of previous | Assessment year | Total contract | The name of the |
| year ending | amount received | authority or persons | |
| from whom amounts | |||
| are received | |||
| 1 | 2 | 3 | 4 |
- In case there has been no income-tax assessment for any year, whether returns have been submitted under sections 139(1), 139(2) and 133 of the Income-tax Act, 1961 or tax has been paid in advance under section 210(3) of the Income-tax Act, 1961 and if so, the amount of income returned for each year and tax of each of the four years mentioned above and the Income-tax Circle/Ward/District concerned where such returns have been filed, give reasons for the same :
| Assessment | Income returned | Tax paid on self- | Tax paid in | Dates of payment |
| year | assessment u/s | advance u/s | ||
| 140A | 210 | |||
| 1 | 2 | 3 | 4 | 5 |
- Whether any attachment or certificate proceedings are pending in respect of the arrears. The name and address of branch(es) if any.
I declare that the above information is correct and complete to the best of my information and belief.
| ……………………………… | |
| Signature |
Signature of the contractor ……………..
Registration No. …………………………………
Address ………………………………………………..
Date ………………………………………………………
I hereby certify that—
- The information contained in this application has been verified from the assessment records and found correct.
- The assessee has paid all tax demands due other than those which have been stayed by competent authority.
- The assessee has been co-operating with the department in facilitating the completion of the pending assessments.
- ( a) The period of three years has expired from the date of the appellate order of the Income-tax Appellate Tribunal confirming or partially confirming the penalty levied on or after 1-4-1975 under section 271(1)(c) of the Income-tax Act, 1961 or under section 18(1)(c) of the Wealth-tax Act 1957.
or
In cases where no appeal has been filed by the assessee against the penalty imposed on or after 1-4-1975 under section 271(1)(c) of the Income-tax Act, 1961 the period of three years has expired from the date of the imposition of the penalty.
(b) The period of three years has expired from the date of the order of conviction on or after 1-4-1975 under section 277 of the Income-tax Act or under section 36(1) of the Wealth-tax Act, 1957 or under section 199/200 of the Indian Penal Code.
Note : Delete whichever is inapplicable in the above certificate.
| Date ……………… | ……………………………………………. |
| Signature of the ITO | |
| ……………………………………………. | |
| Circle/Ward/District | |
| S EAL |
