The Government of India has taken steps to decriminalize minor offenses in direct tax matters, particularly benefiting small and medium businesses. The Finance Act, 2023, introduced a sunset clause in Section 276A of the Income-tax Act, preventing new proceedings under this section from April 1, 2023. Additionally, amendments to Section 276B (effective from October 1, 2024) prohibit prosecution if deducted TDS is deposited before the due date for filing the TDS statement. The Central Board of Direct Taxes (CBDT) revised compounding guidelines in October 2024, making more offenses compoundable, removing time limits on filing compounding applications, and reducing charges.
For litigation management, the government introduced several initiatives, including appointing 100 Joint Commissioners (Appeals), implementing the e-Dispute Resolution Scheme (e-DRS) for small taxpayers, and increasing monetary limits for tax appeals. The Vivad se Vishwas Scheme, 2024, aims to reduce litigation, while the Finance Act (No. 2), 2024, allows Commissioners (Appeals) to overturn ex-parte assessment orders. These steps aim to streamline tax administration and enhance taxpayer confidence.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
LOK SABHA
UNSTARRED QUESTION NO- 220
TO BE ANSWERED ON MONDAY, FEBRUARY 03, 2025/MAGHA 14, 1946
DECRIMINALIZE MINOR OFFENCES IN DIRECT TAX MATTERS
220. Smt. Poonamben Hematbhai Maadam:
Will the Minister of FINANCE be pleased to state:
a) whether the Government has undertaken any steps to decriminalize minor offences in direct tax matters to promote ease of doing business, especially for medium and small businesses;
b) if so, the details thereof;
c) whether the Government has introduced initiatives for litigation management in direct tax matters; and
d) if so, the details thereof?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) Yes, Sir.
(b) The Income-tax Act, 1961 (‘the Act’) has been amended to decriminalise Section 276A (entailing imprisonment of minimum six months extending up to two years) relating to failure of liquidator to give notice of his appointment to the Jurisdictional Assessing Officer within 30 days or failure to set aside notified amount from, or part with, any of the assets of company under liquidation. The Finance Act, 2023, with effect from 01.04.2023, has introduced a sunset clause in section 276A of the Act, which prescribes that no fresh proceedings shall be initiated under section 276A on or after 01.04.2023.
Under clause (a) of section 276B of the Act, a deductor was liable to be prosecuted if payment of Tax Deducted at Source (TDS) to the credit of the Central government was made beyond the prescribed due date. The provision has now been amended by Finance Act (No. 2), 2024 with effect from 01.10.2024, which prohibits prosecution proceedings against the deductor, if the TDS deducted is paid to the government’s credit, on or before the due date prescribed for filing of the TDS statement for relevant quarter.
Further, CBDT has issued revised guidelines for compounding of offences under section 279(2) of the Act on 17.10.2024, wherein several simplification measures have been taken which, inter-alia, include making offences under section 275A and 275B of the Act compoundable, removing limitations on occasions and time to file compounding applications, abolishing interest chargeable on delayed payment of compounding charges, reducing compounding charges for various offences, removing separate compounding charge from co-accused, etc.
(c) The Government has undertaken several measures to improve litigation management in direct tax matters which, inter-alia, include:
i. Creation of 100 new posts of Joint Commissioner (Appeals), which are currently fully operational.
ii. Notification of e-Dispute Resolution Scheme, 2022 (e-DRS) by CBDT, to enable delivery of quick and effective dispute resolution to small taxpayers.
iii. Upward revision of monetary limits for filing appeals before the ITAT, High Court and Supreme Court to Rs. 60 lakh, Rs.2 crore and Rs.5 crore respectively.
iv. Administrative measures by CBDT such as identification of old and high demand appeals for early disposal, augmentation of manpower through assignment of additional charges, etc.
v. Notification of Vivad se Vishwas Scheme, 2024 to reduce litigation and develop trust amongst tax payers.
vi. Empowering Commissioner (Appeals) to set aside ex-parte assessment orders, vide Finance Act (No. 2), 2024.
