Tax Deductors Who Default In Depositing TDS by Due Date Shall be Liable for Prosecution: CBDT

It has come to the notice of Income Tax Department that many times the tax deductors, after deducting TDS from specified payments, are deliberately not depositing the taxes so deducted in Government account and continue to deploy the funds so retained for business purposes or for personal use. Such retention of Government dues beyond the due date is an offence liable for prosecution under Section 276B of the Income Tax Act, 1961. The defaulter, if convicted, can be sentenced to Rigorous Imprisonment (RI) for a term which can extend upto seven years.

The TDS units of Income Tax Department have been taking up prosecution proceedings in suitable cases where TDS has been retained beyond the due date. The Central Board of Direct Taxes has partly modified existing guidelines for identification of cases for launching prosecution. As per the revised guidelines, the criterion of minimum retention period of 12 months has been dispensed with. For the benefit of public at large, it is now clarified that defaulters, who have retained the TDS deducted and failed to deposit the same in Government account within due date, shall be liable for prosecution, irrespective of the period of retention.

However, the offence u/s 276B of the Income Tax Act can be compounded by Chief Commissioner having jurisdiction on the case, either before or after the launching of prosecution proceedings. In the recent past, several defaulters have submitted petitions for compounding of such offences and compounding orders have also been passed by the Competent Authority in suitable cases.

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  1. sekaran says:

    So many mails are coming from public on the working of the inefficient Govt Departments.Yet there is not an iota of improvement in their behaviour. Either the people cannot be corrected or they are all too complacent and habituated to avoid their responsibility. Let us hope AAam Admi Party will drum up the necessary changes in them,notwithstanding the highly strong Trade unions coming to the support of the inefficient staff of the Indian Posts in various places.

  2. Usman Ali Khan says:

    Sir,
    The provision of prosecution for non deposit of TDS amount irrespective of period if most harsh, suppose a person deposits the TDS amount after one week from due date, is prosecuting such persons is correct, in India honest tax payers and honest tax remitters are doing a thankless job,if such persons due to unavoidable reasons remit the tax after due date and if they are prosecuted or made to compound the so called offence instread of claiming only interest, it shall be most unjust. Prosecution should be applicable only to those offenders who have deliberately not deposited the tax amount to make use of the same and are not willing to pay the interest, else the provision is insulting, discouraging and may go against the interest of Gvt. revenue

  3. KV Ramanan says:

    Imposing prosecution is not correct in certain genuine cases. for example a Gas based power sector companies, suddenly stopped the operation due to nonavailability gas from the GAS Suppliers (Reilaince/ONGC), resulted , there is no manufacturing and hence there is no income, companies end up in severe financial crises. Whereas in accounting systems we will have to make a provision for certain routine maintenance/ Salaries etc. In that case how can company can remitte to Govt. For such companies relief must be given.

    K.V.Ramanan.
    Hyderabad

  4. TARUN KUMAR MOHARANA says:

    There is a interest provision for not depositing tax in time. So there should be a cut-off date after which prosecution will be apply. In my opinion nobody is using government fund in business and it may so happen in very rare cases. The government should be penalised when a lot of assessees money is pending as TDS for years together. As government is using assesses fund then govt. should be penalised. In many cases state govt. has making delay in payment of contractor’s bill. in that case assessee is in shortage of money and may use central govt. funds for using in his business. No body is regular in india. The Department itself is top most irregular body for which the Income Tax return forms generally prepared after 2 months from the begining of the assessment year.

  5. M Q ZAMAN says:

    Thanks to the Income Tax Department for taking up this step of prosecuting the erring Tax Deductors. Specially I shall cite one example, where the tax deductor, i.e.,State Bank of India has deducted tax regularly every month from pension but no mention is made in the Form 26AS for months together.Again the Form 16 i.e.,TDS Certificate is also issued on 26th June,2013 for the financial year, 2012-13.
    M Q Zaman, Jharpada, Bhubaneswar-751006

  6. CP Gupta says:

    It is the employee that receives the ‘income’,and for firstly and finally it is HIS responsibility to pay taxes due on him…TDS system is basicly help to government… So it is against natural justice to punish him up to the extent of imprisonment!!!. It should be withdraw n immediately…. Rather the TDS SYSTEM Should be withdrawn…The only responsibility on the employer should be to submit detil of salary paid along with employees name and PAN.

  7. N.B.Chaudhari. says:

    sorry to say that it is not a good provision for collection of tax. Though Employer is responsible to deduct a tax at source ,and makes delay in depositing deducted amount ,then penalty should be charged with interest after specific period.Employer helps to collecting the tax and taxes are known as kamdhenu to the government because our nation can plan and achieve our plan with the help of this tax income. so motivate to the employer to deduct and deposit it in time.Give incentives to the employer who deposits the deducted taxes in time.

  8. vijay kumar says:

    I would request all the participants posting their comments to file their formal suggestions/or complaints to the Head of CBDT to either look into their system for suitable corrections and not to send unneccessary notices to the individual tax payers.

  9. Sekaran says:

    It is clear from so many messages that the system of collecting and depositing the income tax as TDS is far far from satisfactory in India. Though we call our selves as the IT Founders, application is far from satisfactory within the country. The obvious reasons are
    a) the lack of education of the ministers ,
    b) unwillingness of the admin to computerise due to fear of unearthing the corrupt persons and practices,
    c)lack of proper punishment to the defaulting organisations and
    d)the allround tolerance of rampant corruption in the economic sphere due to a huge quantity of slush/black money making rounds in the Govt.
    SO WHO IS THERE TO BELL THIS HOLY CAT CALLED CORRUPTION IN SOCIETY? BUSINESS MEN DO NOT HATE IT, POLITICIANS LIKE IT AND PUBLIC SUFFER IT IN SILENCE.

  10. SANJIV GUPTA says:

    Income tax should be take action against deductor those don’t issued tds certificate timely due to this problem many tax payer don’t file their ITR

  11. Krishnakumar says:

    As for TDS is concerned the TRACES site is a worst site. To generate TDS certificate it takes time. If you correct any efiling then forget about your TDS certificate. More over you will have to be lucky to have your PAN number in TRACES. There are many cases where the PAN shows as INVALID PAN in TRACES but the same shows as valid PAN in NSDL online payment. I had seen many cases like this. A correcyion in efiling which was filed prior to OCT2012 (NSDL was handling then) the corrections are still to be updated in TRACES (more than 7 months). The government should discard the TRACEs which is totally troublesome and useless.

  12. K K SARAOGI says:

    Banks are biggest defaulters for making statutory compliance relating to Income-tax. They are deducting tax and when asked for issuing TDS certificate they are unable to reconcile against which transaction tax has been deducted.

  13. Sekaran says:

    As I have been venting in these columns,the India Post should be the first and foremost needing tightening by the CBDT with all its ramifications for not submitting TDS certs to the customers in time and not having a proper department to do handle the customer complaints on line with regard to 26AS and 16A.

    Further the TDS is also not being deducted properly inspite of having several copies of the same PAN numbers of the same individual who has invested in several products of the India Post. Due to this laxity customers are able to evade TDS easily and PO is not collecting TDS fully from each customer and GOI is running at a loss! I hope that the day will come when GOI will be able to make the India Post into a well oiled machine with accountability and high level of performance from each of it employee. Now the discussion of quality of the workers is better left to Providence!

  14. Niranjan says:

    By TDS provisions a businessman is forced to act as an Tax Collection agent, even though he is not willing for this. He is acting as collection agent that to for no consideration, rather he get penalised for any delay or default.

    In my view to implement the TDS provisons more effectively, the department should give a Tax credit of certain percentage of TDS in his IT return for TDS made and paid in time by the businessman.

    CA Niranjan

  15. R A Tiwari says:

    I agree with Mr. R K Mittal.

    Further, Govt. depts. should encourage to comply with laws. There are many assessee who dont have proper infrastructure. Further going, what punishment departments keep on them where official websites do not work properly and the filers face difficulties and department extends date for its inefficiencies. What foolish decision! Only a floodgate for corruption.

  16. satish boob says:

    this is a very harsh provision. By collecting tax and paying it to the GOVT the deducter is helping to collect the revenue. Many times the deducter could be punished for his innocence

  17. satish boob says:

    sir, this is a very harsh provision. Because by collecting tax and paying it to the govt , the deducter is helping the govt to collect revenue. Many times the deducter could be innocent and could be punished by this provision.

  18. vijay kumar says:

    What about the Govt Departments/Central Ministries who are deducting the TDS but not depositing or posting online in tine due to which the Individual Tax Payers are being served notices. In such cases the Secretary of the Department/Ministry should be served a notice for default.

    VIJAY KUMAR MAGO
    Under Secretary(Retd.)

  19. vijay kumar says:

    What about GOVT Departments/Central Ministries who are deducting the TDS but not depositing or posting online due to which the Individual tax payers are being served notice by IT Department. In GOVT. Departments the CBDT should send the notice to the Secretary of the concerned Departments/Ministries.

  20. Bhupal Singh says:

    Besides my comments above, I wish to add that it is a general practice on the part of deductors to deposit the TDS after some months. They overcome the anomaly of different dates i.e. the actual date of deduction and the date of deposit by showing the same date for deduction & deposit, though the TDS had been deducted few months before. This practice will stop if the IT Deptt carries out scrutiny of TDS as shown by Assessee while calculating Adv Tax and the actual date of deposit by deductee and if it is found that deductor has shown fictitious date of deduction, he should be penalised suitably. This can be done by suitably modifying the Adv Tax Challan form.

    Bhupal Singh

  21. sibaprasad dash says:

    This not a logical decision , As people are paying interest as well as penalty, there is no need for prosecution, IT is just increase complexity in taxation, and to help the professional to earn money by giving legal advice,

  22. Bhupal Singh says:

    Yes, it is a fact that deductors deduct TDs but do not deposit in time, for extraneous reasons, presumably as stated above for personal use or for business use. This practice has become viral due to leniency on the part of IT Department. Hence the TDS does not show up in the TDS Account of the deductee in IT Web Portal and if the deductee accounts for it while working out Advance Tax, it will be mis-match between the amount shown in the IT Web Portal and the amount the Deductee has taken into consideration while calculating Advance Tax and it will appear as if the Assessee has paid less Adv Tax. The IT Deptt can therefore penalise the deductee for depositing wrong ( i.e. less ) Advance Tax by charging interest on late payment of the short Adv Tax.
    Therefore the IT Department should not show any leniency in this regard
    and charge not only interest for late depositing of TDS by Deductor but also levy suitable penalty to curb this tendency on the part of the deductors. Once this is done, the deductors will be cautious and ensure the TDS deducted is deposited in time in future.

    Bhupal Singh

  23. R.K. MITTAL says:

    RI should not be imposed on small defaulters because they do not have proper infrastructure for all legal compliance due to lake of proper professional aids or inability to pay for good professional advice. Moreover govt. is getting interest on delayed payments.

  24. CA Dev Kumar Kothari says:

    The government and its officers must recognise difficulties which some times causes delay in deposit of TDS filing of returns. Even PSU have committed such defaults and they faced litigation.

    Not allowign deduction of relevant sums, levy of higher interest for delay are suffecient peculnary punishments. Even further penalty is not justified. after all delay in any payment should be considered only a civil default and not a crime. Particularly when the payment has already been made.

    Prosecution cases are not desirable in such cases.
    We find criminals like cheaters, thiefs , dakoo, and dishonesty in all sorts of dealings, and even other very serious criminals finding way out due to doubts. But in case of delay in filing of return, deposit of TDS or other tax, technical defaults under law are self proved, such situation should not be used against enforced to put people into jail.

    Cases where tax has been deposited prosecution is not likely to survive therefore there is no use to lauch prosecution.
    Readers are request to read the following articles:

    PROSECUTION – COMPANIES ACT CASE STUDY -A CASE STUDY:

    Un-necessary litigation on deemed crimes of technical or procedural irregularities or delays – causing wastage of time of police and administration- a rethink is necessaryhttp://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=5205

    SOME SUGGESTIONS TO REDUCE CRIMES make police and courts friendly service providers of public.
    taxmanagementindia.com/visitor/detail_article.asp?ArticleID=2000

    Providing for compounding of such offences is also not proper as it is likely to create harrasment and corruption. Insted a late payment fees or late filing fees may be provided and priosecution should not at all be initiated to avoid wastage of time and money of government and tax payers.

  25. v.mahadevan says:

    A national bank had made deductions from interest payable on Fixed Deposits but failed to provide TDS Certificate. When approached the manager observed that Bank provides TDS Certificate only if specifically requested for.Is this the correct position in the eyes of law? A Super Senior Citizen

  26. Prashant says:

    If one look into TDS Compliance from Businees View, it is an unnecessary burden put on an Assesse’s Shoulder.It is Government’s Job which as assesse is doing because he has to do Business.

    Moreover there are interest, penalty and prosecution provisions.In my opinion these provisions should be lenient considering business difficulties, moreover there should be minimum exempt period for delay for which there should not be any penalty, prosecution apart from interest.

  27. MS says:

    As usual, persons who are compliers are law are going to get a big hit. Already fine is imposed for delay in filing of TDS returns apart from interest on delay in remittance of money.

    Instead of harsh treatment the IT dept should encourage the public for compliance of law, which as the time go by can be made strict.

  28. jay says:

    is this applicable to M/s King Fisher – who was in news for various statutory defaults – not depositing TDS, not paying service tax etc.
    OR is it applicable only to the hapless common man who has neither money power nor muscle power or political backup.

  29. CA. Subhash Chandra Podder, says:

    It should be done immediately . Even banks are deducting but not deposited. It department ( CBDT ) should hunt/ identify those – besides non- fillers of Income Tax. Many assesses are unable to file their income tax Return due to non- available of Form 16 /16A .The employers are deducted Income Tax from the salary of employees month after month but not deposited Taxes to the designated bank, Resulting which employees are the victim . Please catch hold of those immediately.
    CA. Subhash Chandra Podder , FCA
    Kolkata
    07/8/2013

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