TDS default: I-T dept issues over 850 prosecution notices

Bengaluru: The Income Tax department has issued over 850 prosecution notices to firms in the private and government domain in Karnataka and Goa on charges of delay in remitting TDS funds to the exchequer.

A senior official said notices where the tax department files court cases for default in Tax Deducted at Source (TDS) payments have been issued to defaulters who have deducted tax from the payees such as employees, professionals, contractors and others and have then delayed the remittance of tax in government coffers or the I-T department.

"The department has issued 859 prosecution show cause notices to various deductors which includes private entities, government agencies and public sector undertakings (PSUs) in Karnataka and Goa region.

"In 48 cases, prosecution has been sanctioned and complaints have been filed in special Economic Offences courts," the department said in a statement.

It said in 223 cases, deductors have filed applications for compounding of offences by paying taxes, apart from interest and penalty, at the rate of 3 percent per month from due date of payment of TDS to the actual date of payment of TDS amount as compounding fees amd charges.

Such action, the official said, has been initiated in other parts of the country as well and the data is being compiled.

In Delhi, Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra had recently written to the field offices of the department to step up action and check TDS defaults by firms and employers, especially in cases where such payments have dropped by more than 15 percent as compared to last time.

With the current financial year drawing towards close, the CBDT boss issued the directive so that TDS collections, which form a substantial chunk in the overall direct tax collections, meet the set regard of Rs 3.50 lakh crore.

The I-T department has netted Rs 2.85 lakh crore revenue till January 31, 2017 under the TDS category.

As per rules, all sums deducted as Income Tax shall be paid to the credit of the central government within seven days from the end of the month in which the deduction is made or before the prescribed dates.

Failure to adhere to the above provisions are liable to attract prosecution proceedings under Section 276B of the Income Tax Act, 1961 besides interest and penalty.

The official said the courts have also cracked down on such instances in the past and in one case in Bengaluru, the court had convicted the defaulters to three years of Rigorous Imprisonment with a fine of Rs 50,000 each for the delayed payment of TDS to government account.

Rules stipulate that in case of a delay in submission of TDS quarterly statements, a fee of Rs 200 per day is levied while the penalty is also leviable in such cases separately.

"Either the delay in remittances of TDS and non-remittances results in hardship to the taxpayers who cannot get credit for the TDS made in their hands.

"The department is taking strict action against such deductors who divert the tax deducted for their business activities or any other purpose. There cannot be any justification for this citing business loss or cash flows problems, since such an amount does not belong to them," a senior official reasoned.

The CBDT Chairman, in his communication, had underlined the need to conduct an increased number of survey operations (where the taxman visits business premises of an assessee) and on-spot verifications with regard to TDS deductions.

"There are expectations for the TDS collections to significantly exceed the target so as to compensate for sluggish growth in advance tax and regular assessment tax.

"In view of this, there is a need to step up efforts for enhancing TDS collections. More TDS surveys are required to be conducted to check large scale non-deduction or under- deduction of tax at source as well as more importantly, non-deposit of tax already deducted," Chandra wrote.

He added, "Moreover, tax deducted by the central government DDOs (Drawing and Disbursing Officers) is not transferred to the tax account of the central government within the prescribed time and there are long delays, especially at the level of the state accountant generals.

"The I-T Commissioners of TDS located in state capitals are directed to ensure that there is proper verification of tax at source by the central government offices located in the state and that the same is credited to the tax account forthwith and in any case before the close of the financial year," the CBDT boss had said in his communication.