Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Wednesday, February 4, 2015


As per the Income Tax Act, all cases where TDS/TCS is deducted but not deposited within the due date, as prescribed, are punishable u/s 276B/276BB or 278A.

CBDT has issued Standard Operating procedure for prosecution in case of TDS or TCS defaults. The assesees / deductors are advised to remove all TDS Defaults shown on TRACES Website otherwise show cause notice for prosecution may be issued by TDS CPC. It is the time to rectify TDS statements filed in earlier years and avoid consequent harsh action by TDS CPC.

 CBDT has issued earlier two circulars for processing and recovery of interest but now has issued standard operating procedure for prosecution in cases of TDS and TCS defaults. The monetary limits to be considered for prosecution as given by the CBDT are: 
Where amount of tax deducted is Rs.1,00,000 or more and the same is not deposited by the due date

Mandatorily be processed for prosecution in addition to the recovery

Where the tax deducted is between Rs.25,000 and Rs.1,00,000 and the same is not deposited by the due date

May be processed for prosecution depending upon the facts and circumstances of the case e.g
-Repeated defaults and
- Tax not been deposited till detection.

 Identification of cases:

·          CPC-TDS/TRACES will generate a list of prosecutable cases for mandatory processing for prosecution (List-A)

·          Such identification shall be done within one month of the filing of the quarterly TDS statement.

·          There will be two parameters for identifying prosecutable case for mandatory processing.

Ø  Late Payment Interest had not been paid completely/not paid at all till that date,
Ø  Deduction had been made but no challan available in the account of the deductor.

(Limit Rs.1,00,000/- for the cases of Late Payment Interest and for Short Payment)

·         CPC-TDS will generate another list of cases (List-B) for defaults of delay in payment of Rs. 25,000 to Rs. 1,00,000/- along with default sheets for the year as well as preceding year and subsequent year within one month of the filing of the quarterly TDS statement.
·         TDS cases dealt by the International Taxation Division, with respect to payments made to non-residents also required to be dealt with in the same manner.
·         CPC-TDS shall generate the list of such non-filers within one month from due date and communicate to the AO(TDS) for issue of notice and further pursuit.

Procedure for launching prosecution

1)      CPC TDS will identify and enter into prosecution register

In case of mandatory processing or otherwise, CPC- TDS will identify the cases for prosecution and will enter in the ‘Prosecution register’ and will report to the CIT (TDS) who shall also maintain the prosecution register in Form–D. Till a specific module in CPC-TDS is made functional for having control on prosecution proceedings, the entries may be made in manual register.

2)      AO ( TDS) will gather further information & issue show cause

AO(TDS) once the case is identified for processing will collect the following information:

(a) Details of the company/ firm/ individual, Address, PAN Number and TAN number
(b) Name of Directors/ partners/ Responsible person, their addresses, PAN and other particulars
(c) Accounts of the deductor for the relevant year showing late payments.
(d) Copies of the TDS statement filed by assessee deductor.

(e) Copies of challans of late deposit of TDS by the assessee deductor.
(f) Copies of the intimations showing late payment interest for all the quarters of the relevant assessment year, if it is available.
(g) Copies of Audit report, if they show default.
(h) While collecting above information, AO(TDS) may also collect other details to check whether :
     (i) the default was only in one year
     (ii) the deductor has himself rectified the mistake and deposited the tax
     (iii) the same offence has been compounded earlier and if yes, how many time etc.

The AO(TDS) shall issue show cause notices to the person responsible for deduction, within 45 days of receipt of the list of prosecutable cases from CPC-TDS end will ensure that the reply is furnished within 30 days of the issue of the show cause notice.

In case no reply is furnished within 30 days, it shall be presumed that the person responsible for deduction has no cause to state and the matter may be pursued further.

The AO(TDS) shall examine the reasons/reply for non-compliance and will enter Form ‘F’and send to the CIT(TDS) The Form ‘F’ will indicate :
·         The facts of commissioning of offence.
·         Events, primary & secondary evidences to establish the offence with present stage of the proceedings and list of documentary evidences including depositions, submissions to prove the offence.  
·         The offence is second or subsequent offence in terms of Section 278A.

AO(TDS) will mandatorily refer all the cases of TDS default exceeding Rs.1 lakh to CIT(TDS), cases of defaults between Rs.25000-Rs.1lakh shall be referred to the CIT(TDS) only if he is satisfied that it is a case fit for prosecution. The report to CIT(TDS) shall be submitted within 60 days of the issue of show cause notice. Time granted to furnish the reply may be excluded from this time limit.

Sanction by CIT TDS

The CIT(TDS) will accord sanction u/s 279(1). He shall:
·         If considers the case fit for prosecution will generate online a show cause notice(s) to all proposed accused(s) u/s 276B/276BB/ 278B of the I.T. Act
·         After hearing the assessee and after proper application of mind clearly enunciate a fair and judicious view has been taken in view of the provisions of Section 278AA before filing the complaint(s).

Compounding Application by the deductor

·         The assessee deductor can file a compounding application under S.276B/276BB before the Chief Commissioner of Income-tax.
·         The application should be processed on priority basis and mandatorily be disposed off within the time frame as prescribed by the Central Action Plan guidelines.
·         During the pendency of the compounding application, the CIT(TDS) shall keep the prosecution proposal pending. As soon as an application for compounding is moved, an entry should be made in the prosecution register & Entries of subsequent action on compounding application shall also be made in such register.

Time frame from identification to passing of order u/s 279(1)/279(2):

Time limit for submitting proposal for sanction u/s 279(1)
Time limit for according sanction u/s 279(1)
Time limit for launching Prosecution
Authority to submit proposal & launch prosecution
Within 90 days of generation of list on CPC-TDS detection of offence or receipt of information from any other source/ income tax authority
Within 60 days of receipt of information from the AO(TDS)
Within 30 days of receiving approval u/s 279(1)
AO(TDS) having jurisdiction.
( Same as above)
( Same as above)
( Same as above)
( Same as above)

No comments:

Post a Comment