CBDT: Delay in remittance of taxes withheld would lead to initiation of prosecution proceedings

 

The Central Board of Direct Taxes (“CBDT”) has recently modified the guidelines for initiation of prosecution proceedings under section 276B of the Income-Tax Act, 1961 (“Act”). The press release dated August 6, 2013 has clarified that any delay in remittance of Tax Deducted at Source (“TDS”), would be liable for prosecution regardless of the period of delay.

Under section 276B of the Act, any tax deductor could be prosecuted for delay or default in remittance of TDS and be sentenced with rigorous imprisonment up to a period of 7 years. Prior to this press release, the Revenue Authorities (“RA”) were adhering to an internal guideline of initiating prosecution proceedings where the delay was more than 12 months. In other words, a tolerance period of 12 months of delay for initiation of prosecution was followed.

To curb the practice of tax deductors deliberately delaying the remittance of TDS and deploying the funds for business, the CBDT has withdrawn the tolerance period, which was only an internal guideline, not prescribed in law. With this change in policy, the RA could initiate prosecution proceedings even for a day’s delay in remittance of taxes. It has also been clarified that tax deductors would have the option of applying for compounding of such offences before the Jurisdictional Chief Commissioner and the offence would be compounded in suitable cases.