The various provisions of TDS as discussed in
the preceding chapters are statutorily required to be strictly complied with.
Any default in compliance can attract, levy of interest, penalty and in certain
cases initiation of prosecution
proceedings. In this chapter a brief discussion of the possible defaults and the
consequential proceedings is being done.
Failure to deduct
tax - Where the employer has failed to deduct tax or when short deduction of tax has been done,
following statutory provisions are attracted:-
Charging of interest u/s 201(1A) - The
deductor is treated to be ‘assessee in default’ in respect of the short
deduction/non deduction of tax. Under Section 201(1A) he is liable to pay simple
interest @ 1% for every month or part of a month on the amount of tax in arrear from the date on which
such tax was deductible to the date on which such tax is actually deducted. Further such interest shall
be paid before furnishing the quarterly statement of each quarter. Charging of
interest u/s 201(1A) is mandatory and there is no provision for its
waiver.
Procedure for interest calculation : The
calculation of interest is to be done as per Rule 119A
and is summarized below:
- Where the interest is to be calculated for every month or part of a month comprised in a period, any fraction of a month shall be deemed to be full month and interest shall be so calculated.
- The amount of tax in respect of which interest is to be calculated is to be rounded off to nearest multiple of Rs. 100 ignoring any fraction of Rs. 100.
Penalty u/s 221- The assessee in default
is liable to imposition of penalty where the assessing officer is satisfied that
the defaulter has failed to deduct tax as required
without good and sufficient reason. The quantum of penalty is not to exceed the
amount of tax in arrear. Besides, a reasonable
opportunity of being heard is to be given to the assessee.
Penalty u/s 271C- A penalty equivalent
to the amount of tax the deductor has failed to deduct, is leviable u/s 271C. Such
penalty is however only leviable by a Joint Commissioner of Income Tax.
Failure to deposit tax in govt. account
after deduction: Where the employee has deducted
the tax at source but failed to deposit wholly or partly, the tax so
deducted in government account, the following
statutory provisions are attracted:-
- Interest u/s 201(1A)- The deductor is treated as an assessee in default and interest u/s 201(1A) is leviable @1.5% for every month or part of the nonth on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid. Further, the tax along with the simple interest u/s 201(1A) becomes a charge upon all the assets of the deductor.
- Penalty u/s 221- Penalty to the extent of tax not deposited is leviable by the A.O. as discussed earlier.
- Prosecution proceedings u/s 276 B- Where the deductor has failed to deposit tax deducted at source, in govt. a/c without a reasonable cause then he is punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.
Failure to apply for T.A.N or to quote T.A.N. Where a person who is
responsible to deduct tax at source has failed,
without reasonable cause:-
- To apply for T.A.N. within prescribed period or
- After allotment, failed to quote such TAN in challans for payment of tax or TDS certificate or returns of TDS (as required u/s 206) - then a penalty u/s 272BB of a sum of Rs.10,000 may be imposed by the assessing officer. However a reasonable opportunity of hearing must be given to the employer/deductor.
Failure to furnish TDS certificate or
returns/statement of tax deduction at source- (penalty u/s. 272A(2)) Where
the employer has failed to issue TDS certificate (form 16) within one month of the end of financial year (by
31st of May of the next F.Y. for F.Y. 2010-11 onwards) or has failed to furnish
the quarterly statement of tax in form 24Q, within the time prescribed u/s
200(3) (rule 31A), then a penalty of Rs. 100 is leviable for each day during the
period for which default continues. The quantum of penalty is not to exceed the
tax deductible and it is to be levied only by a Joint Commissioner or Joint
D.I.T. after giving the assessee an opportunity of being heard.
Prosecution u/s
277- Where a person, who is required to furnish statement u/s 200(3)
(quarterly statements) makes a false statement in verification or, delivers an account or statement which is
false and which the person knows or believes to be false or does not believe to
be true, then he is punishable with rigorous imprisonment for a term which shall
not be less than 3 months but which may extend to 7 years along with fine. Where
the amount of tax, which would have been evaded if the
statement or account had been accepted as true, is 1 lakh rupees or less, then
rigorous imprisonment may be from 3 months to three years and with fine.
The Finance Act, 2008 has introduced amendment
in section 201 (w.e.f. 1.6.2002) which clarifies, that in case any employer, or
any principal officer of a company;
- does not deduct,or
- does not pay,
- or after so deducting fails to pay the whole or any part of the tax, then such person shall be deemed to be an assessee in default. Further penalty to be charged u/s. 221 shall not be levied by the assessing officer unless he is satisfied that such failure to deduct and pay tax was without good and sufficient reasons.
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