Not just non-remittance of TDS, even delay is not tolerated

Directors of a private firm sentenced to three years’ rigorous imprisonment

February 22, 2017 10:25 pm | Updated 10:25 pm IST

Bengaluru: The Income Tax Department has tightened the noose on employers who have deducted Tax Deducted at Source (TDS) from employees but defaulted on remitting it to the government, causing serious inconvenience to employees who receive tax demand notices.

This, however, has not gone down well with the industry.

Not just non-remittances, even those employers who have delayed remittance of TDS deducted from their employees beyond a reasonable time, have been sent prosecution show-cause notices even though they have already remitted the tax with penalty.

“This year, we have sent more than 15,000 letters and prosecution notices to 150 firms, which were selected by an automated software based on the delinquency in these cases,” Sibichen K. Mathew, Commissioner of Income Tax (TDS), Bengaluru said. “Many firms have delayed remittance for more than two years. Many have considered this to be a revenue stream and are rotating the corpus in their business, which is a crime,” he said during an interaction with members of the Federation of Karnataka Chamber of Commerce and Industry on Wednesday.

While many industrialists objected to the I-T department ‘waking up’ now for delays in previous fiscals, Mr. Mathew said that in all the 859 cases where prosecution show-cause notices have been issued, several letters had been sent earlier alerting the firms on the delay.

Of the 859 cases, 223 defaulters have approached the department for compounding of offences by paying interest and penalty, a three per cent compounding charge for every month from due date, in addition to the stipulated TDS, to escape prosecution. Their plea, however, has been rejected, he added.

Meanwhile, the I-T Department, in a statement, has said that a Special Economic Offences Court, Bengaluru convicted the directors of a private firm for delay in remittance and sentenced them to three years’ rigorous imprisonment, even though the firm had remitted TDS with penalty during the time of conviction.

Some defaulters vanish

I-T sleuths have found that several companies that have been served prosecution notices have wound up, vanished or resurfaced with other names. “We are tracking down the directors of such firms and attaching their assets. In case of Kingfisher Airlines, we have collected ₹151 crore by freezing bank accounts, impounding pending tax refunds and other means. We will also get a share in the auction of Kingfisher House in Mumbai,” Mr. Sibichen Mathew said.

Government departments lax

Not just private firms, government departments and Public Sector Units also figure in the list of defaulters. Prominent among those are the BBMP, Bangalore University and the State Public Works Department.

“There is no diversion or embezzlement of tax money in government departments since most of these transactions are book adjustments. There are also some grey areas, which are being contested at appellate tribunals. However, State government departments are very lax in filing quarterly reports of TDS deductions, which create problems for employees,” Sibichen K. Mathew said.

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