The Central Board of Direct Taxes (CBDT) has recently clarified that certain news items in the media regarding the issue of prosecution notices to several small companies for TDS default, are completely misleading and are factually inaccurate.
Furthermore, CBDT has stated that the Mumbai Income Tax TDS office has issued show cause notices only to a limited number of assessees. These assessees have defaulted in depositing more than Rs. 5 lacs of the TDS collected from its employees, with the Income Tax Department, in time.
Deducting taxes from the employees and other taxpayers and not depositing the same on time to the credit of the Government Treasury is an offence punishable under the law; this delay also affects the interest of the employees since the tax has already been deducted from their salaries. If the TDS is not deposited on time by the employers, the employees will not be able to claim the credit for the same at the time of filing their income tax returns.
CBDT said that in the last one month, there were only 50 big cases for which prosecution notices have been issued by the Mumbai IT TDS office. Out of these, in 80% of the cases, the TDS tax default is above Rs. 10 lacs, and in 10 % cases, the TDS default is between Rs. 5 Lacs to Rs.10 Lacs. In the remaining 10% of the cases, the TDS default is of more than Rs. 1 crore, as detected in the survey.
Prosecutions have also recently been started against four big businesses where they collected more than Rs 50 Crores of tax from the taxpayers and had not yet deposited it with the Income Tax department. However, such legal and rightful action on the part of the Department is unfortunately portrayed as an act of harassment on the small employers in the media.
CBDT added that, in a country of 130 Crore people where approximately six crore returns are filed every year, the department has issued only 1400 prosecutions notices so far for various offences under the Income Tax Act during the FY 2018-19; this, by any chance, cannot be termed as mass harassment by the department. Therefore, to say that notices have been issued to many taxpayers for minor defaults is completely incorrect and misleading.