DO THE THANKLESS JOB & GET PROSECUTION AS A REWARD- T.D.S.
DO THE THANKLESS JOB & GET PROSECUTION AS A REWARD
Call it a T.D.S or a TEDIOUS. It’s tantamount to one and the same thing. Perhaps, no one can breathe comfortably (Exclude I.T. department) if one goes through the recent ruling of the Honorable Apex court. What a thankless job an assessee is doing for the Government? What is the reward an assessee is getting when it is working as an agent of the Government? All the more, what is the consequence that follows if a minor failure is committed by the assessee? A judgment with a far reaching effect was very recently delivered by the Honorable Supreme court in Madhumilan Syntex limited case wherein it is held that prosecution can be done for delay in depositing the T.D.S
BRIEF HISTORY OF THE CASE:
The amount involved in this case was a little more than Rs 1 lacs & relates to the year 1989. The company had deposited the T.D.S along with interest into the Government treasury after a delay of two-day, yet the AO (Assessing Officer) issued a show cause notice to the company alleging that there was failure to credit TDS to the Central Government as required by the Income-Tax Act. This was an offence punishable under Section 276B & 278B of the Act, he said.
Though the assessee had reasonable cause for not remitting the taxes within the stipulated period, the Commissioner of Income tax (CIT) granted sanction to prosecute the assessee and its directors.
It was pleaded by the assessee that there was delay in receiving loan from the bank, due to which TDS could not be paid in time. Also, that because of construction of a unit by the company, there was shortage of liquid funds and hence the payment could not be made by the due date.
SUPREME COURT VERDICT:
On reference to the Supreme Court, it was held that once a statute requires payment of tax and stipulates the period within which such payment is to be made, the payment must be made within that period. If the payment is not made within the specified period, it amounts to default and appropriate action can be taken under the Act. Failure on part of the company in depositing the taxes is an offence, which is punishable under the Income Tax Act.
The further ruling said that the imposition of a penalty for non-deduction of tax does not take away the power to prosecute accused persons if an offence has been committed by them. If a civil suit is pending against the assessee, an appropriate order will be passed by the competent Court in such an event. That, however, does not mean that if the accused have committed any offence, the jurisdiction of criminal court would not be applicable to the situation. Both the proceedings are separate and independent and one cannot abate or defeat the other in such a scenario.
Although the company is merely a “legal” or “juristic” person and not a natural person, prosecution under the Act would still apply as “corporate criminal liability” is not unknown to law. Further, the Supreme Court observed that to hold a person responsible under the Act, it must be shown that he/she is a “principal officer” or is “in charge of” and “responsible for” the business of the company or firm.
Also, no separate notice and/or communication is required to be served on the directors treated as the principal officers, if the notice served on the company indicated that the directors are the principal officers of the company. Therefore, the sanction to prosecute granted by the CIT cannot be held to be illegal or unlawful.
CONCLUSION:
It’s not only an absolute failure to deposit T.D.S that attracts prosecution penalty. A mere delay in deposit of T.D.S would equally attract prosecution. No matter how much is the delay in payment of T.D.S. Forget the quantum of amount involved. Ignore the good intention & past track record. Leave apart the reasonableness for non-payment of T.D.S. Mobilize the fund by whatsoever way but Pay T.D.S WITHIN TIME. Now one needs to be extra careful and comply with the provisions relating to T.D.S.
Call it a T.D.S or a TEDIOUS. It’s tantamount to one and the same thing. Perhaps, no one can breathe comfortably (Exclude I.T. department) if one goes through the recent ruling of the Honorable Apex court. What a thankless job an assessee is doing for the Government? What is the reward an assessee is getting when it is working as an agent of the Government? All the more, what is the consequence that follows if a minor failure is committed by the assessee? A judgment with a far reaching effect was very recently delivered by the Honorable Supreme court in Madhumilan Syntex limited case wherein it is held that prosecution can be done for delay in depositing the T.D.S
BRIEF HISTORY OF THE CASE:
The amount involved in this case was a little more than Rs 1 lacs & relates to the year 1989. The company had deposited the T.D.S along with interest into the Government treasury after a delay of two-day, yet the AO (Assessing Officer) issued a show cause notice to the company alleging that there was failure to credit TDS to the Central Government as required by the Income-Tax Act. This was an offence punishable under Section 276B & 278B of the Act, he said.
Though the assessee had reasonable cause for not remitting the taxes within the stipulated period, the Commissioner of Income tax (CIT) granted sanction to prosecute the assessee and its directors.
It was pleaded by the assessee that there was delay in receiving loan from the bank, due to which TDS could not be paid in time. Also, that because of construction of a unit by the company, there was shortage of liquid funds and hence the payment could not be made by the due date.
SUPREME COURT VERDICT:
On reference to the Supreme Court, it was held that once a statute requires payment of tax and stipulates the period within which such payment is to be made, the payment must be made within that period. If the payment is not made within the specified period, it amounts to default and appropriate action can be taken under the Act. Failure on part of the company in depositing the taxes is an offence, which is punishable under the Income Tax Act.
The further ruling said that the imposition of a penalty for non-deduction of tax does not take away the power to prosecute accused persons if an offence has been committed by them. If a civil suit is pending against the assessee, an appropriate order will be passed by the competent Court in such an event. That, however, does not mean that if the accused have committed any offence, the jurisdiction of criminal court would not be applicable to the situation. Both the proceedings are separate and independent and one cannot abate or defeat the other in such a scenario.
Although the company is merely a “legal” or “juristic” person and not a natural person, prosecution under the Act would still apply as “corporate criminal liability” is not unknown to law. Further, the Supreme Court observed that to hold a person responsible under the Act, it must be shown that he/she is a “principal officer” or is “in charge of” and “responsible for” the business of the company or firm.
Also, no separate notice and/or communication is required to be served on the directors treated as the principal officers, if the notice served on the company indicated that the directors are the principal officers of the company. Therefore, the sanction to prosecute granted by the CIT cannot be held to be illegal or unlawful.
CONCLUSION:
It’s not only an absolute failure to deposit T.D.S that attracts prosecution penalty. A mere delay in deposit of T.D.S would equally attract prosecution. No matter how much is the delay in payment of T.D.S. Forget the quantum of amount involved. Ignore the good intention & past track record. Leave apart the reasonableness for non-payment of T.D.S. Mobilize the fund by whatsoever way but Pay T.D.S WITHIN TIME. Now one needs to be extra careful and comply with the provisions relating to T.D.S.
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