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CBDT lashes out at reports of high-handedness in TDS default notices; shows the mirror to defaulters

In retaliation against allegations of high-handedness in its name, the CBDT stated that certain "vested interests" were misleading the media to avoid punitive action against themselves.

twitter-logo BusinessToday.In        Last Updated: January 20, 2019  | 23:16 IST
CBDT lashes out at reports of high-handedness in TDS default notices; shows the mirror to defaulters

The Central Board of Direct Taxes (CBDT) has reacted strongly against reports crying foul over show cause notices to several Mumbai-based small businesses in cases of TDS default. The authority over direct taxes clarified in a statement on Sunday that the Mumbai Income Tax TDS Office had issued prosecution show cause notices only in cases where it was required. The CBDT retaliated that certain "vested interests" were misleading the media to avoid action against themselves.

"Certain news items that appeared in a section of media regarding enmasse issue of prosecution notices to small companies for TDS default are completely misleading and full of factual inaccuracies. Mumbai Income Tax TDS office has issued prosecution show cause notices only in a limited number of big cases where more than Rs 5 lakh of tax was collected as TDS from employees etc and yet the same was not deposited with the Income Tax Department in time," the CBDT said in the statement.

"Having deducted tax from employees and other taxpayers and not depositing the same in time in the government treasury is an offence punishable under the law. It also affects interest of the employees from whose salary the tax has been deducted by the unscrupulous employers who have not deposited the same in time in the government treasury," CBDT further added.

If a company does not deposit the TDS it has collected on time, its employees become ineligible for claiming credit of the tax deducted when they file their own tax returns.

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Certain media reports earlier today alleged the authority of sending prosecution notices to small taxpayers over minor violations, threatening them with legal action under punitive provisions of the Income Tax Act. The reports suggested that the number of taxpayers who have received such notices run in thousands over the course of 2018.

In response, CBDT said that the only 50 prosecution notices have been issued by the Mumbai I-T TDS Office in major cases over the past one month. "Out of these, in 80 per cent of the cases, the TDS tax default is above Rs 10 lakh and in 10 per cent cases TDS default is between Rs 5 to Rs 10 lakh. In the remaining 10 per cent cases, TDS default is of more than Rs 1 crore as detected in the survey," the authority said.

CBDT also informed that prosecutions have been launched against four major business houses that collected more than Rs 50 crore of TDS but did not deposit with the government on time.

Only 1,400 prosecutions have been filed so far in the country for various offences under the I-T Act during this financial year, CBDT further said.

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Here's the complete statement by the CBDT:

Central Board of Direct Taxes (CBDT) today said that certain news items that appeared in a section of media regarding enmasse issue of prosecution notices to small companies for TDS default are completely misleading and full of factual inaccuracies. CBDT clarified that Mumbai Income Tax TDS office has issued prosecution show cause notices only in a limited number of big cases where more than Rs. 5 lakh of tax was collected as TDS from employees etc and yet the same was not deposited with the Income Tax Department in time.

CBDT said that some defaulter companies and vested interests are deliberately misleading the media to thwart action against themselves. Having deducted tax from employees and other taxpayers and not depositing the same in time in the government treasury is an offence punishable under the law. It also affects interest of the employees from whose salary the tax has been deducted by the unscrupulous employers who have not deposited the same in time in the government treasury. If the TDS is not deposited in time, the employee would be ineligible for claiming credit of the tax deducted when he files his own return.

CBDT stated that in last one month only in 50 big cases prosecution notices have been issued by Mumbai IT TDS office. Out of these, in 80% of the cases the TDS tax default is above Rs. 10 lakh and in 10 % cases TDS default is between Rs. 5 to Rs. 10 lakh. In the remaining 10% cases, TDS default is of more than Rs. 1 crore as detected in the survey. Prosecutions have also recently been launched against 4 big business houses where more than Rs 50 crore of tax was collected by them from the tax payers and yet not deposited with the Government in time. But such legal and rightful action is being unfortunately projected in the media by the vested interests as if the department is going overboard to harass small employers.

It would be pertinent to note that in a country of 130 crore people where around 6 crore returns are filed every year, only a total of 1400 prosecutions have been filed so far for various offences under the Income Tax Act during this financial year. This, by any stretch of imagination, cannot be termed as mass harassment by the income tax department. Therefore, to say that prosecution notices enmasse have been sent to taxpayers for minor defaults is completely incorrect and misleading, CBDT added.

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Edited by Vivek Punj

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