Prosecution for failure to pay TDS, dividend distribution tax, or ensure tax payment on income in kind [Section 276B]
- Nature of Default
Prosecution may be initiated in the following cases:
o Failure to pay TDS;
o Failure to pay dividend distribution tax on dividends declared, distributed, or paid on or before 31.03.2020;
o Failure to ensure payment of tax on winnings in kind, whether wholly or partly, under section 194B;
o Failure to ensure payment of tax on winnings from online games in kind, whether wholly or partly, under Section 194BA;
o Failure to ensure payment of tax on benefit or perquisite in kind under section 194R;
o Failure to ensure payment of tax on consideration in kind for transfer of VDA under section 194S.
No prosecution shall be launched for failure to deposit TDS if the amount is deposited on or before the due date for filing the TDS statement. If the government extends the due date, the extended date shall be considered for calculating the limitation period for immunity from prosecution.
- Non-cognizable Offence
The offence is non-cognizable under section 279A, i.e., police cannot register an FIR or initiate investigation/arrest without court permission.
- Exception
As per CBDT Circular No. 24/2019, dated 09.09.2019, no prosecution shall be initiated where:
o The TDS default is Rs. 25 lakh or below, and
o The delay in deposit is less than 60 days from the due date.
However, in exceptional cases (e.g., habitual defaulters), prosecution may be initiated with prior approval of a collegium of two officers of CCIT/DGIT rank.
- Period of Imprisonment
Punishable with rigorous imprisonment ranging from 3 months to 7 years along with fine.
- Prosecution for Subsequent Offences
For second and subsequent convictions, the person shall be punishable with rigorous imprisonment from 6 months to 7 years and with fine.
- Penalty for failure to deduct or pay
Failure to deduct or pay tax as required under Sections 194B, 194BA, 194R, 194S, or Dividend Distribution Tax, makes a person liable to penalty under Section 271C.
- Relaxation from Prosecution
Immunity from prosecution may be granted by the Principal Commissioner/Commissioner, but it will be withdrawn if the assessee fails to meet the required conditions and according to CBDT guidelines, the offence under this provision is compoundable.