TDS defaults: penalty applies for failure to deduct; prosecution may follow for false verification or non-payment of deducted tax. Penalty for failure to deduct tax at source is imposed where whole or part of tax required to be deducted is not deducted, subject to affording the assessee a reasonable opportunity of being heard and consideration of conditions for waiver or reduction. Prosecution for false verification of TDS returns is to be examined based on voluntariness of any revised return and payment of tax with penal interest. Prosecution for failure to pay deducted tax to the Government may be initiated for non-payment of collected TDS, subject to applicable procedural safeguards.