Delayed payment of TDS beyond one year

[Amalraj Michael]

We are private limited company , we paid the TDS amount into Goverment treasury for the fy 09-10 by July 11 .

the IT issued a show cause notice as to why they cannot procecute me for this delay . I believed that TDS should be remited befroe filing of the return and accordingly all the TDS deducted were deposited by July befroe filing of the return with out interest  . The IT issued a notice for the amount relating to first quarter of 9/10 - which goes beyond one year .  I requested the CIT to drop the case as I had paid and I also paid interest later . We also had some financial difficulties - even the creditros were used to be paid after 6 months or so . The CIT says go for compounding - what is meaning of compounding - if we compound , wll they drop the procecuton proceedings ? pl advise   

[CAGOPALJI AGRAWAL]

Hope this below mentioned instruction would be help you out.

SECTION 271C l PENALTY FOR FAILURE TO DEDUCT TAX AT SOURCE

Action for TDS defaults

1. Attention of the Board has been drawn to the issue of applicability of penalty and prosecution  provisions for TDS defaults committed by various assessees. The matter has been considered and examined and this instruction issues with the approval of Central Government.

2. So far as the levy of penalty under section 271C is concerned, the penalty under section 271C is to be levied in cases where there is a failure to deduct the whole or any part of tax as required by or under the provisions of Chapter XVII-B. However, as per section 274 of Income Tax Act, the assessee must be heard or given a reasonable opportunity of being heard and also the conditions as laid down in section 273B of IT Act must be kept in mind in such cases.

3. As regards initiation of prosecution  proceedings under section 277 of Income Tax Act, for false verification of TDS return, it needs to be examined in each case as to whether revised TDS return has been filed voluntarily or otherwise. In such case, it may also be verified as to whether taxes together with penal interest under section 201(1A) have been paid or not.

4. Prosecution proceedings under section 276B of Income Tax Act, may be initiated subject to section 278AA of Income Tax Act, in all cases where there is a failure to pay to the credit of the Central Government the tax deducted at source as required by or under the provisions of Chapter XVII-B.

Instruction : No. 1968, dated 8-6-1999.

AI Summary

Failure to remit TDS can trigger penalty or prosecution unless statutory conditions, payment and compounding options are met. Delayed remittance of TDS can lead to a penalty for failure to deduct tax at source, subject to the assessee's right to a hearing and other procedural conditions. Prosecution for false verification of TDS returns depends on whether a revised return was filed voluntarily and whether taxes plus penal interest have been paid. Prosecution for failure to pay deducted tax is possible but is subject to statutory safeguards and potential compounding where permitted.