TaxTMI 
TaxTMI 
Revised Standard Operating Procedure (SOP) for Prosecution in cases of TDS/TCS default
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....lhi STANDARD OPERATING PROCEDURE FOR PROSECUTION IN CASES OF TDS/TCS DEFAULT 1. Introduction 1.1 This SOP is issued for the use of the departmental officers with the objective to streamline the procedure for processing cases of TDS/TCS defaults for prosecution and make it more efficient. The SOP should be followed as far as possible and shall apply prospectively to all prosecution proceedings, for TDS/TCS defaults, which are pending at any stage in the office of the Commissioner/Chief Commissioner or its subordinate office (s) as on the date of issue of this SOP. In all cases the proposals should, henceforth, be submitted in the new prescribed proforma (Form 'T') annexed with this SOP. However, prosecution proposals which have already been submitted by the AO to the CIT(TDS), need not be revised. 2. Identification of the cases 2.1 Vide revised guidelines issued by the CBDT in F. No. 285/90/2013-IT(Inv. - V)/384 dated 18.10.2016, it has been decided that a list of cases shall be generated periodically by the Pr. DGIT(Systems) based on the criteria approved by member(Inv.) CBDT which shall be mandatorily processed for prosecution in addition to the recovery steps as ma....
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....ed protocol expected to be followed in this regarded is enclosed as Annexure-2. 4.5 The details of late payment defaults for each case identified for mandatory processing shall be generated by the CPC(TDS). These details shall include the section under which TDS was deducted, amount of TDS, date of deduction, due date of payment and actual date of payment. 4.6 In respect of cases selected by CIT(TDS): a) Wherever corresponding TDS statements have already been filed, late payment details as per TDS statement, if any, shall be obtained by AO from AO portal on TRACES. b) In the case of a non-filer, AO will upload order passed under section 201(1)/201(1A) on the basis of default details obtained during the survey or otherwise. 4.7 The details of late payment defaults should be enclosed as annexure to the notice issued by the AO and preserved as they are the basis for initiating Prosecution. The purpose of enclosing these details with the notice is also to confront the deductor and require him to confirm these defaults. 4.8 In case, the deductor does not object to these details, the same will form part of Sr. No. 6 of Form 'T'. In case the deductor objects ....
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....1 The AO may ensure, to the extent possible, that the reply is obtained normally within 30 days of the issue of the show cause notice. In case no reply is furnished within the prescribed time, it may be presumed that the person responsible for tax deduction and deposit has no explanation to offer and the matter may be pursued forward. It is also advisable for the AO to simultaneously make attempt to collect relevant details from other sources such as TAN/PAN records, assessment records, TRACES, website of Registar of Companies, so that non-compliance on the part of the deductor doesn't come in the way of proceeding further and /or filing prosecution complaint. 4.12 The AO(TDS) shall examine the reasons/reply for default and prepare the proposal in Form 'T'. This form should be filled with due care ensuring that all details required are complete and correct and send the same to the CIT(TDS) through proper channel on TRACES. Detailed proposal has to be submitted offline. Separate proposal should be submitted for each assessment year. 4.13 The AO(TDS) shall refer all the cases falling in the list of TDS defaulters generated by CPC-TDS for mandatory processing to the CIT(TDS) thr....
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....eedings, keeping in view the provisions of Sec. 278AA of the Act. d) There could be possible extraordinary circumstances or situations beyond the control of the deductor which may prevent of hinder timely compliance at his end. Vide F.No. 285/90/2013-IT(Inv.V)/384 dated 18.10.2016, clarification has been issued by the Board for interpretation of section 278AA to address genuine concerns of the deductors. The fact that the deductor has remitted the tax before filling of TDS statement and interest before receipt of notice from the AO (TDS) for prosecution, may be taken note of amongst other submissions of the deductor while considering his case for prosecution. Some of the other circumstances where section 278AA could be invoked, provided the deductor has remitted the money with interest are highlighted below: i) Payment of TDS by the deductor within 60 days of the due date on account of genuine hardship. ii) Deductor having filed application under BIFR or under the insolvency and Bankruptcy Code, 2016 during the relevant period which has been admitted. iii) Where only provision has been made in the books of account without actual payment to the De....
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.... made. The CIT(TDS) shall complete the process and pass an order u/s 279(1) sanctioning prosecution or dropping the show cause notice preferably within 90days from receipt of proposal from the AO(TDS) through the Range Head excluding the additional time taken to dispose off compounding petition filed, if any. 4.16 The deductor can at any stage of the proceedings, file a compounding application before the Pr. Chief Commissioner of Income tax /Chief Commissioner of Income tax. Instruction vide F. No. 285/35/2013-IT(Inv. V)/108 dt. 23.12.2014 should be followed in dealing with the compounding application. If a person who has committed an offence (s) under S.276B/276BB files an application for compounding of the said offence(s), the application should be processed expeditiously and disposed of within the time frame prescribed in the Central Action Plan for the FY. During the pendency of the compounding application, the CIT(TDS) shall keep the prosecution proposal pending. As soon as an application for compounding is moved, an entry should be made in TRACES. Entries of subsequent action on compounding application should also be made on TRACES. 4.17 The CIT(TDS) after according san....
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...., Range Head & the AO (TDS) shall make necessary entries in TRACES at various stages of processing prosecution. For procedural aspects of handling cases on TRACES, tutorials are also available on TRACES which may be referred to by all the authorities. 4.22 Similarly, If any such prosecutable offence come to light during the proceedings before the appellate authorities, revision authorities or any other proceedings, same shall also be treated at par with other prosecutable cases as enumerated under Chapter-XVII of the Income Tax Act,1961 and action shall be initiated in accordance with the procedure laid down in this SOP. 5. TIME FRAME 5.1 The time period for the entire process from identification to passing of order u/s 279(1) /279(2) is summarized as under: S. NO. Section Time limit for submitting proposal for sanction u/s 279(1) Time limit for according Sanction u/s 279(1) Time limit for filing prosecution complaint 1. 276B. Preferably within 90 days from issue of SCN by AO TDS[CIT(TDS) may extend the timeline for submission of prosecution proposal considering the facts and circumstances of each case](Refer Para 4.13) Preferably within 90 days ....
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....osecution should not be accorded. (vi) Seeking opinion of the Prosecution of Legal Counsel, if need is felt in view of the complexity of facts involved and ensuring that the opinion is obtained from the Counsel within 30 days. (vii) Examining the replies to the SCN, other material and the opinion of the legal Counsel where ever it is obtained, and on satisfaction that it is a fit case for prosecution, passing speaking order u/s 279(1) in the case of defaulter(s) for each assessment year separately. In case he is satisfied with the submissions of the deductor, he shall drop the proceedings after recording the reasons in writing with an intimation to the deductor. (viii) Completing the process and passing an order u/s 279(1) sanctioning prosecution or dropping the show cause notice expeditiously, preferably within 90 days of receipt of the proposal from the AO(TDS) through Range Head. (ix) Ensuring an entry for the following events in TRACES: (a) On issue of show cause notice to the accused/ co-accused. (b) Reference of legal opinion sought/ received. (c) On passing of sanction order u/s 279/(1) or on dropping of the proc....
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....dentified by CPC(TDS) or otherwise and collect information in accordance with the procedure laid down in this SOP. (iv) Sending the proposal prepared in Form 'T' on TRACES along with other details/ documents to the CIT(TDS) through proper channel. (v) Making entries for all the events associated with prosecution and compounding on TRACES. (vi) Timely submissions of reports on compounding applications for disposal of the applications. (vii) Submission of reports along with records to the CIT(TDS) through proper channel in all cases where notice is issued by AO along with comments either recommending or dropping prosecution. 6.5. Role of CIT (CPC-TDS), Ghaziabad (i) Providing analysis of the data with respect to TDS statements filed during the previous F.Y. to the Director, (Inv-V), CBDT immediately after 15th July of the relevant Financial Year. (ii) Generating list of TDS/TCS defaulters along with their statement of defaults for mandatory processing of cases for prosecution based on the parameters approved by the member (Investigation), CBDT and make it available to AO (TDS) as well as the CIT (TDS) in the second quarter of e....
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....DDT payable Date of declaration/ payment/ distribution of dividend, whichever is earlier Due date for payment to the credit of Govt. Actual date of payment To Govt. Period of default 7. Details of late payment interest (LPI): Form No. & quarter Amount of LPI Chargeable u/s 201(1A) Amount of LPI paid before filling of statement LPI demand generated in order u/s. 201(1A) or 200 Date of payment of Demand Outstanding amount of LPI 8. Details of late filing fee u/s 234E: Form No.& quarter Amount of late filling fee levied Amount of late fee paid Date of payment of late fee Whether appeal filed Status of appeal 9. Details of penalty u/s 221(1) of the I.T. Act for relevant A.Y. If imposed: Date of order u/s 221(1) of I.T Act Amount of penalty Levied Amount of penalty paid Date of appeal before CIT (A), If filed Status of further appeal,if any 10. Please specify the other section of Income ....
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.... filling up this Form : (i) No column of the Form should be left blank. If the column is not applicable, the same shall be clearly mentioned. (ii) At Sr. No. 2 the details of the co-accused to be filled in on the basis of details gathered as per procedure laid down in Annexure-2 of SOP. (iii) At Sr. No. 5, the details of only those quarters shall be given in which defaults of delayed payments are there. (iv) At Sr. No. 6(a), details of defaults generated by CPC should be enclosed if they are not contested by the defaulter. If contested, the details shall be prepared on the basis of verification of documents submitted by the defaulter. (v) For preparing details in Sr. No. 13(e), the minutes book, signatures on audit report, balance sheet, etc., may also be relevant along with other material, as they throw light on role of various directors/partners, etc in controlling the business and their responsibility in accordance with sec 278B of the I.T. Act. (vi) The original copies of prosecution documents mentioned in Sr. No. 13(e) should be kept safely in personal custody of the AO and a proper handing over such documents should be done at the time of change of incumbent....
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....he case of Madhumilan Syntex Ltd. Vs. Union of India (2007), 290 ITR 199(SC) has also held that from the statutory provisions, it is clear that to hold a person responsible under the Act, it must be shown that he/she is a 'principal officer' under section 2(35) of the Act or is "incharge of" and 'responsible for' the business of the company or firm. Thus, the persons who are held Principal Officer u/s 2(35) of the I.T. Act, 1961 or the persons "in charge of" and "responsible" for business of the company or the Firm are also liable to prosecution besides the person (s) with whose consent, connivance or because of whose neglect the offence has been committed. The AO, therefore, should keep these provisions in mind while collecting the details and evidences and preparation of prosecution proposals while proposing the names of the accused and co-accused (s). 6. The following details may therefore be collected in the case of Companies through the Show Cause Notice to the defaulter and/or through other sources: (i) Details of the Company: Address (present) Other address(s), if any PAN Number Date of incorporation Contact numbers (ii) Details of Direct....