TaxTMI 
TaxTMI 
Revised Standard Operating Procedure (SOP) for Prosecution in cases of TDS/TCS default
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..... 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 may be necessary in such cases. It has been clarified in the guidelines that mandatory pro....
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....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 to the details of defaults, the AO shall examine the relevant documents submitted by the deductor and prepare a statement ....
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....resumed 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) through the Range Head. He may also refer any other case found fit for prosecution to the CIT(TDS), keeping in view CBDT revised guidelines issued in F. No.285/90/2013-IT (Inv.V)/384 dated 18.10.2016. The AO sha....
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....e 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 Deductees due to financial constraints, court order, statutory obligations under various laws including under the Companies Act, 1956, pending legal proceedings, etc. iv) Cases of genuine financial hardship leading to closure of business. v) Sudden demise of ....
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....ductor 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 sanction u/s 279(1) shall send back the record to the authority seeking sanction along with the sanction order in duplicate, one for filing in the Court with complaint and other for the record. 4.18 If the defaulter is a government servant, then as required u/s 197 of the Code of Criminal Procedure, 1973 (Cr.PC), the AO should ....
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....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 of receipt of proposal from the AO(TDS) through Range Head (excluding the additional time taken to dispose off compounding application filed, if any) [Refer Para 4.15(g)] Preferably within 30 days of receiving approval u/s 279(1) (Refer Para 4.19) 2. 276BB -do- -do- -do- 5.2 The time lines given above should be followed as far as possible. However, any deviation from the time lines shall not render prosecution proceedin....
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....y. 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 proceedings as the case may be. (d) On receipt of compounding application/report on the compounding application. (e) On filing of prosecution complaint before the competent court. (f) On receipt of order of competent Court. (g) On appeal, if any appeal is filed by the accused or by the Department. (x) Ensuring that the guidelines for compounding of offences under Direct Tax Laws issued vide F.No 285/35/2013-IT (Inv.V)/108 dated 23.12.2014 are adhered to. (xi) Providing feedback regarding quality of cases selected for mandatory processing in....
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....iding 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 every F.Y. preferably by 31st July of the relevant Financial Year. (iii) Providing monthly disposal status of prosecution and compounding of TDS/TCS defaults to Pr. CCIT/CCIT (TDS), CIT(TDS), Directorate of TDS, Member (Revenue), and Member (Inv.). ANNEXURE-1 FORM-T Proforma for submitting proposal for prosecution u/s. 276B, 277 & 278 of the I.T. Act,1961 1. Details of deductor (accused): (i) Name (ii) TAN (iii) Address (iv) PAN (v) Status 2. Details of proposed co-accused (if any) u/s 278B of the I.T. Act i.e. partners, directors, karta, principal officer etc who are proposed to be prosecuted, if the deductor is firm, company, HUF, AOP or BOI and DDO in the case of Government deductor. Name of the direc....
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....nt 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 Tax Act and other laws such as IPC, which are also proposed for simultaneous prosecution. 11. Whether the provisions of sec. 278A are applicable i.e. whether the defaulter has been convicted of an offence u/s 276B of the I.T Act earlier? 12. Details of compounding applications filed, if any: (a) Whether compounding application for this year or any other year was filled : yes/ No (b) If yes: Sr. No The year(s) for which compounding application(s) were filed status 13. Detailed note justifying the proposal for prosecution: (a) The details of defaults in terms of frequency and quantum. (b) Present state of demand and short note on efforts for recovery. Status (c) Brief explanation for the defaults submitted by the accused and observation of AO on factual accuracy of the same. (d) The reasons for proposing name of different co-accused at Sr. No .2, If any, for prosecution. (e) The details of prosecution documents on the basis of which offe....
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....f incumbent. (vii) This proforma shall also be used for submitting prosecution proposals u/s 276BB with relevant changes as applicable. ANNEXURE -2 Procedure for launching prosecution in the case of a Company/Firm/AOP/BOI 1. The Companies/Firm/AOP/BOI, etc. are artificial entities. Though such entities can also be convicted, but they cannot be imprisoned. Moreover, it is always the persons in control of the business who are responsible for commission and omission of various acts. It is, therefore, necessary to carefully identify the persons who are responsible for offence committed by the Company/Firm/AOP/BOI etc., so that they also can be prosecuted. 2. In the case of Company/Firm/AOP/BOI, provisions of Sec. 278B are relevant in deciding the accused and co-accused. As per Sec. 278B(1) of the I.T. Act, 1961 "where any offence is committed by a Company, every person who, at the time the offence was committed, was in charge of, and was responsible to the Company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly, unless he proves that the offence ....
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....h PAN Residential address Mobile Numbers Whether Active or not Responsibilities handled * Date of appointment In support copies of relevant resolution or other relevant documents can be sought. (iii) Details of person responsible for payment on which TDS is deducted (From 1st April of relevant F.Y. till date): Name and designation Date of Birth PAN Residential address Mobile Number Designation Other Responsibilities handled ** Date of appointment (**) In support copies of relevant resolution or other relevant documents can be sought. These persons are prima facie covered under section 278B of the I.T. Act. These persons are also prima facie responsible and liable for prosecution under section 278B of the I.T. Act, unless they prove that the offence was committed without their knowledge or that they exercised all due diligence to prevent commission of such offence. (iv) Details of every person (including Directors) who was in charge of and was responsible to the company for conduct of business of the company (From 1st April of relevant F.Y. till date): Name and designation Date of Birth PAN Residential address Mobile Number Designation Responsibilities handl....