Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram
Article Section

Home Articles Income Tax Mr. M. GOVINDARAJAN Experts This

FAILURE TO FILE STATEMENT OF TAX DEDUCTED AT SOURCE WITHIN PRESCRIBED TIME

Submit New Article
FAILURE TO FILE STATEMENT OF TAX DEDUCTED AT SOURCE WITHIN PRESCRIBED TIME
Mr. M. GOVINDARAJAN By: Mr. M. GOVINDARAJAN
September 3, 2016
All Articles by: Mr. M. GOVINDARAJAN       View Profile
  • Contents

Payment of TDS recovered

Section 200 (1) of the Income Tax Act, 1961 (‘Act’ for short) provides that any person deducting any sum in accordance with the foregoing provisions of Chapter XVII shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs.

Filing of statement for TDS deducted

Section 200 (3) of the Act provides that any  person deducting any sum on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in sub-section (1A) of section 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time, prepare such statements for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorized by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed.

Rule 31A (2) prescribes the time limit for filing the said statement.  The statements are to be filed in each quarter as detailed below-

  • For period from April to June – 31st July of that financial year;
  • For period from July to September – 31st October of that financial year;
  • For period from October to December – 31st January of that financial year;
  • For period from January to March – 31st May of the following financial year.

Rectification of statement

The proviso to Section 200 (3) provides that the person may also deliver to the prescribed authority a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be specified by the authority.

Penalty for non filing of TDS statement

Section 272A(2)(k) of the Act provides that if any person fails to deliver or cause to be delivered a copy of the statement within the time specified in Section 200 (3), then penalty of ₹ 100 shall be paid for every day during which the failure continues provided that the amount of penalty for failures in relation to a statement made under  Section 200(3) shall not exceed the amount  of tax deductible or collectible as the case may be.  Section 272A(4) provides  that no order under this section shall be passed by any income tax authority unless the person on whom the penalty is proposed to be imposed is given an opportunity of being heard in the matter by such authority.

Scope for filing statements

The most important objective of the tax deducted at source provisions is to extend the reach of the income tax department so as to make tax administration more effective and efficient and to reduce opportunities for tax evasion so as to bring equity in the system.  To achieve this objective, person/s in each organization, who is responsible to make certain payments required to deduct tax at source on or before making such payment and furnish e-TDS quarterly statement online before the NSDL on quarterly basis.  Such provisions help in achieving the above stated objective through non intrusive method and thus improve tax compliance and collection.  Deduction of tax at source provisions not only increases the reach of the Department but also leads to creation of an audit trail that can be utilized as an effective tool against detection of tax evasion.   Hence, in case of non compliance of tax deducted at source provisions, stringent action is incorporated in the income tax law.   Penal provisions are part of tax laws and they differentiate between those who pay the taxes and adhere to tax laws as against those who do not.  Thus, it not only brings equity in the tax system but also as an effective deterrent against possible tax evasion.

In ‘Rashmikant Kundalia V. Union of India’ – 2015 (2) TMI 412 - BOMBAY HIGH COURT the High Court held that it is not in dispute that as per the existing provisions, a person responsible for deduction of tax is required to furnish periodical quarterly statements containing the details of deduction of tax made during the quarter, by the prescribed due date.  Undoubtedly, delay in furnishing of tax deducted at source returns/statements has a cascading effect.  Under the Income Tax Act, there is an obligation on the Income Tax Department to process the income tax returns within the specified period from the date of filing.  The Department cannot accurately process the return on whose behalf tax has been deducted until information of such deduction is furnished by the deductor within the prescribed time.  The timely processing of returns is the bedrock of an efficient tax administration system.   If the income tax returns, especially having refund claims, are not processed in a timely manner, then-

  • delay occurs in the granting of credit of tax deducted at source to the person on whose behalf tax is deducted and consequently leads to delay in issuing refunds to the deductee, or raising of infructuous demands against the deductee;
  • the confidence of a general taxpayer on the tax administration is eroded;
  • the late payment of refund affects the Government financially as the Government has to pay interest for delay in granting the refunds; and
  • the delay in receipt of refunds results into a cash flow crunch, especially for business entities.

Latest case law

In ‘Raja Harpal Singh Inter College V. Principal Commissioner of Income Tax’ – 2016 (5) TMI 1109 - ALLAHABAD HIGH COURT the Assessing Officer, on going through the records of the appellant detected that the appellant had failed to furnish e-TDS quarterly statements online for the assessment years from 2008 – 09 to 2012 – 13 and had consequently violated the provisions of Section 200(3) of the Act.  The Assessing Officer issued notices to the appellant.  Despite the issue of notice the appellant had neither appeared on the date of hearing nor furnished any explanation.  A final opportunity was provided in which it was indicated that the penalty order would be passed on the basis of the materials available on record by treating that the appellant accepted the default and that it had no explanation to offer.   The appellant engaged an Advocate.  The Advocate appeared on the hearing but did not furnish any reasonable cause for not filing e-TDS statements or any explanation for waiver of penalty.  He sought for an adjournment which was granted.  Even on the adjourned date no reply was submitted.   Later the appellant submitted a letter, dated 16.01.2013 in which it was mentioned that the regular principal had joined the college on 21.01.2010 and he was collecting the necessary papers and that there was no intention to violate any provision of law.  The appellant sought for one month time for filing e-TDS statements.  The appellant however did not furnish any explanation for the delay in filing the statements.  The appellant filed e-TDS statements on 08.02.2013 and 09.02.2013.  The Assessing Officer found that no reasonable cause had been shown by the appellant for not filing the e-TDS statements within the time limit prescribed and as it was established that the deductor had violated the provisions of Section 200(3) of the Act, the appellant was treated as an ‘assessee in default’ and a penalty under Section 272 A(2)(k) of the Act at the rate of ₹ 100 per day was imposed.

Against the order of Assessing Officer, the appellant filed appeal before Commissioner (Appeals).  The Commissioner (Appeals) noted that there was no regular incumbent holding the charge of Principal since 30.03.2006 until the new Principal was appointed with effect from 25.01.2010.  The Commissioner (Appeals) considered that the appellant was prevented by sufficient cause to file the e-TDS statements relating to the financial years 2007 – 08, 2008, 09 and 2009 -10.  Even after the appointment of regular Principal, the appellant failed to file e-TDS statements.  The Commissioner (Appeals) modified the order of the Assessing Officer that the penalty shall be imposed with effect from 01.04.2010 to the date of filing return.  The penalty for the financial years 2010-11 and 2011 -12 is to be computed from the due date of filing to the date of returns were actually filed.

Against this order the appellant filed appeal before the Tribunal.  The Tribunal dismissed the appeal upholding the order of Commissioner (Appeals), who reduced the penalty.  Against which the appellant filed the present appeal before the High Court.   Before the High Court, the appellant submitted the following contentions-

  • for imposing penalty, adequate opportunity was required to be provided as is contemplated under Section 272A(4) of the Act;
  • it cannot be said that opportunity was provided to the appellant to furnish an explanation since no reply was sent to the college in response to the application dated 16.01.2013;
  • even though no explanation has been furnished to the Assessing Authority sufficient explanation had been offered before the first appellate authority for not furnishing e-TDS statements in time;
  • the explanation has not been considered in its correct perspective, no penalty could have been imposed upon the assessee;
  • non filing of the e-TDS statements has not resulted in any loss to the Revenue and so no penalty could have been imposed.

The Revenue submitted the following before the High Court-

  • questions of law do no arise for consideration in this appeal as the Tribunal has on a careful appreciation of facts, dismissed the appeals;
  • the penalty was correctly imposed on the assessee as the e-TDS statements were not filed in time and no satisfactory explanation was offered.

The High Court did not accept the contention of the appellant that no opportunity was granted to him.  Even if no order was passed on the application, the appellant was obliged to file the statement and offer an explanation but even after the expiry of the period prayed for in the application, the appellant did not furnish any explanation for the delay in filing e-TDS statements.    The assessing authority, therefore, in the absence of any explanation having  been offered by the appellant, levied penalty under Section 272A(2)(k) of the Act.  The appellant only offered explanation before the Commissioner (Appeals), who reduced the penalty.    The High Court further held that it could not also be urged by the appellant that no penalty could have been imposed for non filing of the e-TDS statements in time as it has not resulted in any loss to the Revenue since the Department cannot accurately process the returns on whose behalf tax has been deducted until information of such deduction is furnished by the deductor within the prescribed time limit and the timely processing of returns is the bedrock of an efficient tax administrative system.  The High   Court held that substantial questions of law that had been framed in this appeal do not arise for consideration and dismissed the appeal.

 

By: Mr. M. GOVINDARAJAN - September 3, 2016

 

Discussions to this article

 

Sir, nice article.

The importance of filing TDS Statements should be understood by the assessee. It not only invites penalty to the assessee, but also is injustice to all those deductees whose tax being deducted by the assessee. Thus administrative difficulties should not be considered to be reason for such delay. There are consultants, advisor who does such work on behalf of assessee. Their assistance should be sought keeping in mind that non-filing of TDS return is actually deny credit to deductees in time. Thanks.

Mr. M. GOVINDARAJAN By: Ganeshan Kalyani
Dated: September 4, 2016

 

 

Quick Updates:Latest Updates