Streamlining of procedure for identification and processing of cases for prosecution under Sections 276B & 276BB of the Income Tax Act 1961, and related issues - Income Tax - F. No. 285/90/2013-IT(Inv.-V)/384

F. No. 285/90/2013-IT(Inv.-V)/384 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes E-2, ARA Centre, Jhandewalan Extn. Dated 18th Oct. 2016 To All Pr. CCIT(CCA)/CCIT/CCIT(TDS), all DGIT(lnv.) and all CCIT(Central) Madam/Sir, Sub : Streamlining of procedure for identification and processing of cases for prosecution under Sections 276B 276BB of the Income Tax Act 1961, and related issues - reg. Guidelines issued vide F. No. 285/90/2008-IT(lnv.-I)/05 dated 24.04.2008 contains the procedure for identification and processing of potential prosecution cases for various categories of offences. Paragraph 3.1 (i) and (ii) of the said guidelines pertain to identification of cases for processing relating to the offences under Sections 276B and 276BB of the Income Tax Act, 1961 (the Act) respectively for failure to pay tax deducted at source (TDS) or tax collected at source (TCS), as the case may be, to the credit of Central Government. These Paragraphs were modified vide Guidelines issued vide F. No. 285/90/2013-IT(Inv.) dated 07.02.2013. 2. It has been decided to broaden the selection criteria when quantum based to a more scientific and risk based approach which factors in the compliance behavior of the Deductors. In accordance with this, the following guidelines are issued for identification of potential prosecution cases forthwith, in supersession of earlier guidelines of the Board on the subject, including those contained in F No. 285/90/2013-IT(lnv.) dated 07.02.2013: (i) Offences u/s 276B: Failure to pay tax deducted at source to the credit of Central Government by the due date A list of cases of defaulters shall be generated periodically by the DGIT(Systems) based on criteria approved by the Member(lnv.) CBDT which shall be processed for prosecution in addition to the other steps including recovery as may be necessary in such cases. The authority for processing the cases for prosecution under this section shall be the officer having jurisdiction over the TDS cases. These cases hove to be mandatorily processed for prosecution. Mandatory processing does not mean mandatory filing of prosecution. It requires due application of mind of the CIT concerned on all relevant facts and arriving at a judicious decision with regard to action u/s 276B. (ii) Offences u/s 276BB: Failure to pay tax collected at source to the credit of Central Government The guidelines for identification and processing of cases under this section would be the same as for offences u/s 276B of the Act. 3. It is reiterated that in addition to the above list of cases defaulters generated by DGIT(Systems), the CIT(TDS) may consider any other case for prosecution based on information from sources such as survey/spot verification/grievances received. The CIT(TDS) may also select any other case, based on facts and circumstances of that case, under intimation to the Pr.CCIT/CClT(TDS) along with reasons for selecting the case. If any default is detected during search, the processing ADIT/DDIT shall inform the AO having jurisdiction over TDS at the earliest. 4. Where a case is selected for processing under Sections 276B or 276BB of the Act, as the case may be, for a particular year, the defaults for other years in respect of such case, if any, may also be considered for processing for prosecution irrespective of whether or not the case was previously considered for processing for prosecution. 5. Each CIT(TDS) would ensure fair distribution of work among officers of his charge, as far as possible, by assigning or reassigning the jurisdiction of the cases. 6. Another set of guidelines were issued vide F. No. 285/90/2013 IT(lnv.V)/112 dated 27.12.2014 on the subject Addressing genuine concerns of the assessee while processing cases for TDS/TCS related prosecution under Direct Tax Laws . Doubts have been raised regarding interpretation of words before detection used in para 4.1 of the said guidelines. It has been decided to supersede the above guidelines with the following: (i) Section 278AA of the Act provides that for the purposes of section 276B, no person shall be punishable for any failure referred to in the said provision if he proves that there was reasonable clues for such failure. The fact that the Deductor has remitted the tax before filing of TDS Statement and interest before receipt of notice from the AO (TDS) for prosecution may be taken note of amongst other submission of the defaulter while considering his case for prosecution. While processing the cases for prosecution u/s 276B/276BB, a fair and judicious view should be taken in view of the provision of section 278 AA before taking a decision for filing of complaints. (ii) If a person who has committed an offence(s) under section 276B/276BB files application for compounding of the said offence(s), the compounding application should be processed on priority and mandatorily disposed off within the time frame prescribed by the CAP guidelines. 7. The Pr.CCslT/CCslT and DGslT are requested to circulate the amended guidelines among all officers of their region for strict compliance. Yours faithfully, (Mamta Bansal) Director, lnv-V, CBDT New Delhi