Thousands of taxpayers get notices for minor defaults
I-T Officials Now Have Target For Serving Notices
Lubna.Kably@timesgroup.com
Mumbai:20.01.2019
Mridula stood shivering outside a magistrate’s court in Mumbai. It wasn’t the drop in temperature, but the thought that she could land in jail owing to a rigorous Income Tax provision, which did not look into the severity of her tax default, that led her to draw her shawl more tightly around her. She had defaulted by 30-odd days on depositing TDS collected from her employees’ salary.
Her two-year-old content company, which manages websites of several small business entities, has six full-time employees and deals with freelancers when there is a spike in work. Mridula was shocked to get a notice from the I-T department saying: ‘To show-cause why prosecution under section 276B, read with section 278B of the I-T Act, should not be launched.’ The sections deal with failure to deposit TDS with government, and the imprisonment ranges from three months to a maximum of seven years.
According to Mridula (name and some details changed to protect identity), only four of her employees earned salaries above the exemption limit of ₹2.5 lakh, and the delayed TDS (an insignificant sum) had been deposited by her with the government within the financial year.
In addition, details of chairman, managing director and directors were sought.
Meant primarily to tackle the menace of black money, I-T officials have lately been using the punitive provisions widely. TOI has examined many such notices issued over the past several months. According to a collation of RTI replies, the number of notices served to taxpayers in 2018 runs into thousands.
To shore up revenue, Sushil Chandra, chairman, Central Board of Direct Taxes (CBDT), in a recent letter to his cadres (reported by TOI on January 6) called for filing of prosecution against persons wilfully evading payment of outstanding taxes and for ‘substantial’ defaults in remitting TDS to government. CBDT’s action plan has also given targets to I-T officials for serving prosecution notices for TDS defaults.
Even salaried employees have been served notices for delay or non-filing of I-T returns, states K Shivaram, senior advocate and past president of All India Federation of Tax Practitioners (AIFTP).
‘Taxpayers given very short period to respond’
A meet Patel, a CA and chairperson of the taxation committee at the Bombay Chartered Accountants’ Society (BCAS), states, “For the smallest of defaults like late payment of TDS, late payment of self-assessment tax, delayed or non-filing of tax returns (including TDS returns), taxpayers are issued showcause notices asking why prosecution proceedings should not be launched. Even a mere nonfiling of appeal against any addition to income or disallowance of expenditure made during assessment is a ground for launching prosecution. Further, taxpayers are given a very short period within which to respond.”
Recently, BCAS, IMC Chamber of Commerce and Industry, and a few other CA associations across India filed a representation with revenue secretary Ajay Bhushan Pandey protesting against the use of prosecution provisions in a mechanical manner, with minor mistakes treated as major offences at par with large-scale evasion).
They have said these actions vitiate the promise of a non-adversarial tax regime. Even as many other steps (such as e-assessment or speedy refunds) have been taken to benefit taxpayers, the spate of prosecution notices sends a bad signal, say tax experts.
An I-T official explains the taxpayer must promptly respond to any notice, explaining reasons for default. If there is a ‘reasonable cause,’ say, for failure to deposit TDS, Section 278AA of the Act provides punishment shall not be imposed.
The official agrees that the term ‘reasonable cause’ is not defined, but instances such as illness of self or close kin and financial difficulties, if supported by evidence, could be accepted. In several instances, the I-T commissioner grants sanction totheI-Tofficer tolaunch prosecution proceedings and the officer files a complaint with the small causes court.
“If the ‘defaulting’ taxpayer is a company, proceedings are launched on the company and all directors, including foreign directors, professional (independent) directors and the principal officer,” says Patel.
“Once prosecution is launched, taxpayers have to appear from time to time before the magistrate court. It takes years for matters to reach the final hearing stage. Magistrate courts are not able to deal with a number of matters filed indiscriminately. In many cases, penalty has been deleted by the I-T appellate tribunal or by high courts, yet the matter is not discharged,” states K Shivaram.
Full report on www.toi.in
I-T Officials Now Have Target For Serving Notices
Lubna.Kably@timesgroup.com
Mumbai:20.01.2019
Mridula stood shivering outside a magistrate’s court in Mumbai. It wasn’t the drop in temperature, but the thought that she could land in jail owing to a rigorous Income Tax provision, which did not look into the severity of her tax default, that led her to draw her shawl more tightly around her. She had defaulted by 30-odd days on depositing TDS collected from her employees’ salary.
Her two-year-old content company, which manages websites of several small business entities, has six full-time employees and deals with freelancers when there is a spike in work. Mridula was shocked to get a notice from the I-T department saying: ‘To show-cause why prosecution under section 276B, read with section 278B of the I-T Act, should not be launched.’ The sections deal with failure to deposit TDS with government, and the imprisonment ranges from three months to a maximum of seven years.
According to Mridula (name and some details changed to protect identity), only four of her employees earned salaries above the exemption limit of ₹2.5 lakh, and the delayed TDS (an insignificant sum) had been deposited by her with the government within the financial year.
In addition, details of chairman, managing director and directors were sought.
Meant primarily to tackle the menace of black money, I-T officials have lately been using the punitive provisions widely. TOI has examined many such notices issued over the past several months. According to a collation of RTI replies, the number of notices served to taxpayers in 2018 runs into thousands.
To shore up revenue, Sushil Chandra, chairman, Central Board of Direct Taxes (CBDT), in a recent letter to his cadres (reported by TOI on January 6) called for filing of prosecution against persons wilfully evading payment of outstanding taxes and for ‘substantial’ defaults in remitting TDS to government. CBDT’s action plan has also given targets to I-T officials for serving prosecution notices for TDS defaults.
Even salaried employees have been served notices for delay or non-filing of I-T returns, states K Shivaram, senior advocate and past president of All India Federation of Tax Practitioners (AIFTP).
‘Taxpayers given very short period to respond’
A meet Patel, a CA and chairperson of the taxation committee at the Bombay Chartered Accountants’ Society (BCAS), states, “For the smallest of defaults like late payment of TDS, late payment of self-assessment tax, delayed or non-filing of tax returns (including TDS returns), taxpayers are issued showcause notices asking why prosecution proceedings should not be launched. Even a mere nonfiling of appeal against any addition to income or disallowance of expenditure made during assessment is a ground for launching prosecution. Further, taxpayers are given a very short period within which to respond.”
Recently, BCAS, IMC Chamber of Commerce and Industry, and a few other CA associations across India filed a representation with revenue secretary Ajay Bhushan Pandey protesting against the use of prosecution provisions in a mechanical manner, with minor mistakes treated as major offences at par with large-scale evasion).
They have said these actions vitiate the promise of a non-adversarial tax regime. Even as many other steps (such as e-assessment or speedy refunds) have been taken to benefit taxpayers, the spate of prosecution notices sends a bad signal, say tax experts.
An I-T official explains the taxpayer must promptly respond to any notice, explaining reasons for default. If there is a ‘reasonable cause,’ say, for failure to deposit TDS, Section 278AA of the Act provides punishment shall not be imposed.
The official agrees that the term ‘reasonable cause’ is not defined, but instances such as illness of self or close kin and financial difficulties, if supported by evidence, could be accepted. In several instances, the I-T commissioner grants sanction totheI-Tofficer tolaunch prosecution proceedings and the officer files a complaint with the small causes court.
“If the ‘defaulting’ taxpayer is a company, proceedings are launched on the company and all directors, including foreign directors, professional (independent) directors and the principal officer,” says Patel.
“Once prosecution is launched, taxpayers have to appear from time to time before the magistrate court. It takes years for matters to reach the final hearing stage. Magistrate courts are not able to deal with a number of matters filed indiscriminately. In many cases, penalty has been deleted by the I-T appellate tribunal or by high courts, yet the matter is not discharged,” states K Shivaram.
Full report on www.toi.in
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