| Question And Answer | |
|---|---|
| Subject: | PROSECUTION NOTICE UNDER TDS |
| Category: | Income-Tax |
| Querist: | KARAN SHAH |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Prosecution, TDS |
| Date: | July 12, 2022 |
A COMPANY HAD DEDUCTED TDS OF RS. 50 LACS WHICH WAS PAID LATE BY 7 MONTHS DUE TO COVID 19 AND FINANCIAL CRISIS. THE SAID TDS WAS PAID LATE WITH APPLICABLE INTEREST AND LATE FEES. ALSO THE TAX WITH INTEREST AND RETURN WITH LATE FEES WAS FILED VOLUNTARILY BEFORE RECEIVING ANY NOTICE.
NOW AFTER 2 YEARS, THE DIRECTOR HAS RECEIVED NOTICE FOR INIATIATING PROSECUTION AS THE COMPANY HAD COMMITTED DEFAULT AND IS A PERSON IN DEFAULT.
WHAT REPLY SHOULD BE FILED TO AVOID PROSECUTION?
As we understand, the assessee has deposited the TDS with interest before issuance of any notice from the Department.
The Hon’ble Supreme Court in the case of Madhumilan Syntex Ltd. v. UOI (2007 ) 290 ITR 199 (SC) held that prosecution proceedings are valid if TDS is not paid to the Central Government within stipulated period and a delayed payment has no merit
Albeit, section 278AA of the Act provides that no person shall be punishable for any failure referred to in the said provisions if he proves that there was reasonable cause for such failure.
In the case of Sonali Auto Private Limited v. State of Bihar [2017] 84 taxmann.com 286 (Patna) (HC) where assessee deducted TDS but same was not deposited within specified time due to oversight on part of its accountant was held to be valid.
Therefore, the assessee has to justify and demonstrate why there was a reasonable cause for delayed deposit of TDS in the Government exchequer.
The assessee may also consider option of applying for compounding of offences .