Tax offences, failure to pay TDS up to Rs 25 lakh not be prosecuted by taxman

Shishir Sinha New Delhi | Updated on September 12, 2019

The new guidelines also defines the `exceptional circumstances' for the prosecution.


Income Tax Department has come out with a new set of guidelines for identifying and processing cases for prosecution under direct tax laws. The guidelines make it clear that cases involving tax due to less than ₹ 25 lakhs or delay up to 60 days in depositing tax will not be taken up for prosecution barring exceptional circumstances.

The guidelines cover offences under section 276B, 276 BB, 276C (1) and 276 CC of the Income Tax Act 1961. Section 276B talks about offences related to failure to pay tax to the credit of Central Government. Section 276 BB deals with failure to pay the tax collected at source. Section 276C (1) prescribes action in case of wilful attempt to evade tax while section 276CC deals with failure to furnish returns of income.

Tax Department has mentioned that the circular will come into effect with immediate effect and will apply to all the pending cases where the complaint is yet to be filed. It has prescribed a system of collegium comprising of two senior officers for approval in exceptional situations. These two officials will be of the rank of Chief Commissioner of Income Tax (CCIT) or Director General (DGIT). “For examination of facts and circumstances, and to ensure that only deserving cases below the threshold limit as prescribed get selected for filing of prosecution complaint, such sanctioning authority shall seek the prior approval of a collegium of two CCIT/DGIT rank officers, including the CCIT/DGIT in whose jurisdiction the case lies,” the circular said.

It also mentioned that if there is disagreement between two officials, then the matter will be referred to the Principal CCIT for appeal whose decision will be final. If the same officer is part of the collegium, then his decision will be final.

Exceptional Cases

When an assessee fails to pay tax to the credit of Central Government and amount involved is less than ₹ 25 lakhs or delay in tax collected is up to 60 days, then in normal circumstance, such cases will not be taken up for prosecution. However, if the assessee is a habitual offender, then such case can be taken up for prosecution with approval of collegium. The same approach to be adopted if there is a failure to pay the tax collected at sources.

Cases, where the amount sought to be evaded or tax on under-reported income is up to ₹ 25 lakh, will not be taken for prosecution except with the previous administrative approval of the collegium. Also, the prosecution will be launched only after the confirmation of the order imposing a penalty by the Income Tax Appellate Tribunal. Cases related with a failure to furnish Income Tax Returns where the amount of tax, which would have been evaded if the failure had not been discovered will not be processed for prosecution except with the previous administrative approval of the collegium.

If prosecution ends in declaring the assessee guilty, then he/she be punishable with rigorous imprisonment for a period of which shall not be less than 3 months but which may extend to 7 years and with fine. Amount of fine could go up to 300 per cent of the tax payable plus tax dues.

Published on September 12, 2019

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