Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

[Section 201]- Consequences of failure to Deduct TDS or pay TDS

[Section 201]- Consequences of failure to Deduct TDS or pay TDS
[Section 201]- Consequences of failure to Deduct TDS or pay TDS

(1)  [Section 201(1)]- Assessee to be deemed as assessee in default

Where any person, including the principal officer of a company.—

(a)        who is required to deduct any sum in accordance with the provisions of this Act; or

(b)        referred to in section 192(IA), being an employer.

—           does not deduct, or

—           does not pay, or

—           after so deducting fails to pay,

the whole or any part of the tax, as required by or under this Act, then, such person, shall,
without prejudice to any other consequences which he may incur, be deemed to be an
assessee in default in respect of such tax and hence shall be liable to penalty under section
221.

(i)    The paver shall be deemed to be in default only if the tax is not paid by the payee direct

For the removal of doubts, it is hereby declared that if any person, including the principal officer of a company,—

(a)     who is required to deduct any sum in accordance with the provisions of this Act; or

(b)          referred to in section 192(1A), being an employer,

does not deduct, or after so deducting fails to pay, or does not pay, the whole or any part of the tax, as required by or under this Act, and where the assessee has also failed to pay such tax directly, then, such person shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default within the meaning of section 201(1), in respect of such tax.

(ii)   circumstances where Deductor shall not be treated as assessee deemed to be in default [Proviso to section 201(1)]

Any person, including the Principal Officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee—

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(i)         has furnished his return of income under section 139;

(ii)        has taken into account such sum for computing income in such return of income; and

(iii)    has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:

Form for furnishing certificate of accountant under the first proviso to section 201(1) [Rule 31ACB]

As per rule 31ACB(1), the certificate from an accountant in Form 26A shall be furnished to the Principal Director General or Director General of Income-tax (Systems) or the person authorised by the Principal Director General or Director General of Income-tax (Systems) in accordance with the procedures, formats and standards specified under rule 31 ACB( 2), and verified in accordance with the procedures, formats and standards specified under rule 31 ACB(2).

As per rule 31ACB(2), the Principal Director General or Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of the Form 26A and be responsible for the day-to-day administration in relation to furnishing and verification of the Form 26A in the manner so specified.

No penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person has without good and sufficient reasons failed to deduct and pay the tax.

(2) [Section 201(3)]- Time limit for passing an order U/s 201 holding a person to be an assessee in default

No order shall be made under section 201(1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given l[or two years from the end of the financial year in which the correction statement is delivered under the proviso to sub-section (3) of section 200, whichever is later].

Further, as per section 201(4), Explanation 1 to section 153 regarding exclusion of certain period (like injunction by Court) to calculate time limit shall also be applicable while determining the above time limit. Similarly like section 153(3Xii) there will be no time limit in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260A, 262, 263 or 264 or order of a Court.

However, no time-limits have been prescribed for order under section 201(1) where—

(a)     The deductor has deducted but not deposited the tax deducted at source, as this would be a case of defalcation of gov eminent dues,

(b)     The employer has failed to pay the tax wholly or partly, under section 192(1A), as the employee would not have paid tax on such perquisites,

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(c)      The deductee is a non-resident as it may not be administratively possible to recover the tax from the non-resident.

(3) Penalty payable under Section 221 when the payer is an assessee deemed to be in default under section 201

When an assessee is deemed to be in default in making a payment of tax. he shall, in addition to the amount of arrears, be liable to pay by way of penalty as the Assessing Officer may direct, and in the case of a continuing default, such further amount or amounts as the Assessing Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears.

However, before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard:

Further, where the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section.

Penalty to be cancelled where amount of lax, with respect to the default in the payment of which the penalty was levied, has been wholly reduced [Section 221(2)]

Where as a result of any final order the amount of tax, with respect to the default in the payment of which the penalty was levied, has been wholly reduced, the penalty levied shall be cancelled and the amount of penalty paid shall be refunded.

(4) [Section 201(1A)]- Interest for Late Deposit of TDS

As per section 201(1A), without prejudice to the provisions of section 201(1), if any such person, principal officer or company does not deduct whole or part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at the rate given in the table below on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance with the provisions of section 200(3).

Period of Default Rate of Interest
(a)  From the date the tax was deductible to the date on which such tax is deducted [Section 201(1A)(i)] 1% p.m. or part of the month on the amount of such tax
(b) From the date on which such tax is deducted to the date on which such tax is actually paid [Section 201(1A)(ii)] 1.5% p.m. or part of the month on the amount of such tax

 

(5)  [Section 271H]- Penalty for Failure to furnish Statements. etc.

(A) Penalty for failure to furnish statement or furnishing incorrect information in the statement [Section 271H(1)]:

Without prejudice to the provisions of the Act, a person shall be liable to pay penalty, if, he—

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(a)     fails to deliver or cause to be delivered a statement within the time prescribed in section 200(3) or the proviso to section 206C(3) relating to TCS; or

(b)     furnishes incorrect information in the statement which is required to be delivered or cause to be delivered under section 200(3) or the proviso to section 206C(3).

(B) Quantum of Penalty [Section 271H(2)]:

The penalty for delay in filing quarterly statement of TDS/TCS shall be a sum which shall not be less than Rs. 10,000 but which may extend to Rs. 1,00,000.

(C)   No penalty if statement of TDS / TCS Filed within one Year [Section 271H(3)]:

Notwithstanding anything contained in the foregoing provisions of this section, no penalty shall be levied for the failure to file TDS / TCS statement within the time prescribed, if the person proves that after paying tax deducted or collected along with the fee and interest, if any, to the credit of the Central Government, he had delivered or caused to be delivered the statement referred to in section 200(3) or the proviso to section 206C(3) before the expiry of a period of one year from the time prescribed for delivering or causing to be delivered such statement.

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