Total Number of Subscribers: 464   

  Date: 23rd Sep 2009

 Compiled by: M Sathya Kumar  

Is it fair to levy penalty u/s.272A(2)(c) in a mechanical manner ? (Delay in filing e-TDS returns) 

Introduction :

Of late, the grievances of taxpaying community and the tax professionals against the approach of the administration are increasing. Compliances relating to Tax Deduction at Source (TDS) have become a nightmare, since it has become a tool in the hands of the administration to harass the assessee. The other menacing monsters are scrutiny assessment, S. 40(a)(ia), coercive recovery proceedings and the upcoming draconian is Annual Information Return (AIR). Survey and search are occasional enemies while scrutiny, recovery, etc. are becoming regular features. Penalty of Rs. 100 per day for delayed submission of e-TDS returns is the topic for this article.

General hardship with TDS :

Importance of TDS is growing beyond its legitimate proportion. Failures or defaults attract many consequences — viz. payment of tax even if not deducted; interest, penalty, prosecution and above all, the disallowance u/s.40(a)(ia). Penalty again is for more than one reasons — non-deduction, nonpayment, non-submission of declarations u/s.197A, and non-filing or belated filing of TDS. Most of the penalties for delay are Rs.100 per day. The only solace is that the penalty cannot exceed the amount of tax deductible.

Penalty u/s.272A(2)(c) :

Previously, there used to be only annual returns of TDS u/s.206C; barring a few exceptions where quarterly returns were prescribed. Presently, however, all TDS returns are to be on quarterly basis.

There are definitely certain advantages of eregime, such as on-line payment, on-line filing, etc. However, it has also brought in too much of rigidity. Linking of payments with actual deductions, reconciling with payments/credits to parties, adjustments of excess or short payments (even where it is legally permissible) have become very cumbersome.

Another trouble is the frequent changes in the relevant software used by the Department. 3.4 There is another serious hurdle on which the tax deductor has no control. It is now a requirement that Permanent Account Numbers (PANs) of at least 95% of the deductees should be provided. In the present scenario, most of the businesses — like for example — transport, labour contractors, etc. simply refuse to obtain and furnish their PANs. Even white-collared persons have a hesitation in obtaining the PAN.

In many small and medium organisations, there are no trained and qualified accountants; outside professionals cannot cater to so many SMEs; parties with whom the SMEs deal also do not cooperate. In fact there is a strong resistance even to allow the tax to be deducted. Even so-called elite businesses like hoteliers, big associations like transporters, security guard suppliers, etc. resist TDS. All this puts SMEs under tremendous pressure.

The position of non-profit organisations like housing societies, small co-operative societies, schools, clubs, other trusts, etc. is still worse. They are often not even aware of the compliances required. They have no manpower, nor can they afford professional services.

All these factors result in almost inevitable delays. The delays are far from intentional. It is mostly due to circumstances beyond one’s control. Still, penalty proceedings are invoked in a very routine manner; and penalties are levied mechanically by passing stereo-typed, pre-printed orders. It is obvious that there is lack of application of mind and judicious use of discretion.

It is indeed a pity that the Department perceives penalty also as a source of revenue. Penalty is to be used as a weapon to punish and should not become a rule of the day. This increases litigation. Thousands of appeals are being filed. There may be a sizeable collection even on account of filing fees for appeals. It needs to be appreciated that a TDS return is meant for merely furnishing information to the Government, even though it is an important tool to plug the evasion of tax.

It also needs to be reckoned that the deductor in fact assists the Government in collecting the tax and providing valuable information. However, as a reward, what the deductor gets is a constant harassment, rather than any incentive. I shudder at the day when we will experiment with on-line credit of TDS.

Suggestions :

Most importantly, the perception of the administration and the Government should change. 4.2 Officers be advised to use discretion and adopt rational approach.

Quantum of penalty be reduced and it could be made analogous to the filing fee payable to ROC. 4.4 Penalty for SMEs and non-profit organisations should be token in nature.

I believe a strict law should be benevolently administered.

Article by Chandrashekhar Vaze, Chartered Accountant

Rewards waiting for feedback at
E-mail : smarttrainee@gmail.com

www.primeonlinetest.com

Prime Academy - In Pursuit of excellence

Click here to contact us, if you are unable to view the content properly