TDS Violation survey/verification

By

Shankar BoseInspector of Income-tax

MSTU, Puri

Common TDS violation-1

Most common Type of violation is non deposit of tax deducted It is common in the cases of ailing business organisations It was detected in many cases during the surveys

Common TDS violation-2

The normal rate of deduction was not applied It was found in the case of a Insurance business

Common TDS violation-3

In the case of TPA business no TDS was made Some cases have been covered under survey Depptt issued a circular

Common TDS violation-4

Non refundable advance paid against rentTDS attracts against advance u/s 194IIt is an all India issue now

Common TDS violation-5

Professional fees paid by DAV college , chandigarh to guest lecturers were shown as salary It should have been professional payments

Common TDS violation-6

Compensation paid by the LA Collectors for compulsory acquisition of land It is applicable in the case other govt authorities also

New area-Credit Card

Credit card issuing Bank

Acquiring Bank

Retail Merchant

Bill settlingAuthority

Some other areas Transaction fees paid by the brokers

to the stock exchange Professional fees paid by the

coaching centre to the professionals Amount recovered by the banks from

corporates and service charges received

Survey /verification Survey /verification Survey /verification Survey /verification

Survey is to be done u/s 133ASurvey is to be done u/s 133ABut there is statutory provision fo But there is statutory provision fo verification verification

Back Ground of Survey

Introduced in the Act w.e.f 01.04.1964

Power was limited to-

1. The ITO2. Inspector

They were entitled to-

1.Inspect the books of a/cs2.Place identification marks3.Take extracts

Different kinds of survey

Collection of information and evidences and utilize in scrutiny proceedings

Collection of information relating toTDS Verification of Depreciation Verification of Deductions and Exemptions Recovery of outstanding demands

Purpose of TDS survey

Whether TDS has been made against the expenditures which requires deduction

Whether deduction has been made at proper rate

Whether the tax deducted has been deposited to Govt. account in due time

Whether the statements have been filed

•Survey is possible even to enquire about tax deducted at source : Reckitt and Colman of India Ltd. vs. ACIT [2001] 251 ITR 306 (Cal).

•‰Residential premises can also be covered if some business/professional work/document is being done / kept there.

•‰Business or residential premises of third parties, including a Chartered Accountant, a pleader, or Income Tax Practitioner, of whom the assessee may be a client, are not places which could be entered into for the purpose of section 133A. (Circular no. 7- D dt 3/5/1967)

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What is meant by TDS compliance?

T.D.S compliance means:

Compliance with TDS provisions/TCS provisions as contained in the Income tax Act, 1961.

TDS compliance includes:-

deductions of TDS/TCS on payments/credits/advances whichever is earlier

deductions of TDS/TCS under the correct section and correct rate as contained in Chapter XVIIB & XVIIC of the I.T.Act, 1961

payment of TDS/TCS by the prescribed date to the Central Government Account

filing of TDS/TCS statements on prescribed forms by prescribed dates

payment of interest due u/s.201(1A) in case of delayed payment.

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Selection of case

Deposit of TDS is lower than earlier years TDS statements are not being filed though it

has its activity A special nature of payment where TDS is

not made by similar deductors Any petition from deductee/outsider giving

information of non payment of TDS Deductors not following the guidelines from

CBDT

ANALYSIS OF ITD DATA

CASES IN PROSECUTION LIST

HABITUAL LATE FILERS (Late filing is closely linked to Late Payment)

NON-FILERS

CASES SHOWING NEGATIVE TREND (In a particular Section)

CASES SHOWING SHIFT IN TDS (Particularly from 194J/194I to 194C )

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OPERATION: BASIS OF SELECTION

GRIEVANCE APPLICATION FILED BY PERSONS TAX EVASION PETITIONs TRADE/NATURE OF BUSINESSANALYSIS OF NEWSPAPER REPORTS/INFORMATION AVAILABLE THROUGH INTERNET ANALYSIS OF CASE LAW DECIDED IN FAVOUR OF REVENUE INFORMATION ARISING OUT OF DETAILS FILED ALONGWITH 197 CERTIFICATES INTERPRETATIVE ISSUES THIRD PARTY INFORMATION

BE PREPARED

WITH BUSINESS MODEL OF THE ASSESSEE FROM T.A.R./ INTERNET

WITH THE STRUCTURED QUESTIONNAIRE FOR STATEMENT

WITH THE DATA FROM THE ITD SYSTEM/ RETURN OF INCOME

WITH LIST OF DOCUMENTS THAT MAY BE ASKED ON ARRIVAL AT THE PREMISES

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Nature of the place

Place of businessor

professionOther place

Books of accounts/documents orcash/stock, other valuables are kept.

Papers to be verifiedPapers to be verified Trial balance Cash BookSpecific ledger accounts P&L Accounts , Balance sheet Audit report Challans Rent agreement Contract agreement

How to proceed How to proceed • Identify the deductible expenses • Verify the deductions and whether

deposits have been made • Tally with the challans • Find out whether there is any

discrepancy• Come to the conclusion

BE PROFESSIONALBE PROFESSIONAL EXECUTE OPERATIONS IN PROFESSIONAL WAY

FUNCTION LIKE A TEAM……DELEGATE TASKS TO MEMBERS

DON’T SIT IDLE ( It sends a very wrong message to Assessee)

BE COURTEOUS YET FIRM IN YOUR APPROACH

KEEP THE RANGE HEAD UPDATED OF THE PROGRESS

COLLECT ONLY THOSE DOCUMENTS THAT ARE REQUIRED (Avoid Garbage)

PowersPowers

Books of a/cs and otherdocuments

Cash, stock and valuablearticles

1.Inspect2.Place identification3.Take extract4.Impound

1.Verify2. Make an inventory

Precaution

The person authorized to conduct survey shall never remove cash or other valuables from the spot of survey

Record statement

Record statement u/s 133AGeneral information of the business

activity Record the discrepancies foundPoint out where proper deduction has

not been made and record the reason

Issue 131

• Where the required document could not be produced during the course of survey, issue summons u/s 131 to produce on a particular day

Report and proceeding

Submit a preliminary report within 24 hours of survey completed

Submit the detailed report as early as possible

Initiate proceeding u/s 201(1)/ 201(1A) immediately

Complete the proceeding without making delay

Thank You