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Changes in TDS provisions
(This is the continuation of the answer to the question on "Changes in TDS provisions" that appeared in these columns on April 15 and 22.)
Q: What are the changes in relation to penalties and prosecution?
A: Almost every Finance Bill strengthens the arms of the Government by providing for fresh penalties or provisions for prosecution. Apparently it is believed that such provisions are substitutes for investigation, since some of these provisions do not appear to have any utility except as provision in terrorem hardly consistent with a taxpayer-friendly regime.
Sec. 269T is amended to include the requirement of return of loans to be made by account payee cheques or account payee drafts. So far only return of deposit required such mode of repayment. Further, Sec. 269T will also freshly include `other person' besides bank, company, co-operative society or firm so that it would appear that unorganised entities, besides individuals are covered by the provision, where the transaction exceeds Rs. 20,000 in value. In view of the fact, that penalty equal to the amount is prescribed for violation of this requirement, the extension of the draconian power for all persons and to cover even repayment of loans is hardly justifiable.
The power to levy penalty under Sec. 271 is now made available to the Commissioner, that is, Administrative Commissioner. Would it apply to cases, where the assessing officer failed to initiate penalty proceedings, but the Commissioner thinks it is necessary? It is however reasonable to presume that it will apply only in a case where the Commissioner exercises his power under Sec. 263 and enhances the assessment and finds that while doing so, that there is concealment in the return filed by the assessee attracting penal provisions. The innocuous omission of the words, "who has not been previously assessed under this Act" proposed in Explanation 3 to Sec. 271(1) has the effect of treating the entire income of any person, who has not filed the return even after the date by which a normal assessment could be completed within the time limit under Sec. 153(1), as concealed income, so that besides tax and interest, penalty equal to tax at the minimum and three times the tax at maximum will be exigible for every non-filer on record.
The anomaly in levy of penalty under Sec. 271F is proposed to be removed. Persons covered by one by six rule are liable for a penalty of an amount of Rs. 5,000, for any delay after the due date, while regular taxpayers are liable for penalty of the same amount, only if they failed to furnish return before the end of the assessment year. Penalty Sec. 271F as substituted, will be exigible only if no return is filed before the end of the year for both classes of assessees. This is effective from June 1, 2002.
Sec. 272A is amended enabling penalty of Rs. 100 for every day of delay as presently possible in matters for filing returns will now be extended to those who are exempt from payment of income-tax under Sec. 10 but are now required to file such returns.
Sec. 272B is a new provision introduced for levy of penalty of Rs. 10,000, if a person fails to apply for Permanent Account Number under Sec. 139A or fails to quote it or gives a wrong number knowing it to be false or does not believe it to be true. There is already a provision under section 272A which provided for penalty of Rs. 500 for non-compliance introduced with effect from April 1, 1976. It was omitted from April 1, 1989 because it was made part of Sec. 272A(d) providing for penalty of Rs. 500. Only with effect from June 1, 2001, it was substituted by a flat rate penalty of Rs. 10,000 for non-compliance with Sec. 139A. This penalty will now be under Sec. 272B with the default extended to giving a false number, which should even otherwise been covered by the existing law.
Sec. 272BBB is introduced for non-compliance with the new requirement introduced by Sec. 206CA providing for requirement of tax collection account number, where there is liability to pay tax at the point of collection as required under Sec. 206C of the Act. Penalty is again Rs. 10,000 for the omission.
Sec. 275B provides for prosecution for non-compliance of requirement under Sec. 132(1)(iib) of the Act, which requires that any person in possession or control of any books of account or other document maintained in the form of electronic record should offer the authorised officer the necessary facility to inspect such books of account or other documents.
The books of account and other documents are those kept in the form of electronic record. Since the authorised officer has the entire control of the premises including the electronic records, is it necessary to have a special provision requiring the occupant to provide facility for inspection? Probably what is expected is that the occupant would help authorised officer to decode the computer information by providing information as to the necessary commands for such decoding. Assuming that self-incrimination is not barred during investigation, it is difficult to see how such facility and co-operation can be extracted by the threat of prosecution. The search officer may well be required to exercise his own resources as he does for deciphering concealment from duplicate set of accounts, documents or assets found. The provision for prosecution for failure to facilitate investigation by a term of rigorous imprisonment extending up to two years is yet another power liable to abuse. Such prosecution is not spared even under the blanket provision in Sec. 278AA excusing punishment, where there is reasonable cause for such failure as for certain other categories of offences, because Sec. 278AA has not been amended to include prosecution under Sec. 275B making the provision all the more horrendous.
S. Rajaratnam
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