The CBDT has relaxed norms in relation to prosecution procedure specified in case of defaults on TDS payment whether it be quantum or the time lapsation. At the same time, it has eased action on tax filers who default by under-reporting of income or may be do not comply with the tax return filing rule i.e. do not file the ITR.
Here it can be pointed that last month, the country's finance minister Nirmala Sitharaman tweeted, "I have instructed the revenue secretary to come up with measures to ensure that honest taxpayers are not harassed and those who commit minor or procedural violations are not subjected to disproportionate or excessive action."
So, to simply the procedural measures, in a circular dated September 9, 2019, the CBDT has laid down the limit as well as time period for conducting prosecution in respect of TDS defaults. The circular said, "Cases, where non-payment of TDS is Rs 25 lakh or below and delay in deposit, is less than 60 days from the due date shall not be processed for prosecution in normal circumstances. However, irrespective of this, recourse will continue to lie against habitual defaulters, with the approval of a "collegium" comprising of two senior-ranking officers."
In a circular dated May 28, 1980, the CBDT said there shall be no prosecution in case the TDS deposit is delayed by less than a year but the move was later scrapped in August 2013. So, the threshold of over Rs. 25 lakh as well as the extension in time limit will provide the much needed relief to a wide array of taxpayer base especially small-medium entrepreneurs.
Also, in a case when there is a gap in income disclosure in the ITR, prosecution has been simplified and herein a safety net has been specified which states that the amount sought to be evaded or the tax in case of under reported income is Rs. 25 lakh or less. For such violation rule, the prosecution action will be taken up only after the collegium approves the same. And in such cases, the imprisonment can be up to 7 years.
Again worth mentioning here is that the department has specified lower threshold of Rs. 10,000 for carrying out prosecution action on individuals who do not file their ITRs. The CBDT said the circular shall "come into effect immediately and shall apply to all the pending cases where the complaint is yet to be filed".