The Income-Tax department has revealed that 447 companies allegedly duped the government of Rs 3,200 crore as they did not deposit the sum, which they had deducted from their employees as Tax Deducted at Source (TDS), with the government.
The TDS wing of the Income-Tax department has swung into action after a report said that the money was diverted to meet their other business obligations.
According to the reports, the TDS wing of the department has initiated prosecution against these firms, under section 276 (B) of the Income-Tax Act, which entails imprisonment from three months to seven years.
The department was mulling to add sections of cheating and criminal breach of trust under the Indian Penal Code.The offenders are reported to be mostly builders. One of the offenders is a leading builder who diverted Rs 100 crore income-tax deducted from salaries of its employees for business interests.
Other companies involved in the scam include movie production houses,infrastructure companies and start-ups. An IT company has not deposited Rs 11 crore, whereas a port development firm has not deposited Rs 14 crore.
The department has also initiated action by attaching bank accounts. The source said that the money was used as working capital in several cases.While some employers have promised to pay, some are unable to pay. In some cases, 50 per cent of the TDS deducted from employees was misused.
According to the date from the Finance Ministry, only 7 companies are filing the returns while the rest 8 lakh companies are not filing them and are claiming the tax liability is below Rs. 3,000 and they are not bound to file returns.So, starting from April 2018, if the companies fail to file their returns, they will be prosecuted under section 276CCC.
According to the section 276CCC, if such companies are found guilty, the directors of the companies may face a jail term of 3 months to 2 years. In case the liability is more than Rs. 25,000, then the probability is high that these Directors can face a jail term of 6 months to 7 years.