This document discusses common TDS violations found during surveys conducted by the Income Tax Department. It outlines several types of common violations: 1) Non-deposition of taxes deducted, which is often seen in struggling businesses. 2) Failure to apply the normal deduction rates, as seen in an insurance business. 3) Failure to make any TDS deductions for a TPA (third party administrator) business. 4) Not treating non-refundable rent advances as attracting TDS under section 194I. 5) Misclassifying professional fees paid to guest lecturers as salary. The document provides guidance on purpose, selection, operation, and procedures for conducting TDS surveys

1. TDS Violation
survey/verification
By
Shankar Bose
Inspector of Income-tax
MSTU, Puri

2. 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

3. Common TDS violation-2
The normal rate of deduction was not
applied
It was found in the case of a Insurance
business

4. 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

5. Common TDS violation-4
 Non refundable advance paid against
rent
TDS attracts against advance u/s 194I
It is an all India issue now

6. Common TDS violation-5
 Professional fees paid by DAV college ,
chandigarh to guest lecturers were shown
as salary
It should have been professional
payments

7. 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

8. New area-Credit Card
Credit card
issuing Bank
Acquiring
Bank
Retail
Merchant
Bill settling
Authority

9. 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

10. Survey /verificationSurvey /verification
Survey is to be done u/s 133ASurvey is to be done u/s 133A
But there is statutory provision foBut there is statutory provision fo
verificationverification

11. Back Ground of Survey
Introduced in the Act w.e.f 01.04.1964
Power was limited to-
1. The ITO
2. Inspector
They were entitled to-
1.Inspect the books of a/cs
2.Place identification marks
3.Take extracts

12. 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

13. 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

14. •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)
14

15. 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.
15

16. 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

17.  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 )

17

18. OPERATION: BASIS OF SELECTION
GRIEVANCE APPLICATION FILED BY PERSONS
 TAX EVASION PETITIONs
 TRADE/NATURE OF BUSINESS
ANALYSIS 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

19.  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

19

20. Nature of the place
Place of business
or
profession
Other place
Books of accounts/documents or
cash/stock, other valuables are
kept.

21. Papers to be verifiedPapers to be verified
Trial balance
Cash Book
Specific ledger accounts
P&L Accounts , Balance sheet
Audit report
Challans
Rent agreement
Contract agreement

22. How to proceedHow 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

23. 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)

24. PowersPowers
Books of a/cs and other
documents
Cash, stock and valuable
articles
1.Inspect
2.Place identification
3.Take extract
4.Impound
1.Verify
2. Make an inventory

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

26. Record statement
Record statement u/s 133A
General information of the business
activity
Record the discrepancies found
Point out where proper deduction has
not been made and record the reason

27. 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

28. 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

29. Thank You