Tax deducted at sources (TDS) was not deposited into the government treasury

within due time

Fact

Rule 13 of the Income Tax Rules (ITR), 1984 states that:

”All sums deducted in accordance with the provisions of Chapter VII of the Ordinance shall be
paid to the credit of the government within two weeks from the end of the month of such
deduction or collection by the person making the deduction or collection, as the case may be”

During our audit we observed that TDS was not deposited into the government treasury within
due time. Instances are given below:

Deduction Due Deposit

Sl# Particulars Deposit date
Date date
1. Salary tax of Hasina Ferdous 29-Jan-15 14-Feb-15 19-Feb-15
2. Salary tax of Hasina Ferdous 26-Feb-15 15-Mar-15 24-Mar-15
3. Tax on CLS center rent 15-Jan-15 14-Feb-15 24-Mar-15
4. Tax on CLS center rent 12-Feb-15 14-Mar-15 24-Mar-15
5. Tax on CLS center rent 15-Feb-15 14-Mar-15 24-Mar-15
6. Tax on CLS center rent 26-Feb-15 14-Mar-15 24-Mar-15

Risks/ Implications

i. This is a non-compliance with the Income Tax Rules, 1984;

ii. The organization may be deemed to be an assessee in default; and
iii. Due to the non-compliance as stated above, the organization is exposed to the risk of
following penalties as per the Income Tax Ordinance, 1984:
a. Proportionate expense might be disallowed [under section 30(a) of the ITO,
1984] at the time of income tax assessment of the organization.
b. The unpaid tax may be recoverable with 2% interest per month from the
organization as per Section 57 of ITO, 1984.
c. In addition, the responsible person of the company may be punishable with
imprisonment for a term which may extend to one year, or with fine, or with
both for the above offence as per Section 164 of the ITO, 1984.

Recommendation

Tax should be deposited to government exchequer in due time.

Management Response