Section 276B

What a section 276B notice is

TDS — Prosecution. Criminal prosecution proposed for failure to deposit TDS. It is a critical-severity notice in the tds family under the Income Tax Act 1961.

If you ignore it: Prosecution proceedings.

Time to reply: this notice type carries no standard period. The date is printed on the notice itself and you must read it off the document. THIS IS CRIMINAL. The product must not draft this alone. Escalate to the CA immediately and recommend counsel. Hard-stop in the engine.

Section 276B — the law in short

What the courts have decided on section 276B, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• US Technologies International Pvt Ltd v CIT Supreme CourtHelps taxpayer
  You deducted the TDS but paid it late. Is penalty under s.271C leviable?
  No. Section 271C(1)(a) is attracted by a failure to deduct, not by late payment of tax already deducted. But interest under s.201(1A) still runs, and prosecution under s.276B remains available — this is not an amnesty.
• Madhumilan Syntex Ltd v Union of India Supreme CourtHelps department
  I deposited the TDS late but with interest. Can the company and its directors still be prosecuted?
  Yes. The offence under s.276B is complete once deducted tax is not credited to the Government within the prescribed time; depositing it later with interest is a civil consequence and does not wipe out the default. Directors identified as principal officers under s.2(35) were properly arrayed with the company under s.278B.
• Associated Cement Company Ltd v CIT Supreme CourtHelps departmentNo later treatment found
  My contract is only for loading bags, not a works contract, and much of what I pay is reimbursement of the contractor's wage bill. Must I still deduct under section 194C on the whole sum?
  Yes. The Supreme Court held that any work in section 194C(1) means any work, not a works contract, which is a term with a special connotation in tax law. The sub-clause itself includes supply of labour, which shows the wider intention. The deduction is of a percentage of the sum credited or paid, not of the contractor's income component; the words on income comprised therein show only that what is deducted is tax at source. And nothing in the sub-section allows the payer to exclude amounts paid to the contractor by way of reimbursement of wages he has paid his workers.
• Dr. Manoj Khanna v ITO High CourtHelps departmentNo later treatment found
  You have now paid the TDS. Does that end the prosecution under s.276B?
  Not by itself. Belated deposit does not extinguish criminal liability unless the statute says so. The s.278E presumption of a culpable mental state attaches to a person in managerial charge and can only be rebutted at trial.
• Vilas Babanrao Kalokhe v Principal Commissioner of Income Tax (Central), Pune High CourtHelps taxpayerNo later treatment found
  I filed my return but could not pay the self-assessment tax with it. I paid it a couple of months later. They have prosecuted me under s.276C(2). Can that stand?
  On these facts, no. The Bombay High Court quashed the complaint and the order issuing process, holding that s.276C(2) punishes a wilful attempt to evade payment of tax and not a mere failure to pay, and that the averments in the complaint fell short of any inference of wilfulness where the assessee had pleaded financial difficulty and had in fact paid the tax with interest.
• ITO v MKY Constructions P Ltd High CourtHelps taxpayerNo later treatment found
  We paid the whole TDS default with interest before the complaint was filed. Can we still be prosecuted under s.276B?
  Not where a reasonable cause for the failure is made out. The Delhi High Court refused the department leave to appeal against an acquittal in three prosecutions under section 276B read with section 278B. Section 278AA carves out an express exception to penal liability under section 276B where the accused establishes a reasonable cause for the failure to deposit. The trial court had found that the company's default was driven by a liquidity crisis caused by legally recoverable payments withheld by contracting parties, that the entire defaulted tax had been deposited with interest under section 201(1A) and late fee under section 234E, and that the default was not deliberate. The High Court held that finding neither perverse nor legally infirm, and declined to disturb it.
• ITO v MKY Constructions Private Limited High CourtHelps taxpayer
  I deducted tax at source but could not deposit it on time because my own contract payments were stuck. I have since paid it with interest. Can I still be prosecuted?
  Not where reasonable cause is proved. The Delhi High Court refused leave to appeal against acquittals under section 276B read with section 278B. Section 278AA opens with a non obstante clause and means that the existence of a reasonable cause operates as a statutory defence to prosecution. The company was a sub-sub-contractor whose large receivables from the main contractor, and refunds from the Department, were stuck, and it deposited the whole of the tax with interest and late fee before the complaints were filed, a fact the Income Tax Officer admitted in cross-examination. That showed the absence of the culpable mental state and the trial court's finding was neither perverse nor legally infirm.
• SKS MC Joint Venture v State of Jharkhand High CourtHelps taxpayerHigh Courts differ
  I deposited the TDS late but with interest, and years later the department filed a criminal complaint under s.276B. Can I get it quashed?
  On these facts, yes. Where the deductor had deposited the tax with the stipulated interest before any complaint was filed, and the department then launched the prosecution long afterwards instead of exercising its power to compound, the Jharkhand High Court held that continuing the criminal proceeding was an abuse of the process of law and quashed the cognizance order.
• Income-Tax Department v Vishweshwara Rao Chava High CourtHelps departmentNo later treatment found
  The complaint under s.276B names me as a director and says nothing more than that I was in charge of the company. The trial court discharged me. Can the Department get that set aside?
  Yes, if the complaint carries the specific averment that the director was in charge of and responsible to the company for the conduct of its business, and the s.2(35) notices treating him as principal officer are on the record as exhibits. Whether he really was at the helm is a matter of evidence for the trial, not a ground for discharge, and non-production of the record behind the notices does not make the complaint bad at that stage.
• Binod Pattanayak v Union of India High CourtCuts both waysNo later treatment found
  My s.276B prosecution for late deposit of TDS is pending and the CBDT has issued fresh compounding guidelines dated 17 October 2024. Will the High Court still quash the complaint under s.482 CrPC?
  On this order, not as a matter of course. The Orissa High Court, having read clauses 4.6 and 8.3 of the CBDT's guidelines of 17 October 2024, took the view that the Department has now harmonised the procedure for compounding offences under the Act arising out of curable defects, and that in the present regime, where compounding of the offence is permissible, the inherent jurisdiction under s.482 CrPC need not necessarily be invoked. The petition was disposed of with liberty to seek compounding, and with a direction that the application be considered on its merits uninfluenced by the Court's observations.
• Sree Metaliks Limited v Union of India High CourtHelps taxpayer
  We deposited the TDS late, with interest, and the Department accepted it — then launched a s.276B prosecution against the company and its directors. Can the complaint be quashed?
  On this judgment, yes, where the delay is explained. The Orissa High Court quashed a s.276B read with s.278B prosecution for delays of between 15 and 394 days in FY 2019-20, holding the delay well explained by the company's insolvency resolution process and the COVID-19 restrictions, and noting that the prosecution had been launched only after the Department had received the TDS along with interest. It followed the Jharkhand High Court in Dev Multicom and its own earlier decision in D.N. Homes.
• A.M. Enterprises v State of Jharkhand High CourtHelps taxpayerSuperseded by amendment
  I paid the TDS with interest before sanction and no penalty was ever levied. Can they prosecute?
  On this combination of facts, no. The High Court quashed the s.276B/278B prosecution because the tax with interest had been deposited before sanction under s.279(1), no penalty proceedings had ever been initiated, and the delay was explained. If a cancelled penalty destroys the basis of a prosecution, the position is stronger where no penalty was ever adjudicated at all.
• Indo Arya Central Transport Ltd v CIT (TDS) High CourtHelps department
  The Commissioner has sanctioned my prosecution under s.276B without dealing with my explanation that a cash crunch and the department's own withheld refunds caused the delay. Can I have the sanction quashed in a writ petition?
  Not on these facts. The Delhi High Court held that a financial crunch, pending refunds and a delay of less than twelve months are ex facie factual matters which may constitute the defence of reasonable cause under s.278AA, but that the onus of proving reasonable cause lies on the person being prosecuted and the place to discharge it is the criminal trial, not a writ petition. A sanction under s.279(1) is open to judicial review only in a limited way, to see that the authority acted fairly and reasonably, and the court will not sit as an appellate forum over it.
• Homi Phiroz Ranina v State of Maharashtra High CourtHelps taxpayer
  I am a non-executive director. The complaint under s.276B read with s.278B says only that I was in charge of and responsible to the company for the conduct of its business. Is that enough to put me on trial?
  No. The Bombay High Court held that a bare averment reciting the words of s.278B, with no material showing that the director was in fact in charge of the company's affairs and responsible for the conduct of its day to day business, does not disclose a prima facie case, and process should not have issued against such a director. The applicants, who were non-executive directors and two of whom were practising advocates who could not in law act as full-time directors, were discharged.
• Statutory position — s.201: who is deemed an assessee in default, the Form 26A escape that covers non-deduction only, one per cent and one and one-half per cent for two different periods, and the six-year limit from 1 April 2025 CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  The TDS officer has passed an order under section 201 treating me as an assessee in default and has added interest under section 201(1A). Who exactly is in default, what gets me out of it, which interest rate runs for which period, and how far back can he go?
  Section 201(1) deems a person who does not deduct, does not pay, or after deducting fails to pay the whole or any part of the tax to be an assessee in default in respect of that tax. Its first proviso takes him out of that deeming, but only for a failure to deduct, and only if the payee has furnished his return under section 139, has taken the sum into account in computing income in that return and has paid the tax due on the income declared — and the deductor furnishes a certificate to that effect from an accountant, which rule 31ACB requires in Form 26A. Interest under section 201(1A) runs at two rates for two different periods: one per cent for every month or part of a month from the date the tax was deductible to the date it was deducted, and one and one-half per cent for every month or part of a month from the date it was deducted to the date it was actually paid. Where the first proviso to section 201(1) rescues the deductor from the tax, the proviso to section 201(1A) still charges the one per cent, from the date the tax was deductible to the date the payee furnished his return. Since 1 April 2025 an order under section 201(1) for a failure to deduct cannot be made after six years from the end of the financial year in which payment is made or credit is given, or two years from the end of the financial year in which a correction statement is delivered under the first proviso to section 200(3), whichever is later; until 31 March 2025 the figure was seven years and the limit protected only a failure to deduct from a person resident in India. Section 201 governs a default on a sum paid or credited up to 31 March 2026; where the earlier of credit or payment falls on or after 1 April 2026, the consequences provision is section 398 of the Income-tax Act, 2025.
• CBDT Compounding Guidelines 2024 CBDT Circulars & InstructionsHelps taxpayer
  I want to compound my income tax offence. What do the current guidelines let me do?
  Considerably more than the old ones. The guidelines of 17 October 2024 abolish the Category A/B classification, remove the cap on the number of applications and the 36-month outer time limit, extend compounding to ss.275A and 276B, allow a co-accused to apply for a company or HUF, and set TDS compounding charges at a single 1.5% per month with no interest on delayed payment of the charge.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.