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Transferred 40 lakhs without tds what to do??

P Kahyap (Others) (50 Points)

29 November 2014

I have transferred INR 40 Lakhs to someone's account, at that time I didn't knew that TDS is such a thing and we need to deduct that amount. After I came to know about that, the reciever refused to give his PAN Details. Now what should I do to show this in income tax papers/statements?

How am I supposed to tell them that for what I paid this money for, If I will say I paid him for services then am liable to service tax as well. I would really appreciate if someone could help me on this :)

All the payment was made by interenet banking transfers.

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4 Replies

Gagan Deep Singh (CHARTERED ACCOUNTANT) (1190 Points)
Replied 29 November 2014

Dear Kahyap, there is a remedy under section 201 where payer fails to deduct TDS. As per this section if deductor fails to deduct tds while making paymnt to a RESIDENT then he will not be treated as assesse in default if the deductee(person to whom payment is made) shows that amount in his return and pays the tax due on that amount before the filing of return.

But you are still liable to pay interest @ 1% p.m. on TDS amount from the month TDS to be deducted till the month of filing of return by the deductee and u also need to furnish certificate from CA to this effect in prescribed form.

As far as service tax is concerned you are a service reciever in this case & service reciever is liable only in case of reverse charge.

Its better if u mention the nature of services because it will also help to analyze whether u are liable to deduct tds.

P Kahyap (Others) (50 Points)
Replied 29 November 2014

Originally posted by : Gagan Deep Singh
	Dear Kahyap, there is a remedy under section 201 where payer fails to deduct TDS. As per this section if deductor fails to deduct tds while making paymnt to a RESIDENT then he will not be treated as assesse in default if the deductee(person to whom payment is made) shows that amount in his return and pays the tax due on that amount before the filing of return. But you are still liable to pay interest @ 1% p.m. on TDS amount from the month TDS to be deducted till the month of filing of return by the deductee and u also need to furnish certificate from CA to this effect in prescribed form. As far as service tax is concerned you are a service reciever in this case & service reciever is liable only in case of reverse charge. Its better if u mention the nature of services because it will also help to analyze whether u are liable to deduct tds. -

Hello Gagandeep,
Thanks for your valuable post.

Actually nature of work was Digital Marketing & Consumer Awareness, I had some companies (out of India) in my contact who wanted to increase their brand awareness. As I had some good contacts so I got those big contracts easily, Honestly at that time I was having one thing in mind, i.e. how to make money.

So after having those contracts signed with those companies, I came to know about this guy through some internet sites where people offer freelance jobs to whom I transferred these 40 lakhs, He said he will post links, articles and reviews to all over the internet about those companies thus increasing their brand value.

Since I had no Idea about the invoices, TDS and all, I just kept making payments to him through internet bank transfers to account number and name he passed.

After sending like 40 lakh rupees I came to know that we need to deduct TDS if we are transferring money to someone. I asked him PAN card details, he refused.

At this time it was clear that it was not his account instead of someone else, clearly he is not in a mood of paying tax and all or may be who knows why he is doing that.

Now what should I show this in papers as for what I transferred this money for ? What if I have not filed TDS? What if that guy didn't file any tax? What could be the worst case with me?

I am worried a lot about this, if you can help I will really appreciate.

Gagan Deep Singh (CHARTERED ACCOUNTANT) (1190 Points)
Replied 29 November 2014

Dear, if there is an individual business & turnover of his business during last year is less than 1 crore(not liable for tax audit) then he is not liable to deduct TDS .

Generally where person liable to deduct TDS & he fails to deduct TDS then he is treated as assessee in default u/s 201. For which intt @ 1% p.m. u/s 220 & penalty equivalent to the amount of TDS will be applicable u/s 221.

But commissioner may waive intt u/s 220 if u show them that payment would cause general hardship to the assesee or deduction of TDS is beyond your control. Penalty may also be waived by commissioner u/s 273A(1) if u voluntary disclose all the facts of the case. Then u have to pay only TDS which is 1%u/s 194C as per nature of services u have told me. It means u will be only liable for Rs 40000. You may also adopt compounding of offence where you have to pay fees & you will be relieved from all your liabilities. But adopt this only if its more beneficial & take some legal advice in this matter.

According to your service you are also liable to charge service tax on the amount recovered from the companies. If the amount is still payable by companies you should charge ST on invoice. Otherwise persuade companies to reimburse service tax amount. Otherwise compounding of offence facility is available which you may adopt. Penalty may also waived u/s 80 since your case is not a case of fraud.