Non-issue of Form 16 by employer-HC asks ITD to penalise defaulters under IPC and publish list of defaulters 

Non-issue of Form 16 by employer-High Court asks Department to  penalise defaulters u/s 405 of IPC and publish list of defaulters 

ABCAUS Case Law Citation:
ABCAUS 2707 (2019) (01) HC

Under the provisions of section 203 of the Income Tax Act, 1961 (the Act) read with Rule 31,every employer who makes a deduction of income tax at source (TDS) from salaries is required to issue TDS certificate in Form 16 to the respective employees.

The said Form 16 is required to be furnished by the employer to the employees annually, latest by 15^th day of June of the financial year immediately following the financial year in which the tax has been deducted.

In case of default by the employer in issuing the Form 16 as above, a penalty of Rs. 100/- per day of default has been provided under section 272A(2)(g) of the Act.

In a recent order, the Hon’ble Bombay High Court has asked the Income Tax Department to penalise the defaulting employer u/s 405 of the Indian Penal Code (IPC) and publish list of such defaulters who fail to issue Form 16 to employees as per the mandate of the Act. 

The order was passed in a Writ Petition alleging that due to no issuance of Form No. 16  in time, the employees which included senior citizens, were suffering serious consequences and were even proceeded against under the provisions of the Act.

The Hon’ble High Court asked the Commissioner of Income Tax (TDS) to file a comprehensive affidavit on the issue. The Court also urged that the Ministry of Finance, Department of Revenue to be made aware of these serious lapses . 

The Hon’ble High Court stated that as noticed  there is no transparency as no information is ever displayed by the Income Tax Department in  relation to such defaulters. The Court urged the Department to provide information of such defaulters so that those seeking employment or awaiting  either retiral benefits or such other sums from  the  employers  would  know  in  advance as  to how they are expected to comply with law.

The Hon’ble High Court also invited attention to Section 405 of  the  Indian Penal  Code,  1860  which deals with Criminal Breach of Trust. The Hon’ble High Court observed that prima facie, the reading of the Section 405 together with its explanation (which cover within its ambit, the employers who after deducting EPF/ESI contributions from the salaries of the employees, do not deposit it), furnishes enough ground to bring the defaulting employers to book by applying said provisions of the  Indian  Penal Code to them.  

The Hon’ble High Court observed that no record was found till date where the Department had applied provisions of IPC in the prosecution  launched against such defaulters.   

The Petition is still pending for final disposal. Bookmark the post link and revisit to read the final judgment 

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