Business NewsNews

Seeking to crackdown on shell companies, the government has proposed to remove exemption available to firms with tax liability of up to Rs 3,000 from filing IT returns beginning next fiscal. The Union Budget 2018–19 has rationalised the IT Act provision relating to prosecution for failure to furnish returns. Thus, a managing director or a director in charge of the company during a particular financial year could be liable for prosecution in case of any lapse in filing IT returns for any financial year beginning 01-04-2018. The income tax departments would now track investments by these companies. Also, the focus will be on those firms that show less profit and also those who file IT returns for the first time. There are around 12 lakh active companies in the country, out of which about 7 lakh are filing their returns, including annual audited report, with the Ministry of corporate affairs. Of this, about 3 lakh companies show ‘nil’ income.

The Section 276CC of the Income Tax Act, 1961 provided that if a person wilfully fails to furnish in due time the return of income, he shall be punishable with imprisonment and fine. However, no prosecution could be initiated if the tax liability of an assessee does not exceed Rs 3,000. The government has amended the provision with effect from 01-04-2018 and removed the exemption available to companies. In order to prevent abuse of the said proviso by shell companies or by companies holding benami properties, it is proposed to amend the provisions so as to provide that the said sub-clause shall not apply in respect of a company. The Budget announcement follows the recommendation of the task force on shell companies, which was set up in February, 2017. In the government’s fight against black money, shell companies have come to the fore as they are seen as a potential for money laundering. Till the end of December 2017, over 2.26 lakh companies were deregistered by the MCA for various non compliances and being inactive for long. Since 2017, the apex policy making body of the IT department — the Central Board of Direct Taxes (CBDT), has been sharing with the MCA specific information like PAN data of corporates, Income Tax returns (ITRs), audit reports and statement of financial transactions (SFT) received from banks.

[Source: The BusinessLine]