The Income Tax Department today unearthed irregularities worth Rs 3,200 crore pertaining to tax deducted at source (TDS) accounts of some entities and individuals in Mumbai.

According to an investigation between April 2017 and March 2018, 447 companies deducted tax from its employees but did not deposit the amount and diverted it to further their own business interests.

Income Tax Department's TDS wing has started prosecution proceedings against the firms and in some cases, warrants have also been issued.

The offences under IT Act attract a minimum punishment of three months to a maximum of seven years of rigorous imprisonment plus fine. Prosecution is initiated under Section 276-B.

However, sources in the I-T Deparment claims, "It is not a scam -- but a very common verification survey details. Every year, its done. Quantum may vary from year to year. This is just like an employer deducts TDS on salary but does not deposit on time."

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WHAT IS TDS?

Tax Deducted at Source (TDS) is a means of collecting income tax in India, under the Indian Income Tax Act of 1961.

Under this Act, any payment covered under these provisions shall be paid after deducting prescribed percentage.

It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service. It has a great importance while conducting tax audits. An assessee is also required to file quarterly return to CBDT.

Income tax returns mentions the TDS deducted and paid to government every quarter.

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