Missing TDS Credits and Elusive PAN - CBDT has to answer a lot of questions from Delhi High Court
ANAND Parkash, FCA, wrote a letter to the Delhi High Court, “ I am a regular income tax practitioner. I draw the attention of this Hon'ble Court towards the numerous difficulties faced by Income Tax assessees country wide due to the faulty processing of the Income Tax Returns and the TDS deducted at source and request that certain directions be issued by this Hon'ble Court so that lakhs of tax payers are saved from the harassment in filing revised returns/rectification petitions every year. ”
1. The Income tax assessees filing Income Tax returns, on receipt of intimations u/s 143(1), generally are required to pay huge demands which are created because of mismatch of TDS as claimed in the Income Tax return. This is primarily because of the fact that department gives credit of TDS which stands reflected in their online computer records i.e Form No.26AS.
2. Whenever any Department/Govt Office/Bank deducts TDS on behalf of the assessee he has to file quarterly statement of TDS deducted, along with PAN of deductee and other details. Even if there is slightest of mismatch in reporting the particulars of deductee, the TDS deducted by the Department will not reflect in the Form 26AS and as such, no credit of TDS will be allowed to the assessee resulting in unnecessary demands and hassles of getting the rectifications done.
3. To get the rectification done, at first the assessee has to request the concerned department to file a revised statement with correct particulars of deductee and only after revised statement is filed, the same will start reflecting in the 26AS and thereafter, the rectification is possible which is a very lengthy procedure. In many cases the concerned department refuses to revise the statement.
4. The department has communicated the demands outstanding for various years in their records to the Central Processing Unit without carrying out the necessary rectifications lying pending at their end and without reconciling their records. Now Central Process Unit while issuing refunds in the later years adjusts demands for earlier years. Sometimes the demands for earlier years may not have been communicated to the assessee. This is totally against the law.
5. The Returns of the assessees who have expired are filed by legal heirs and in case of refund, the same is issued by CPC in the name of dead person only. This causes great harassment to get the same rectified online or through assessing officer.
6. In case of ITR filed in ITR 4S by the assessee CPC is not considering the taxes paid by the assessees even if they are being reflected in Form 26AS. This is some technical problem in their software.
7. Assesses who are filing their Income Tax return u/s 44AD are not obliged to pay any Advance Tax as per the provisions of the Income Tax Act, 1961. But, while processing the Income Tax returns CPC is charging interest u/s 234B, 234-C in all such cases which is causing unnecessary rectification and paper work as the same should not be levied at all.
8. If an assessee has duly paid the taxes due to the Income Tax Department u/s 140-A, but he defaults in filing of return within the prescribed period of time, CPC is still charging interest u/s 234A from the date of payment till the filing of Income Tax Return.
9. During the filing of TDS return by deductor there is possibility of mistake like PAN being incorrectly mentioned, challan No. being incorrect of Assessment Year being wrongly mentioned by the deductor and also that no TDS return has been filed. In this case, TDS of deductee will not be shown in Form 26AS and credit will not be allowed by the Income Tax Department. Whereas there is no fault of deductee anywhere.
10. There is possibility that bank punches the wrong details like TDS No., Challan No. etc. In this case, there will error in processing the TDS return filed by deductor. So, TDS amount will not reflect in Form 26AS (Pan Data) with NSDL and credit will not allow to deductee whereas TDS was deducted by the deductor.
The Delhi High Court took this as a public interest writ petition and issued notice to the CBDT Chairman, Chief Commissioner of Income Tax, Delhi-I and Director General of Income Tax (Systems), along with some of its own questions:
(1) Whether procedure under Section 245 of the Income Tax Act, 1961 is being followed before making adjustment of refunds and whether assessees are being given full details with regard to demands, which are being adjusted.
(2) Whether the Revenue is taking caution and care to communicate rejection of TDS certificates and intimation under Section 143(1) in case any adjustment or modification is made to taxes paid, either as advance tax, self assessment tax or TDS.
(3) Whether and what steps are taken to verify and ascertain that the old demands against which adjustment is being made was communicated to the assessee?
(4) What steps have been taken to ensure that the deductors correctly upload the TDS details/particulars on the Income Tax website?
(5) What is the remedy available to the assessee and can he/she approach the Department in case the deductor fails to correctly upload the particulars in his/her cases?
(6) Whether an assessee can get benefit of TDS deducted or/and paid but not uploaded by the deductor and procedure to claim the said benefit?
The Court appointed two senior advocates as amicus curiae and they recounted issues like:
The assessees are facing difficulty and harassment as in several cases new PAN card/ numbers are issued, when an application for rectification is filed; when new PAN number is issued, the assessees do not get credit of the taxes paid/deducted under the old PAN number; new addresses are mentioned in the returns, which are uploaded on the Income Tax website. This should be treated as intimation to the Department about change of address. Address is not stated or mentioned on the PAN card. Assessees specially the young middle class do frequently change their city or addresses; Sometimes, the assessees are asked to apply for rectification of PAN details separately even if the new address/details are furnished in the return. They have to submit the old PAN card and, therefore, for months they are without the original PAN card. Assessees now require PAN card for almost everything. This puts them to inconvenience and harassment without any palpable advantage or benefit to the Department.
The High Court wanted the Department's comments on these issues too. The Department is directed to file the affidavit on or before 29th May 2012. Let's see what happens on 30th May 2012 when the case is listed.