Income Tax - TDS and Refund Problems -Delhi High Court Comes to Rescue of Hapless Taxpayers
PLEASE recall DDT 1861 - 21 05 2012 - under the caption, Missing TDS Credits and Elusive PAN - CBDT has to answer a lot of questions from Delhi High Court. The Delhi High Court had in asked the Government to file an affidavit answering several questions raised.
Now after examining the affidavit filed by the Income Tax Department, the Delhi High Court observed,
1. In the counter affidavit, it has been acknowledged and accepted that the taxpayers are facing difficulties in receiving credit of Tax Deducted at Source (TDS for short). It is also accepted that taxpayers are facing difficulties in getting refunds on account of adjustment towards arrears.
2. the problems faced by the tax payers can be broadly classified into two categories. Firstly, failure and difficulties in getting credit of TDS paid. The said amount is deducted from the income earned by the assessee but even for several reasons not attributable to the taxpayers, they are denied credit. The second category consists of adjustment of past demands or arrears of the tax from the refund payable.
3. Section 245 of the Income Tax Act, 1961 envisages prior intimation to the assessee so that he can respond before any adjustment of refund is made towards a "demand" relating to any other assessment year. Thus opportunity of response/reply is given and after considering the stand and plea of the assesse, an order/direction for adjustment when justified and proper is made. The section postulates and mandates a two stage action. Prior intimation, and then a subsequent action when warranted and necessary of adjustment, of the refund towards arrears.
4. Most of the assessees have a grievance that in spite of writing letters to the deductors to rectify and correct the TDS details, the deductors fail and neglect to do so, as the failure does not entail any adverse consequence or action against them. The deductee being the tax payer is out of pocket and is harassed, but the deductor does not suffer, when the deductee does not get benefit of the tax paid.
The Court has directed the Revenue to file further affidavit and the case is posted for 2nd November 2012.
The High Court gave interim directions as:
1. We issue interim direction to the respondents that they shall in future follow the procedure prescribed under Section 245 before making any adjustment of refund payable by the CPU at Bengaluru. The assessees must be given an opportunity to file response or reply and the reply will be considered and examined by the Assessing Officer before any direction for adjustment is made. The process of issue of prior intimation and service thereof on the assessee will be as per the law. The assessees will be entitled to file their response before the Assessing Officer mentioned in the prior intimation. The Assessing Officer will thereafter examine the reply and communicate his findings to the CPC, Bengaluru, who will then process the refund and adjust the demand, if any payable. CBDT can fix a time limit for communication of findings by the Assessing Officer. The final adjustment will also be communicated to the assessees.
2. If the Assessing Officer feels that benefit of TDS reflected in AS26 should not be given, he should issue notice to the assessee to revise or correct the mistake and only if the necessary rectification or correction is not made, an order under Section 143(1) should be passed and the demand should be raised. We issue an interim direction to this effect.