2014 (5) TMI 520 - HC - Income Tax

High Court orders refund of excess TDS with interest, stresses fair treatment in tax matters

The High Court ruled in favor of the petitioner, a civil contractor, in a case concerning the refund of excess tax deducted at source (TDS) by a ... Mismatching of TDS amount - Refund of TDS - Application for rectification of mistake u/s 154 of the Act – Held that:- Following COURT ON ITS OWN MOTION Versus COMMISSIONER OF INCOME TAX AND OTHERS [2013 (3) TMI 316 - DELHI HIGH COURT] - no effort was made by the AO to verify the fact as to whether the deductor had made the payment of the TDS in the government account - Department has shown their helplessness in not refunding the amount on the sole ground that the details of the TDS did not match with the details shown in Form 26AS - it is apparent that there is a mismatch between the details uploaded by the deductor and the details furnished by the assessee in the income tax returns - when the assessment was processed and a refund was issued, no intimation was given by the department as to why the balance TDS amount could not be credited – the AO was under a duty to verify whether or not the deductor had made the payment of the TDS in the government account. Assessee has suffered a TDS, but has not been given due credit inspite of the fact that he has been issued a TDS certificate by a government department- There is a presumption that the deductor has deposited TDS amount in the government account especially when the deductor is a government department - By denying the benefit of TDS to the assessee because of the fault of the deductor causes not only harassment and inconvenience, but also makes the assessee feel cheated - the mismatching is not attributable to the assessee and the fault solely lay with the deductor – assessee is entitled for refund of the TDS amount - The assessee has also made out a case for payment of interest since there was delay in refunding the amount which was attributable solely with the Department and there is no fault on the part of the assessee – Decided in favour of Assessee. Issues:1. Refund of excess tax deducted at source (TDS) by Government Department.2. Failure of Income Tax Department to credit TDS amount due to mismatch.3. Legal remedy sought for refund and interest payment.Analysis:1. The petitioner, a civil contractor, received payments from Government Departments with TDS deducted. The petitioner filed for income tax return, claiming a refund of excess tax paid. The Income Tax Department processed the return, issued a partial refund, but withheld the balance citing mismatched TDS details.2. The petitioner filed applications for rectification under Section 154 of the Income Tax Act, seeking the refund of the balance amount. The Department admitted processing the return but claimed the applications were not received or signed correctly. The issue of mismatched TDS was acknowledged, with the Department requiring TDS details to match Form 26AS for refunds.3. The High Court referred to a Delhi High Court case highlighting the challenges faced by taxpayers due to TDS mismatches and the administrative failures causing inconvenience and financial burden. The CBDT issued instructions for verifying TDS payments and giving credit in case of mismatches. The High Court found the Department's failure to verify TDS payment by the Government Department and the mismatch issue unjust, leading to harassment for the petitioner.4. The Court invoked Section 237 and Section 243 of the Income Tax Act, emphasizing the petitioner's entitlement to a refund of excess tax paid and interest on delayed refunds. The Court ruled in favor of the petitioner, issuing a mandamus for the refund of the TDS amount with interest, attributing the delay solely to the Income Tax Department's fault.5. The judgment directed the Department to refund the amount with interest within three weeks and pay costs to the petitioner. The decision highlighted the importance of fair treatment, rectification of administrative errors, and providing relief to taxpayers facing TDS mismatch issues, especially when the fault lies with the deductor, in this case, a Government Department.