TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Court rules department's PAN correction limits impermissible, directs verification and bars higher tax demand.</h1> <h3>Purnima Advertising Agency Pvt. Ltd. Versus Deputy Commissioner of Income Tax - TDS Circle & 1</h3> Purnima Advertising Agency Pvt. Ltd. Versus Deputy Commissioner of Income Tax - TDS Circle & 1 - [2017] 396 ITR 526 Issues Involved:1. Error in mentioning the Permanent Account Number (PAN) in TDS returns.2. Demand for unpaid dues due to incorrect PAN.3. Limitation on correction of PAN errors in TDS statements.4. Department's policy on correction of PAN errors.Issue-wise Detailed Analysis:1. Error in Mentioning the Permanent Account Number (PAN) in TDS Returns:The petitioner, a company engaged in the advertisement business, made payments to various recipients and deducted tax at source (TDS) at 2%. Due to an inadvertent error, the PAN of M/s. Star (India) Pvt. Ltd. was wrongly mentioned in the TDS returns for the second and third quarters of the financial year 2010-2011. The respondent authority found that the PAN provided did not match the actual PAN of the deductee, leading to the application of Section 206AA(1) of the Income Tax Act, which mandates a higher TDS rate of 20% in the absence of a valid PAN.2. Demand for Unpaid Dues Due to Incorrect PAN:The department issued an intimation dated 24.11.2014, raising a demand of Rs. 2.04 crores for short deduction of tax at source. The petitioner realized the error and attempted to correct the PAN declaration. However, the online system of the department did not permit the correction because the system allows changes only if up to four digits/characters are to be corrected.3. Limitation on Correction of PAN Errors in TDS Statements:The department's affidavit stated that the online system permits corrections limited to two alphabetical and two numerical errors in the PAN. This limitation is built into the software to avoid undue charging of higher tax rates due to bona fide data entry errors. The affidavit also highlighted the challenges of processing millions of TDS statements and correction statements in a technology-driven ecosystem.4. Department's Policy on Correction of PAN Errors:The court examined the statutory provisions under Chapter XVII of the Act, which pertains to the collection and recovery of tax at source. Section 200A allows for the processing of TDS statements and correction statements, indicating the possibility of correcting errors. The court noted that while the department recognizes the possibility of genuine errors, it limits corrections to four characters. This limitation was deemed illogical and not supported by any conscious policy decision.Judgment:The court held that the department's decision to limit PAN corrections to two alphabets and two numeric characters was impermissible. The court directed the department to verify the petitioner's claim of actual deduction of tax at the prescribed rate in the case of M/s. Star (India) Pvt. Ltd., ensure that the corrected PAN belongs to the said agency, and confirm that the tax was actually deposited. If these conditions are met, the department should not insist on raising a higher demand from the petitioner under Section 206AA(1) of the Act.Conclusion:The petition was disposed of with the court directing the department to allow the correction of the PAN error and verify the petitioner's claims, ensuring that the higher demand for TDS is not enforced if the corrected PAN is validated and the tax was duly deposited.
TaxTMI 
TaxTMI 
