TaxTMI 
TaxTMI 
2012 (9) TMI 163
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....ches and difficulties are eliminated. 3. Having heard the parties, we feel that 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 tax payers, they are denied credit. The second category consists of adjustment of past demands or arrears of the tax from the refund payable. The two problems have to be addressed and tackled separately. 4. With regard to the second category, it is noticed that the Income Tax Department has initiated process of centralised computerization of records, centralized computerized filing and processing of returns and issue of refunds, which is to be appreciated and is laudable. The problem is not for the said reason but because of the wrong and incorrect data uploaded in the centralized computer system. In the counter affidavit it is stated that the Assessing Officers were asked to carry out physical verification of the past demands and to create manual arrears D&CR for upto the financial year 2010-11 vide Board‟s letter dated 28th A....
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....count by the assessing officers in the course of verification/reconciliation of demands at their end. Besides, the assessing officers have also to taken into consideration the regular tax payments (minor head 400) made by the assessee to arrive at the correct outstanding demand. As the reconciliation has to be done by a large number of assessing officers of respective CCIT(CCA) region there is a need of supervisor and monitoring of this activity by the CIT(CO)." 6. Section 245 of the Income Tax Act, 1961 empowers and authorizes an Assessing Officer to adjust refunds against demand. The said Section reads:- "245. Set off of refunds against tax remaining payable.-Where under any of the provisions of this Act a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken unde....
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....ssued a communication of the taxpayers through e-mail (wherever e-mail address is available) and by speed post informing him the existence of the demand in the books of the AO and that such demand is liable for adjustment against refund u/s 245 of the IT Act, 1961. As on dated 14.6 lakh such communications have been sent through e-mail and 8.33 lakh communications have been sent through speed post." (emphasis supplied) 10. In the said paragraph it is accepted that when a return is processed under Section 143(1), the CPU itself adjusts the refund due against the existing demand i.e. there is adjustment, but without following the procedure prescribed under Section 245, which requires prior intimation so that the assessees can respond or give their explanation. It is also stated in the said paragraph that 14.6 lac communications have been sent by e-mail and 8.33 lac communications have been sent through speed posts making adjustments of refunds. The total amount adjusted as per the letter dated 21st Aug., 2012 is Rs. 4800 crores. 11. At this stage, Mr. Sanjeev Sabharwal, sr. standing counsel states that in some cases prior intimation was sent. Ms. Prem Lata Bansal, Sr. Advocate,....
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....mmunicated to the assessees. 14. This brings us to the problem where adjustments of refund has been made by the CPC, Bengaluru, without following the procedure prescribed under Section 245 of the Act and adjustment has been made for non-existing or fictitious demands. Obviously, the Revenue cannot take a stand that they can make adjustments contrary to the procedure prescribed under Section 245 of the Act based on the wrong data uploaded by the Assessing Officers. Question of payment of interest also arises. However, before issuing final directions in this regard, an affidavit as directed above explaining the procedure adopted by them should be brought on record. Opportunity is given to the Revenue to adopt a just and fair procedure to rectify and correct their records and issue refunds with interest without putting a harsh burden and causing inconvenience to the assessee. 15. This brings us to the first problem relating to the failure of the taxpayers to get credit of the TDS, which has been deducted from the income payable/paid to them. The said problem can be further bifurcated into two categories. The first category relates to cases where the amount is reflected in Form 2....
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....e consolidated list of such mismatches are sent from CPC to the CIT (TDS) having jurisdiction over the deductor for necessary follow-up with the deductors." 19. The response is unconvincing and unsatisfactory. It expresses complete helplessness on the part of the Revenue to take steps and seeks to absolve them from any responsibility. 20. Mr. Nagesh Behl, CA has drawn our attention to Section 272BB, wherein penalty of Rs.10,000/- has been prescribed for failures on the part of the deductor. The Board will examine the said provision and whether the same can be invoked in cases where complaints are received from the tax payers that in spite of requests, the deductors fail to rectify the defects or upload the correct TDS details. Denying benefit of TDS to a tax payer because of fault of the deductor, which is not attributable to the deductee, is a serious matter and causes unwarranted harassment and inconvenience. Revenue cannot be a silent spectator and wash their hands or express helplessness. This problem is normally faced by the small taxpayers including senior citizens as they do not have Chartered Accountants and Advocates on their pay roles. The marginal amount inv....
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....n to report Advance Tax/Self Assessment Tax Payment Particulars. Mistake in PAN, Assessment Year etc. committed while preparing the challan. Furnish the correct particulars to the bank branch where challan was paid and request for uploading corrected challan data to NSDL. 23. It is further stated in the counter affidavit:- "Procedure for rectification and correction of mismatch. (i) While communicating the intimation after processing of the electronic returns, CPC also intimates to the assessee a report of mismatch of tax credit. The template of such mismatch communication (M5) is appended herewith. On receipt of the same, tax payers are requested to examine their records and correct the error(s) of the nature indicated above. (ii) Thereafter the tax payer ma approach CPC, Bangalore for „Rectification‟ of the earlier intimation based onn corrected entries, and the entitled tax credit is allowed to the taxpayer by CPC. Procedure for giving credit even when there is slight mismatch. (i) That the taxpayer is not allowed to credit of taxes even if there is a lightest of mismatch in the TDS particulars reported in form 26AS is not correct be....
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....mall tax payers/individuals regarding issue of refunds, which are denied on the basis of wrong or bogus demands or incorrect record maintenance and the problem faced by them in getting full credit of the tax, which is deducted from their income and paid to the Revenue. The problem is apparent, real and enormous. It has escalated because of Centralized Computerization and problems associated with the incorrect and wrong data which is uploaded by both the deductors or payees and the Assessing Officers. The issue is of general governance, failure of administration, fairness and arbitrariness. The magnitude of the problem and the number of tax payers adversely affected thereby is apparent from the counter affidavit, wherein it is admitted that 43% and 39% of the returns in Delhi zone for the Financial Year 2010-11 and 2011-12 respectively were defective. Substantial number of these defaults relate to mismatch of TDS details and the tax payers have been denied benefit of TDS claimed by them. For the Financial Year 2010-11, the approximate demand created in Delhi Zone because of the defective returns was Rs.3000 crores, which stands reduced to Rs.1900 crores after the tax payers approach....