TaxTMI 
TaxTMI 
2013 (3) TMI 316
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....h April, 2012 written by Anand Prakash, F.C.A. Chartered Accountant. The said letter was treated as PIL and marked to this Court. Subsequently, All India Federation for Tax Practitioner filed the second writ petition on identical or similar lines. For the sake of convenience, we reproduce the letter dated 30th April, 2012 in verbatim: "1. 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. 2. 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. 3. Whenever any Department/Govt Office....
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....ld not be levied at all. 9. 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. The Hon‟ble Supreme Court in the case of Pranob Roy as reported in 309 ITR 231 has held that interest is compensatory in nature and as such no interest should be charged when the taxes stands paid either as Advance Tax or as self assessment tax. 10. 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 & credit will not be allowed by the Income Tax Department. Whereas there is no fault of deductee any where. 11. 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 NSD....
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....it shall be indicated and the respondents need not furnish the said details." The order dated 4th May, 2012, also refers to difficulties with regard to PAN card numbers. This aspect has not dealt with and is left open, if required and necessary to be examined in another case. 4. On 30th May, 2012, another detailed order was passed as certain aspects/questions were highlighted. The point raised were crystallized for the purpose of counter affidavit to be filed by the respondents and read: " (i) Whether it is possible to have a centralized window for receipt of applications in case benefit of TDS certificate is refused or refund due has been adjusted against a demand for a previous year? The application once received should be processed within a specified time frame and the assessee should be informed by post. (ii) Whether single Window Counter can be set up for assessees to make complaints that the deductor has not correctly uploaded the details as a result of which the assessee is not getting the credit of the TDS? (iii)(a) Nagesh Kumar Behl, who has moved an application being C.M. No.7309/2012 has stated that the problem regarding adjustment of refunds where even no ta....
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....y but the said process is very cumbersome. The respondents will examine whether their software can be programmed to refuse/ reject uploading of incorrect data, thus compelling the deductor to feed correct information and the deductor can come to know that the particulars filled up are incorrect and require rectification. (ix) Whether department has informed the deductors about incorrect details and has asked them to rectify the errors within a time period? In case of failure, what action is taken? What happens when a complaint is made by the deductee? (x) Whether the payment of interest on refund under Section 244A is incorporated in the software itself so that when the refund due is calculated it is inclusive of interest, if payable. It is also pointed out that in many cases there is delay between date of determination of refund and issue of the refund cheque/ transfer but interest for said period is not paid. (xi) Even otherwise refund due are not paid with interest. Whether, the application/request for interest can be entertained by post or by email and answered within a specified time frame? (xii) It is pointed out that without password and user name, online returns....
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....nr. Vs. Commissioner of Income Tax and Another (2009) 309 ITR 231 (SC), which as per the Revenue cannot be applied. The second issue is more contentious and relates to whether an assessee is entitled to credit of TDS which has been deducted by a deductor but not paid or credited to the Government. These two issues, it was observed can be taken up by individual assesses and it would not be proper to entertain a Public Interest Litigation on these aspects. In our order dated 31st August, 2012, we clarified that the PILs have not been entertained to decide individual claims but in view of the general problems being faced by most taxpayers specifically by small taxpayers regarding issue of refunds, which are denied for bogus or wrong demands/arrears or incorrect record maintenance and the problem in getting full credit of the tax which has been deducted from the income and paid/deposited with the Revenue. The problem was apparent, real and enormous and had escalated because of centralised computerisation and problems associated with the incorrect and wrong data which was uploaded by the tax deductors or payers and the Assessing Officers. The issue was of general governance, failure of ....
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....ssing Unit for processing of returns and issue of refunds. Besides, these steps relate to policy and fall within the exclusive domain of the respondents. These steps have to be appreciated as they ensure transparency, openness, eliminate high handedness and curtail corruption/red tapism. UPLOADING OF WRONG OR FICTITIOUS DEMAND 9. Prior to 31st March, 2010, Income Tax Returns were examined manually and the respondents did not have centralised computerised data or record of the demands outstanding against a particular assessee. Each Assessing Officer manually maintained a Demand and Collection Register (D&CR, for short). In the counter affidavit, it is stated that the Standing Committee on Finance and Demands for Grants (200910) of the Ministry of Finance (Department of Revenue) had recommended uploading of arrears of demand in the CPU. On 18th March, 2010, the committee was constituted to put in place Management Information System (MIS) for collating and retrieving of data concerning appeal, disposal and recovery etc. In order to carry out the mandate, Chief Commissioners were asked to devote one entire month for house-keeping work with special emphasis on physical verificatio....
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....iation 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)." 12. The letter points out two problems. Firstly, there is problem about the verification and reconciliation of demand which had been uploaded by the Assessing Officer in the CPU. It has been pointed out that these demands were being disputed by the taxpayers. The Assessing Officers were advised to upload amended figures after correction and reconciliation. Secondly tax demand to the tune of Rs.4800 crores had been adjusted by the CPU by way of adjustment of refunds. This adjustment accordingly should be duly reflected and shown in the record maintained by the individual Assessing Officers. On a reading of the said letter, one can see and understand the concern and anguish expressed on account of uploading of incorrect and wrong data in the CPU and the problem faced by them and in turn prob....
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.... if any, so adjusted by CPC due to inaccurate figures of arrear demand uploaded by the Assessing Officer. The Assessing Officer, in appropriate cases, will also upload amended figure of arrear demand on the Financial Accounting System (FAS) portal of Centralised Processing Center (CPC), Bengaluru wherever there is balance outstanding arrear demand still remaining after aforesaid correct/reconciliation. In other cases, where the assesse disputes and requests for correction of the figures of arrear demand, whether uploaded on CPC or not uploaded and still lying in the records of the Assessing Officer, the jurisdictional assessing officer shall verify the claim of the assessee on merits and after due verification of such claim, will make suitable correction in the figure of arrear demand in his records and upload the correct figure of arrear demand on CPC portal. 5. It is specifically clarified that these instructions would apply only to the cases where the figures of arrear demand is to be reconciled/correctedwhether such arrear demand has been uploaded by the Assessing Officer on to Financial Accounting System (FAS) of CPC or it is still in the records of the Assessing Officer....
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....bruary, 2013, it was directed that the respondents must examine the necessity for proper dak/receipt counters for receipt of applications under Section 154 by hand or by post. It was observed that it will be desirable that each application received should be entered in a diary/register and given a serial number with acknowledgement to the applicant indicating the diary number. It was also suggested that details of applications under Section 154 should be uploaded on the website as this would entail transparency. The website should indicate the date on which the application was received and date of disposal of the application by the Assessing Officer concerned. 16. In the affidavit filed on 5th March, 2013, the respondents have stated that they have "recently" prescribed a register for receipt of rectification applications. The said register has various columns namely, date of disposal, date of service of rectification application, demand/refund etc. This is the right step but it must be ensured by the Board that the registers are made available to all Assessing Officers or at the dak counters. The said registers will be made available to the dak counters and the Assessing office....
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....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 under this section." 20. The respondents in their counter affidavit have accepted that the Board from time to time has issued directions that the said Section and the procedure prescribed should be strictly adhered to. Reference is made to instruction Nos. 1952, 1969 and 1989 dated 14th August, 1998, 20th August, 1999 and 20th October, 2010 respectively. Another instruction CPC No. 1 dated 27th November, 2012 has been issued recently. However, in the counter affidavit filed on 28th July, 2012 two conflicting or contradictory stands were taken. In one of the paragraphs of the counter affidavit, the respondents have stated as under: "Accordingly, it was again reiterated that the provisions of section 245 of the I.T. Act, 1961 must be followed and written intimation must be sent to the assessees before adjusting refund of the outstanding demand and any lapse in this regard shall be viewed seriously. The CCsIT/DGsIT/CsIT were direct to....
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.... circumstances, in the order dated 31st August, 2012 we had passed the following interim order: "13. 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." 24. The said interim order is confirmed. We notice that the respondents have taken remedial steps to ensure compliance of Section 245 of the Act as they now give an op....
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....an order under Section 245 of the Act permitting or allowing the refund. E. The Board will fix time limit and schedule for completing the said process. 27. There are three reasons why we have issued the said direction. Firstly, the respondents accept and admit the position that wrong and incorrect demands have been uploaded in the CPC Bengaluru. Secondly, the respondents have not followed the mandate and requirement of Section 245 of the Act before making the adjustment. The two stage process with the opportunity and right of the assessee to submit a reply before the adjustment is made, has been denied. CPC Bengaluru did not entertain or accept any application of the assessee questioning past arrears uploaded in their system as they are not custodian of past records. CPU Bengaluru entertain on-line applications but do not entertain physical or hard copy applications. Assessing Officer similarly did not entertain any application by the assessee on the ground that the order under Section 143(1) was passed by the CPC Bengaluru and they do not have the files/return with them. Thus, the problem was created and caused by the respondents who did not realise the effect and impact of ....
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....fault of the assessee. These are lapses on the part of the Assessing Officer i.e. the Revenue. Interest cannot be denied to the assessees when the twin conditions are satisfied and in favour of the assessee. However, even in such cases Assessing officer may deny interest for reasons to be recorded in writing if the assessee was in fault and responsible for the delay. This is the fourth mandamus which we have issued. 33. The second grievance of the assessee is with regard to the uncommunicated intimiations under Section 143(1) which remained on paper/file or the computer of the Assessing Officer. This is serious challenge and a matter of grave concern. The law requires intimation under Section 143(1) should be communicated to the assessee, if there is an adjustment made in the return resulting either in demand or reduction in refund. The uncommunicated orders/intimations cannot be enforced and are not valid. Respondents in the counter affidavit have not dealt with this problem on the assumption that the Assessing Officer who had manually processed the returns and passed the order/intimations under Section 143(1) would have necessarily followed the statute and communicated the sai....
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....h we have issued. CREDIT OF TAX DEDUCTED AT SOURCE (TDS) 35. This brings us to the second issue regarding credit of TDS or rejection of credit even when the TDS stands paid by the deductor. The said problem can be divided into two categories; cases where the deductors fail to upload the correct and true particulars of the TDS, which has been deducted and paid as a result of which the assessee does not get credit of the tax paid, and the second set of cases where there is a mismatch between the details uploaded by the deductor and the details furnished by the assessee in the income tax return. The details of TDS credited/uploaded in the case of each assessee are now available in form 26 AS. 36. The magnitude of the problem faced by the assessees on account of mismatch for the first reason can be appreciated if we notice the figures given by the respondents in the counter affidavit filed on 28th July, 2012. It is stated that in Financial Years 2010-11 and 2011-12 as many as 43% and 39% of the TDS returns processed in Delhi zone, where the level of compliance is much higher and better than the national average, were found to be defective. A total demand of Rs. 3000 crores app....
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....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 because the board has been issuing Instructions to the filed formations for permitting credit of TDS with or without verification depending upon the facts of the case as mentioned in the instructions. In this regard, a reference may be made to Instruction No.2 of 2011 dated 9th February, 2011 and Instruction No.1 of 2012 dated 2nd February, 2012. (ii) In the said Instructions, the Board has asked the Assessing Officers to accept the TDS claims without verification in all returns where the difference between the TDS claimed and matching TDS amount reported in AS26 data does not exceed rupees one lac. Therefore, the Department is aware of the....
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....ure that fraudulent or double claims for TDS are not made. We are not issuing any specific directions as it is a technical matter but the respondents should take remedial steps in this regard. 42. Another problem highlighted relates to the use of alphabets „U‟, „M‟ and „P‟ in form 26 AS. The said alphabets stand for „unmatched challan‟, „matched challan‟ and „provisional booking‟. It is stated that „provisional booking‟ is applicable for DDOs, i.e., Government deductors and shall be shortly discontinued. „Unmatched challans‟ relate to challans where the report by the deductor in the TDS statement are not found available in the OLTAS data base (OLTAS stands for Online Tax Accounting System). The respondents will fix a time limit within which they shall verify and correct all unmatched challans. This will necessarily require communication with the deductor and steps to rectify. The time limit fixed should take into account the due date of filing of the return and processing of the return by the Assessing Officer. An assessee as a deductee should not suffer because of fault made by deduc....
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.... TDS/TDS statement within due date. Income Tax Rules, 1962 have been modified wherein deductors of all categories are mandated to upload TDS certificates through Tax Information Network System. The issue whether Section 272 BB can be invoked for defaulting deductors, the respondents have stated as under: "11. That with regard to this, it is submitted that Section 272BB of the Act is for failure to comply with the provisions of Section 203A. Section 203A relates to the obtaining of TDS account number/TCS account number by the deductor/collector and quoting of these account numbers in challans, certificates, returns etc. Thus, Section 272BB does not come to the aid of the deductees as far as the issue in paragraph 20 of the order is concerned. However, subject to the conditions specified under Section 271H(3)/(4) of the Act, Section 271H(1) provides for levy of penalty for failure to submit statement under Section 200(3)/ proviso to Section 206C(3) within the time prescribed or for furnishing incorrect information in the said statements." 48. The Finance Minister in his recent speech while inaugurating the new Central Processing Cell for Tax Deducted at Source at Aayakar Bhawan....
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....edit claimed by the taxpayers did not match with the details loaded by the deductors. The Act empowers and authorises the Assessing Officer to verify the contents of the return and notices can be issued to a third party, i.e. the deductor, to furnish information and details. The deductor, the principal officer or person responsible for making deduction, once issued notice to appear, in most cases, would like to comply with the statutory requirements and also furnish details with regard to TDS deducted from the income of the assessee. The statutory powers given to the Assessing Officer are sufficient and should be resorted to and the assessee cannot be left to the mercy or the sweet will of the deductors. Therefore, we direct that when an assessee approaches the Assessing Officer with requisite details and particulars, the said Assessing Officer will verify whether or not the deductor has made payment of the TDS and if the payment has been made, credit of the same should be given to the assessee. These details or the TDS certificate should be starting point for the Assessing Officer to ascertain and verify the true and correct position. The Assessing Officer will be at liberty to ge....
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.... back to the Deductor to correct the details/statement already filed. However, inspite of the Assessee having furnished details to the Deductor, somehow deductor does not upload/correct the statement but Assessee had evidence/necessary proof and documents, then Assessee will be entitled to approach the concerned Assessing Officer and who after due verification will allow such credit." 54. Steps for implementation and to ensure that credit is given to such assessee should be taken by the respondents in this regard and for compliance instructions should be circulated to the Assessing Officer. 55. Thus every effort and attempt must be made to ensure that the assessee should get benefit of the TDS deducted by the deductor and paid to the Government. It would be unfortunate and a matter of regret if an assessee does not get credit, inspite of payment of tax. 56. That facts elucidated above, reveal that there is a communication gap between the assesses and the respondents. We are informed that there is an Income Tax portal where under the head „My Account‟, an assessee can make comments and raise grievance. It may be advisable for the respondents to examine grievance....