TDS not accounted for by I-T dept? Delhi HC order provides some succour

The Delhi High Court, while giving its judgement on the problems encountered by the public in the matter of assessment of tax, said, “Rejection of TDS or failure to get credit for TDS puts the tax payer through needless harassment, inconvenience and costs. The problem, being systematic and institutional, has to be addressed on a general scale”

One more financial year has just come to an end and with that the job of collecting all income certificates, TDS certificates, etc has just begun to enable us to file our income tax (I-T) returns before the end of July 2013. Tax deducted at Source, or TDS for short, has been a pain in the neck for all middle class assesses and despite repeated representations, the government has not agreed to do away with the TDS, particularly in respect of bank deposits.
 

As per the amendment to the Finance Act last year senior citizens are not required to pay any advance tax before the close of the year, but need to pay appropriate tax, if liable, before filing the tax return. But this is only a half-hearted measure, as the government has not waived TDS even for senior citizens even though they are not required to pay advance tax, thereby putting them into great inconvenience.
 

Tax raised is fine but what about accountability in spending it?
 

Problems encountered by tax paying public:
 

Recently, the Federation of Tax Practitioners had filed a writ petition in the Delhi High Court seeking remedies for some of the following problems encountered by the public in the matter of assessment of tax.
 

1. While banks are prompt in deducting tax while paying interest, they do not bother to file TDS returns promptly due to which the tax deducted by them is not reflected in the Form AS 26 of the individual tax payer appearing in the Income Tax website, consequent to which the tax department sends notices to assessees demanding payment of tax.
 

2. Even if the TDS return is filed by banks, many a times, it is wrongly filed resulting in Income Tax Officers (ITOs) refusing to give appropriate credit to assessees for the tax paid by them, despite filing record of tax payments.
 

3. The Central Processing Unit (CPU) of the Income Tax department at Bangalore has, in respect of those assessees who have filed returns on-line, started issuing notices of late to assessees on the basis of wrong entries made in the income tax website showing tax due in respect of earlier years, and asking them to get the same rectified through their ITO, if it is not due from them. This is causing avoidable harassment to all those assessees who have no dues outstanding of earlier years and have a clean record of tax payment.
 

4. Even in such cases, when the assessees seek rectification of tax dues wrongly shown under their name, the ITOs do not respond promptly to such requests resulting in the CPU unilaterally adjusting the refund due for the current year to the non-existing dues shown as outstanding for earlier years, depriving the assesses the rightful refund due to them. 
 

Judgment of the Delhi High Court providing succour to tax payers:
 

Surprisingly the tax authorities have admitted to the Delhi High Court that the data uploaded in their website and relied upon by their Central Processing Unit has errors and mistakes. According to this data a sum of Rs2.33 lakh crore was due and payable as past arrears (payable before 31 March 2010) by the taxpayers.
 

The high court in its judgment dated 14 March 2013, observed as under: 
 

 “The magnitude and number of taxpayers adversely affected can be appreciated from the past arrears figure of Rs2.33 lakh crore, which the tax authorities accept may not be correct,” states the Delhi HC order.

“This effectively means that 23 lakh taxpayers were denied refund or have been refused full refund on account of past arrears,” observes the Delhi HC order.”
 

Should banks pay interest on current accounts as well?
 

The court further said, “Rejection of TDS or failure to get credit for TDS which has been deducted and paid hurts the tax payer and puts him through needless harassment, inconvenience and costs. The problem, being systematic and institutional, has to be addressed on a general scale.”
 

The court has, therefore, in its judgment has given directions to the tax authorities to ensure compliance of the following instructions for the benefit of the public:

  1. Dispose off rectification applications filed by taxpayers regarding non credit of TDS expeditiously. (a separate register for such applications be kept)                             
  2.  Do not adjust refunds against past outstanding demands without prior intimation to the taxpayers.  
  3. If refunds have been suo-moto adjusted, transfer the matter to the concerned tax officer for remedial action in a time bound manner.
  4. Pay interest on delayed refunds where the taxpayer is not at fault
  5. If demand orders for past arrears (for the period prior to 31 March 2010) were not properly communicated to taxpayers, they will be treated as invalid, unless the tax authorities can prove otherwise 
  6. Communicate with tax deductors in case of mistakes made by them in uploading TDS details and get it rectified 
  7. Give the benefit of TDS when taxpayers furnish evidence, even if the tax deductor has made mistakes in uploading details.

If a tax payer faces any of the problems mentioned above, it is advisable to take up the matter with the jurisdictional income tax officer referring to this judgment of the Delhi High Court and seek redress if you find that the tax department is at fault and require remedial action. 

 

 

Other stories by Gurpur
 

(The author is a banking analyst and he writes for Moneylife under the pen-name ‘Gurpur’)

Comments
S BHASKARA NARAYANA
1 decade ago
I too was affected by the IT dept's CPC, B'lore wing. They have not relied upon the form 16 provided by my employer. The Assessing Officer raised demand notice on me alone to my e-mail address, leaving my colleagues, since there is no credit in 26AS for the last quarter.

Even my employer came to my risk.
Can I ask the IT assessing officer to seek my employer, who issued the Form 16 duly verified.---ABXPS0727J
Navin
1 decade ago
I'm facing a similar problem. For a particular Financial year i was supposed to receive a Refund and this i did. However, in the CPC data they showed a demand and adjusted this demand through the refund amount which i was supposed to get in the subsequent years. Had been visiting the local I.tax office at Patna but no result.
Gurpur
Replied to Navin comment 1 decade ago
Mr. Navin, you may write a letter to the Income Tax Officer of your jurisdiction bringing to his notice the mistake committed by CPC in adjusting the refund due to you to the fictitious demand shown in their website and asking for setting right the records to enable you to get back the refund due to you. You can also quote this judgement of the Delhi High Court and seek immediate redressal of your grievance.

If you do not get a proper reply from the ITO within a month, you may approach the Commissioner of income Tax (Grievance Cell) at Patna itself and take up this matter with him for redressal. You may also specify the Delhi High Court order and seek immediate release of refund due to you.
If you do not get any positive response from the Commissioner's office within a month, the next course will be to approach the Income Tax Ombudsman of Patna, the details of which are available on the website of Income Tax dept.Govt. of India.

Kindly proceed as above and I am sure you will succeed in your efforts.
Gurpur.
Gurpur
Replied to Navin comment 1 decade ago
Mr. Navin, you may write a letter to the Income Tax Officer of your jurisdiction bringing to his notice the mistake committed by CPC in adjusting the refund due to you to the fictitious demand shown in their website and asking for setting right the records to enable you to get back the refund due to you. You can also quote this judgement of the Delhi High Court and seek immediate redressal of your grievance.

If you do not get a proper reply from the ITO within a month, you may approach the Commissioner of income Tax (Grievance Cell) at Patna itself and take up this matter with him for redressal. You may also specify the Delhi High Court order and seek immediate release of refund due to you.
If you do not get any positive response from the Commissioner's office within a month, the next course will be to approach the Income Tax Ombudsman of Patna, the details of which are available on the website of Income Tax dept.Govt. of India.

Kindly proceed as above and I am sure you will succeed in your efforts.
Gurpur.
TIHARwale
1 decade ago
Communicate with tax deductors in case of mistakes made by them in uploading TDS details and get it rectified.

this itself would ensure IT returns are assed without difficulty. another thing which calls for attention is if Tax Payer has to file returns by 31 July, TDS should file the details by 15 May and AS26 should be available by 30 June so that Tax payers can make self assessment by 10 July and returns can be filed by 31July
SuchindranathAiyerS
1 decade ago
There will be no real relief unless the erring parties are promptly penalized for the benefit of those who suffer. This is just "work in progress" for the Quota-Corruption Raj.
PRABHAT
1 decade ago
THE JUDGEMENT IS HIGHLY APPRECIABLE . A TAX PAYER IS NOT CONCERNED WITH TDS RECONCILIATION, IF HE IS HOLDING CERTIFICATE FOR THE TAX PAID / DEPOSITED . IN CASE OF ANY MISMATCH , I TAX DEPTT. SHOULD ASK FOR THAT BEFORE COMPLETING ASSESSMENT . BUT DEPTT. IS INTERESTED TO CREATE PANIC FOR THEIR CONVENIENCE .

A LARGE NUMBER OF TAX PAYERS ARE AFFECTED .
VIKAS SIVARAMAN
1 decade ago
It's about time the TaxPayer took a stand. Why pay tax when the processing of tax details and dues are so tedious and so flawed? After all it is hard earned money that the govt - by law - says is due from the taxpayer but then we all know how much of that money getts to where it should go. Look at the misuse and criminal malpractice in the NREGA. IT IS NOW APPARENT THAT ALMOST HALF THE ALLOCATED FUNDS ARE BEING SIPHONED OFF. So why pay taxes? To a Govt that is culpable and incapable of protecting that money and ensuring it reaches where it should? STOP PAYING TAXES TILL GOVERNANCE ENSURES THAT OUR HARD EARNED MONEY IS CORRECTLY AND SAFELY DEPLOYED TO THE LAST PAISA is my recommendation. I'm seriously considering this option. Should not you too?? Think.......
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