High Court fines Income tax Department for not granting TDS credit

The below judgement in favour of taxpayer regarding non granting of due refund due to mismatch in TDS credit in Form 26AS:

Rakesh Kumar Gupta vs. UOI (Allahabad High Court)

Assessee cannot be denied credit for TDS on the ground of Form 26AS mismatch because he is not at fault. Non-grant of TDS credit causes harassment, inconvenience & makes the assessee feel cheated. Dept to pay interest + costs of Rs. 25,000

The assessee filed a return in which he claimed a refund of Rs. 2.32 lakhs on account of excess TDS by the Government department. The return was processed by the Central Processing Centre (CPC) of the Income-tax Department at Bangalore and a refund of only Rs.43,740 was issued. No intimation was given to the assessee as to why the balance amount of Rs.1.88,630 was not refundable. The assessee filed an application u/s 154 for rectification of the mistake and asked for refund of the balance amount. As there was no response from the department despite several reminders, the assessee filed a writ petition in the High Court. HELD by the High Court allowing the Petition:

(i) The difficulty faced by the tax payers relating to credit of TDS was considered by the Delhi High Court in Court On its Own Motion vs. CIT 352 ITR 273 and the CBDT was directed to issue directions with regard to giving credit of unmatched and mismatched TDS certificates. Pursuant thereto, the CBDT issued Instruction No.5 of 2013 dated 8.7.2013 directing that where the assessee approaches the AO with requisite details and particulars in the form of TDS certificate as evidence against any mismatch amount the AO would verify whether or not the deductor had made payment of the TDS in the government account and, in the event, the payment had been made, credit of the same would be given to the assessee.

(ii) On facts, no effort has been made by the AO to verify whether the deductor had made the payment of the TDS in the government account. On the other hand, the Income-tax department has shown 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. 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 Petitioner because of the fault of the deductor causes not only harassment and inconvenience, but also makes the assessee feel cheated. There is no fault on the part of the Petitioner. The fault, if any, lay with the deductor. The mismatching is not attributable to the assessee.

The department must refund the amount within 3 weeks with interest. The department must also pay costs of Rs. 25,000 to the Petitioner.

PAN Card misuse scam

Don't give PAN number for railway Tatkal booking as proof of ID.

The Railways display the PAN. name, sex and age of passengers on reservation charts pasted on railway compartments.

This is a boon for benami transactions. It is mandatory for traders like jewelers to collect tax (TCS) from customers on purchase of jewelry worth Rs 5 lakh & bullion worth Rs 2 lakh.

While complying with TCS rules for collection, payment and uploading of TCS information (e-filing of TDS returns) jewellers have to furnish PAN of customers. For certain customers it is not convenient to provide PAN.

To accommodate high net worth customers, traders have a easy source of benami PAN numbers, name, sex and age from reserved railway compartments. A traveller recently noticed a chap copying PAN particulars along with name, age and sex pasted on reserved compartments, and when confronted with the help of railway police, he admitted that he gets Rs 10 per PAN particulars from jewellers. These persons are copying PAN information of senior citizens, women etc from sleeper class with the intention that passengers in sleeper class are not serious tax payers and generally salaried class.

This wrong usage of a PAN number is known only to the regular tax payers, who regularly check their tax credit on form 26AS provided by the Income Tax department on their website.

This form 26AS is updated only on filing of e-TDS returns by the traders. There is almost 6-12 months time delay for the PAN holder to know that a transaction of above nature has taken place on his name and that too only if he goes through form 26AS.

On noticing the tax credit of above nature while reconciling form 26AS for tax credits for filing the return during subsequent financial year i.e. July / September, the tax payer has an option to exclude the same and go ahead in filing the return.

In that case the department will first initiate action from the tax payer's side asking him to explain the sources of money for the above transaction done in his name and also to prove that he has not carried on the above transaction.

The onus lies on the genuine tax payer for the fault committed by the traders.

This dispute may even take more than 2 years to be settled.

In conclusion, the only way to protect yourself from these fraudulent transactions, is to avoid quoting PAN details for identity proof at any source except for income tax related matters for which your Government had issued for.

You may quote your driving licence , Voter ID etc as your ID Proof but definitely not your PAN.

SOURCE : UNKNOWN/INTERNET

TDS Credit must be given even if TDS Certificate is not available/ entry is not shown in Form 26AS

Citicorp Finance (India) Ltd vs. ACIT (ITAT Mumbai)

The assessee claimed credit for TDS which was denied by the AO on the ground that the claim did not match the entries shown in Form No. 26AS and that there was a discrepancy. On appeal, the CIT(A) held that the assessee would be entitiled to credit to the extent shown in the computer system of the department. On further appeal by the assessee to the Tribunal HELD:

The AO is not justified in denying credit for TDS on the ground that the TDS is not reflected in the computer generated Form 26AS. In Yashpal Sahwney 293 ITR 539 the Bombay High Court has noted the difficulty faced by taxpayers in the matter of credit of TDS and held that even if the deductor had not issued a TDS certificate, still the claim of the assessee has to be considered on the basis of the evidence produced for deduction of tax at source. The Revenue is empowered to recover tax from the person responsible if he had not deducted tax at source or after deducting failed to deposit with Central Government. The Delhi High Court has in Court On Its Own Motion Vs. CIT 352 ITR 273 directed the department to ensure that credit is given to the assessee even where the deductor had failed to upload the correct details in Form 26AS on the basis of evidence produced before the department. Therefore, the department is required to give credit for TDS once valid TDS certificate had been produced or even where the deductor had not issued TDS certificates on the basis of evidence produced by assessee regarding deduction of tax at source and on the basis of indemnity bond.

Note: See also 3i Infotech Limited where it was held “merely because the Department’s system does not indicate the TDS refund, it cannot be held that the assessee should be compelled to deposit the amount once again. It is for the Department to check the error in its system or point out fallacy in the assessee’s claim. There can be no question of penalizing the assessee for no fault committed by it”.

TDS credit to be awarded in deductor deposited it irrespective of 26AS mismatch

CBDT’s Instruction No. 5/2013 [F.No.275/03/2013-IT(B)], dated 8.07.2013

1. The CBDT issues instructions with respect to processing of Income-tax returns and giving credit for TDS thereon in the case of TDS mismatch. A few of the instructions on this subject issued in previous years are Instruction No. 1/2010 (25-2-2010) for returns pertaining to A.Y, 2008-09; Instruction No. 05/2010 (21-7-2010), Instruction No. 07/2010 (16-8-2010) and Instruction No. 09/2010 (9-12-2010) for returns pertaining to AY. 2009-10; Instruction No. 02/2011 (9-2-2011) for returns pertaining to A.Y. 2010-11; and Instruction No. 1/2012 (2-2-2012) and Instruction No. 04/2012 (25-5-2012) for returns pertaining to A.Y. 2011-12. The instructions gave decisions and the manner in which the TDS claims were to be given credit while clearing the backlog of returns pending processing. In the cases that did not fall under the specific TDS amount limit or refund amount computed, the residuary clause in these instructions gave the manner of processing those returns and it stated that “TDS credit shall be given after due verification“. 2. The Hon’ble Delhi High Court vide its judgment in the case ‘Court On its Own Motion v. UOI and Ors. (W.P. (C) 2659/2012 & W.P. (C) 5443/2012 dated 14-3-2013) has issued seven mandamuses for necessary action by Income-tax Department, one of which is regarding the issue of non-credit of TDS to the taxpayer due to TDS mismatch despite the assessee furnishing before the Assessing Officer, TDS certificate issued by the deductor. 3. In view of the order of the Hon’ble Delhi High Court (reference: para 50 of the order); it has been decided by the Board that when an assessee approaches the Assessing Officer with requisite details and particulars in the form of TDS certificate as an evidence against any mismatched amount, the said Assessing Officer will verify whether or not the deductor has made payment of the TDS in the Government Account and if the payment has been made, credit of the same should be given to the assessee. However, the Assessing Officer is at liberty to ascertain and verify the true and correct position about the TDS with the relevant AO (TDS). The AO may also, if deemed necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down. 4. Thus, the manner laid down by the Hon’ble HC in the above mandamus may be one of the method of due verification as mentioned in the various instructions referred in para (1) above. 5. This may be brought to notice of all Officers working under your jurisdiction for compliance

Unmatched TDS challans in form 26AS to be verified & corrected by 31-12-2013 : CBDT

INSTRUCTION NO 11/2013,  Dated: 27 August, 2013

Subject: – Action on Unmatched Challans reflected in Form 26AS – direction of the Hon’ble Delhi HC in the case ‘Court on Its Own Motion vs. UOI & Ors in WP(C) 2659/2012 & WP(C) 5443/2012′- regarding
1. The. Hon’ble Delhi High Court vide its judgement in the case ‘Court On its Own Motion vs. UOI and Ors’ (W.P. (C) 2659/2012 & W.P. (C) 5443/2012 dated 14.03.2013) has issued seven mandamuses for necessary action by Income-tax Department, one of which is regarding the issue of ‘Unmatched Challans’ reflected in Form 26AS where the report by the deductor in the TDS statement are not found available in the OLTAS database resulting in TDS mismatch.
2. The unmatched challans belong to two categories of TDS statements, viz.-

   (i) Statements pertaining to FY 2011-12 and earlier which have been processed by jurisdictional TDS Assessing Officers [hereinafter AOs(TDS)]

   (ii) Statements pertaining to FY 2012-13 onwards, now processed by CPC(TDS)

3. The Hon’ble Delhi High Court (reference: para 42 of the order), has directed that

   “…with regard to unverified TDS under the heading ‘U’ in form 26AS for verification and correcting unmatched challans within a time period, which should be fixed by the Board keeping in mind the date of filing of return and processing of return by the assessing officers.”

4. In view of the above direction of the Hon’ble High Court, it has been decided by the Board that the CPC(TDS)/AOs(TDS) shall immediately issue letters to the deductors, in whose case TDS challans are unmatched, with a view to verify and correct these challans. If necessary, the deductors may be asked to file correction statements, as per the procedure laid down and necessary follow up action be taken. The task should be completed by 31st December, 2013 for FY 2012-13 in the case of CPC (TDS) and FYs 2011-12 & earlier in case of AOs (TDS).
5. This may be brought to notice of all Officers working under your jurisdiction for compliance.
6. Hindi version shall follow.

F. No. 275/0312013-IT(B)

(Anshu Prakash)

Director IT (Budget), CBDT

TAX COMPLIANCE AND TAX PLANNING FOR SALARIED INDIVIDUALS

TAX NEWSLETTER

Volume 1   Issue 1

June, 2012

TAX COMPLIANCE AND TAX PLANNING FOR SALARIED INDIVIDUALS

This issue of the newsletter aims at creating awareness amongst salaried employees about various tax compliance and possible tax planning over the year. We are in the month of June wherein the last financial year (FY) 2011-12 has gotten over and due date to file Return of Income stares in the face and also it is time to submit your Investment declaration for FY 2012-13.

We aim at providing solutions for tax savings and awareness of tax benefits for FY 2011-12 and steps to be taken before hand for tax planning of FY 2012-13.

Most of the tax planning for Salary income can be done at the Salary Structuring (deciding the components of your Salary in most tax efficient manner) stage itself i.e. at the time when one receives his employment letter. Unfortunately, it is not a normal practice to allow employees to choose their Salary components. Nevertheless, let’s take a look at the advantageous methods to reduce your tax liability and a brief insight relating to the issues of Income-tax on Salary.

What is Form 16?

Form 16 is a Certificate of TDS (Tax deducted at Source) i.e. tax deducted on your Salary by your Employer and deposited with the Government on your behalf.

It reflects the details of your Gross Salary, the exempt allowances, your Other Income if any, details of Investments made and deductions availed. Thereafter, your tax liability, TDS made, and tax payable/refundable (If any).

Form 16 needs to be compulsorily issued if tax is deducted on your Salary. It is the responsibility of the Employer to issue Form 16.

As per law, Form 16 for FY 2011-12 needs to be issued to employees by 30^th May 2012 (Being within 15 days of filing of Quarter IV Etds Return).

How do I confirm the TDS shown in my Form 16 is actually correct?

It is the prime responsibility of the Employer to furnish accurate details in Form 16, failure of which attracts penalty to the employer.

Nevertheless, tax authorities recently have empowered the deductees (Employee on whose Salary TDS is made) to cross-verify the TDS details against the records available with the Government.

Tax Information Network (TIN; a division of the Income-tax department) has introduced in recent years, the Form 26AS wherein any tax deducted at source on any of your income is reflected. Thus, you can cross-verify whether the tax that has been deducted is actually paid to the government or not?

It is compulsory to file my Return of Income?

Yes. As per the Income-tax Act, every person whose Gross Total Salary exceeds the basic exemption limit (Rs. 1,80,000/2,10,000/2,50,000) has to file a Return of Income (ROI). Failure to file the Return of Income can expose to a penalty of Rupees Five Thousand.

Also, the laws do not permit payments of your Refunds (If any) when the Income Tax Return is not filed.

It is a good policy and a willful conduct to keep your financial and tax records updated so that you do not have to face hurdles while applying for Business loans, Home loans, Insurance policies, etc. Filing of Income tax Return should be seen as a good habit and not as compliance burden.

By when I have to file my Return of Income?

For salaried individuals the due date of filing of Tax Return is 31st July, 2012 for the FY 2011-12.

I have not filed my earlier years Income-tax Return. Can I file them now?

Yes. You can file Income-tax Returns of earlier years as well. That means if you had not claimed your Refund of last year due to non-filing of Income-tax Return, you can still do it now!

I had not submitted few Investment proofs to my Employer. What do I do now?

The Employer is under obligation to consider all Investment proofs provided by you. However, if you miss on providing any details/proofs you can always claim the investments in your Income-tax Return and claim your Refund, since your Employer has already deducted the extra tax on the investment-portion for which you had not provided the proofs.

How do I reduce my tax liability?

There are many many Investment options which reduce your tax liability.

Section 80C provides you relief till Rs. 1 lac. Various Investments/expenses enumerated under Sec. 80C. They are listed below:

·         Life Insurance premiums ( of self and family)

·         Provident Fund contributions (of self and family)

·         Mutual Fund contributions

·         Public Provident Fund (PPF)

·         Tuition Fees (of self and family)

·         Principal portion of EMI of the Housing loan

·         Fixed Deposit with Banks for 5 years

·         NABARD and other Bonds / Certificates as specified from time to time.

Following are additional deductions which are over and above the Rs.1 lac limit as mentioned above:

·         Health Insurance premium up to Rs.15,000/- (under section 80D)

·         Full Interest on Education loan u/s 80E

·         Donations u/s 80G

·         Interest portion of EMI of Housing loan up to Rs.1.5 lacs (section 24). (Consequently, benefit can be availed on the principal and the interest expenses.)

How do I get maximum benefit of HRA?

House Rent Allowance is exempt the least of the following:

·         HRA actually received

·         Rent paid in excess of 10% of Salary

·         50% of Salary (Rent paid in Metro City) or 40% of Salary (Non-metro city)

How does my House Property Loan help me in tax savings?

Repayment of house loan can be bifurcated in 2 parts:

·         Principal amount allowed till Rs. 1 lac u/s 80C

·         Interest amount allowed till Rs. 1.5 lacs u/s 24

If you have House loan on more than one property, the interest repaid on second home is exempt without any limit. 

I had switched my employment during the year. What about my TDS made by earlier Employer?

It is the responsibility of the employee to furnish to the new employer the details of Salary and TDS made thereon by the previous employer. Only if such details are furnished, the new employer shall take into account the salary and TDS details and calculate TDS to be made in future accordingly.

 How do I file my Return of Income?

People having only Salary and/or House Property and/or Other Income need to file their Income-tax Return in Form ITR-1.

This may be submitted either physically or online. The benefit of submitting the Return online is that the Return is processed quickly, thereby reducing your wait for Refund amount.

If you wish any help with your Return of Income, Form 26AS, any clarifications, update your mailing address, forward the newsletter to a friend, unsubscribe to the newsletter, or provide a feedback please mail us at canirajmahajan@gmail.com.

Prepared by -

Niraj Mahajan

MJP & Co.

Tax Advisors

E: canirajmahajan@gmail.com

M: 98 600 92 752

       About this Newsletter

This publication contains general information only and is not intended to be comprehensive nor to provide specific accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any decision or action that may affect you or your business. Before making any decision or taking any action that may affect you or your business, you should consult a qualified professional advisor.

Whilst every effort has been made to ensure the accuracy of the information contained in this publication, this cannot be guaranteed, and neither MJP & Co nor any related entity shall have any liability to any person or entity that relies on the information contained in this publication. Any such reliance is solely at the user’s risk.