Gujarat High Court : TDS done but not deposited by deductor, still deductee to get credit, Sumit Devendra Rajani Vs ACIT

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 2349 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE M.R. SHAH and
HONOURABLE MR.JUSTICE K.J.THAKER
 
SUMIT DEVENDRA RAJANI....Petitioner(s)
Versus
ASSISTANT COMMISSIONER OF INCOME TAX OSD&1....Respondent(s)
=============================================
Appearance:
MR KETAN H SHAH, ADVOCATE for the Petitioner(s) No. 1
MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1
NOTICE UNSERVED for the Respondent(s) No. 2
=============================================
CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE K.J.THAKER
Date : 23/06/2014
CAV JUDGMENT
 
(PER : HONOURABLE MR.JUSTICE M.R. SHAH)
1.0. Rule. Ms. Mauna Bhatt, learned advocate waives service
notice of Rule on behalf of respondent. In the facts and circumstances of
the case and with the consent of the learned advocates for the respective
parties, the present Special Civil Application is taken up for final
hearing today.
2.0. By way of this petition under Article 226 of the Constitution
of India, the petitioner has prayed for an appropriate writ, direction and
order quashing and setting aside the recovery notice dated 06.01.2012
(Annexure D), by which, the petitioner – assessee has called upon to pay
demand of Rs.6,82,148/raised under Section 143(1) of the Income Tax
Act, 1961 (hereinafter referred to as the “Act”) for the AY 201011.
3.0. The facts leading to the present petition in nutshell are as
under:
3.1. That the petitioner is an individual and assessed to tax under the Act, therefore, for the AY 201011 the petitioner filed his return of income dated 30.12.2010 declaring net taxable income of Rs.29,54,982/.
In the return of income, the petitioner also claimed the credit of tax deducted at source of total Rs.5,86,606/TDS deducted by his employer M/s. Amar Remedies Limited. However, without givingcredit of the TDS deducted by his employer M/s. Amar Remedies Limited on the salary income as well as on the amount received towards professional and technical fees received from the said M/s. Amar Remedies Limited, the department has raised the demand of Rs.6,82,148/by impugned notice issued under Section 221(1) of the Act.

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.

Deductees reported in TDS Statements with structurally Valid, but actually Invalid PANs, impact and action required

Centralized Processing Cell (TDS) has observed from its records that you have reported deductees with invalid PANs in your quarterly TDS statements.  

 

These PANs appear structurally valid, however, they are actually invalid, as they are not available in the PAN Master records.

For example, ARUPS4625S appears to be a valid PAN according to the alphabets and numerals in its structure, however, this is an invalid PAN, as this is not available in PAN Master.

What is the impact :

• The impact of such errors is significant in nature, in view of following :
  • As per section 206AA, the tax is to be deducted at a higher rate, in case of reporting of invalid PANs. Therefore, Short Deduction is charged even if the tax has been deducted at the Section Rate, due to the applicability of section 206AA.
  • The deductor will not be able to generate TDS Certificates for their deductees with invalid PANs.
  • The taxpayer will not be able to avail correct TDS Credits

What actions to be taken :

• The impact of such errors is significant in nature, in view of following :
  • PAN Verification facility on TRACES can be used for verifying the deductees. You are requested to Login to TRACES and
    navigate to "Dashboard" to locate "PAN Verification" in the Quick Links menu.
  • You can also use "Consolidated TAN - PAN File" that includes all the valid PANs attached with the respective TANs. To
    avail the facility, Login to TRACES and navigate to "Dashboard" to locate "Consolidated TAN - PAN File".
  • To correct an invalid PAN reported earlier, a C5 Correction Statement is required to be filed.
  • The PANs can also be corrected using our Online Correction facility
    with Digital Signatures. To avail the facility, you are requested to Login to TRACES and navigate to "Defaults" tab to locate "Request for Correction" from the drop-down menu. For any assistance, please refer to the e-tutorial available on TRACES.

You can reach out to us on ContactUs@tdscpc.gov.in or call our toll-free number 1800 103 0344.

CPC (TDS) is committed to provide best possible services to you.

CPC (TDS) TEAM

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