Delhi High Court
Court On Its Own Motion vs Commissioner Of Income Tax on 14 March, 2013
Author: Sanjiv Khanna
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ WRIT PETITION (CIVIL) 2659/2012
Date of decision: 14th March, 2013
COURT ON ITS OWN MOTION ..... Petitioner
Through Ms. Premlata Bansal, Sr. Advocate
with Mr. V.P. Gupta & Mr. Anuj
Bansal, Advocates along with Mr.
Nagesh Behl, Chartered Accountant.
versus
COMMISSIONER OF INCOME TAX ..... Respondent
Through Mr. Sanjeev Sabharwal, Sr. Standing
Counsel & Mr. Puneet Gupta, Jr.
Standing Counsel for the Revenue.
WRIT PETITION (CIVIL) 5443/2012
ALL INDIA FEDERATION OF TAX PRACTITIONERS ..... Petitioner
Through Ms. Premlata Bansal, Sr. Advocate
with Mr. V.P. Gupta & Mr. Anuj
Bansal, Advocates along with Mr.
Nagesh Behl, Chartered Accountant.
versus
UNION OF INDIA AND OTHERS ..... Respondents
Through Mr. Sanjeev Sabharwal, Sr. Standing
Counsel & Mr. Puneet Gupta, Jr
Standing Counsel for the Revenue.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SIDDHARTH MRIDUL
SANJIV KHANNA, J. (ORAL)
Whether computerisation and Central Processing of Income Tax
Returns is a boon or bane is rather sample to answer, as benefits of
computerisation easily outweigh and out score any argument to the
contrary. Computerization does away with human or manual element
and the frailties attached and ensures transparency besides being quick
and fool proof. Alas, it is a human element and frailties which have
resulted in the present Public Interest Litigation (PIL) which was
initiated pursuant to the letter dated 30th 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/Bank deducts
TDS on behalf of the assessee he has to file quarterly
statement of TDS deducted, along with PAN of deductee
and other details. Even if there is slightest of mismatch
in reporting the particulars of deductee, the TDS deducted
by the Department will not reflect in the Form 26AS and
as such, no credit of TDS will be allowed to the assessee
resulting in unnecessary demands and hassles of getting
the rectifications done.
4. To get the rectification done, at first the assessee has to
request the concerned department to file a revised
statement with correct particulars of deductee and only
after revised statement is filed, the same will start
reflecting in the 26AS and thereafter, the rectification is
possible which is a very lengthy procedure. In many
cases the concerned department refuses to revise the
statement.
5. The department has communicated the demands
outstanding for various years in their records to the
Central Processing Unit without carrying out the
necessary rectifications lying pending at their end and
without reconciling their records. Now Central Process
Unit while issuing refunds in the later years adjusts
demands for earlier years. Sometimes the demands for
earlier years may not have been communicated to the
assessee. This is totally against the law. To get the
necessary rectification done the assessee has to first
approach the assessing officer for necessary rectification
for that assessment year. Then that will be
communicated by the Assessing Officer to the CPC
online or as per their records. And thereafter CPC would
issue refund for the Balance amount.
6. The Returns of the assesses who have expired are filed
by legal heirs and in case of refund the same is issued by
CPC in the name of dead person only. This causes great
harassment to get the same rectified online or through
assessing officer.
7. In case of ITR filed in ITR 4S by the assessee CPC is
not considering the taxes paid by the assesses even if they
are being reflected in Form 26AS. This is some technical
problem in their software.
8. Assesses who are filing their Income Tax return u/s
44AD are not obliged to pay any Advance Tax as per the
provisions of the Income Tax Act, 1961. But, while
processing the Income Tax returns CPC is charging
interest u/s 234B, 234-C in all such cases which is
causing unnecessary rectification and paper work as the
same should 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 NSDL and credit will not allow to deductee
whereas TDS was deducted by the deductor.
12. In the facts and circumstances, it is prayed that
suitable directions be issued to the Income Tax
Department, to mitigate the hardship of lakhs of tax
payers."
2. By order dated 4th May, 2012, notice was issued to the Union of
India, Ministry of Finance, Central Board of Direct Taxes, Chief
Commissioner of Income Tax, Delhi-I and Director General of Income
Tax (Systems), who were impleaded as respondent Nos. 1 to 4. By the
same order, the respondents were directed to revert the averments in
the letter and specific response was sought on the following aspects:
(1) Whether procedure under Section
245 of the Income Tax Act, 1961 is being
followed before making adjustment of refunds
and whether assessees are being given full
details with regard to demands, which are
being adjusted.
(2) Whether the Revenue is taking
caution and care to communicate rejection of
TDS certificates and intimation under Section
143(1) in case any adjustment or modification
is made to taxes paid, either as advance tax,
self assessment tax or TDS.
(3) Whether and what steps are taken
to verify and ascertain that the old demands
against which adjustment is being made was
communicated to the assessee?
(4) What steps have been taken to
ensure that the deductors correctly upload the
TDS details/particulars on the Income Tax
website?
(5) What is the remedy available to
the assessee and can he/she approach the
Department in case the deductor fails to
correctly upload the particulars in his/her
cases?
(6) Whether an assessee can get
benefit of TDS deducted or/and paid but not
uploaded by the deductor and procedure to
claim the said benefit?"
3. The respondents were directed to file counter affidavit providing
full particulars regarding :
(i) Number of assessees where income tax refund
in the last year has been adjusted against
demand for earlier years.
(ii) The quantum adjusted.
(iii) Cases/instances in which action has been
taken against deductors, who in spite of
request made by the assessee have not
correctly uploaded the TDS details.(In respect
of Delhi jurisdiction).
The first two figures/particulars will be furnished on the basis of
computerized records maintained by the Income Tax
Department on their system. If no such record is
maintained/available on the system, 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 tax demand
for earlier year was pending has arisen because the
Assessing Officers have failed or neglected to upload
correct data. The Assessing Officers have uploaded the
data on the basis of Section
143(1) intimation without verifying/ referring to the
rectification order/ benefit subsequently granted. The
assessees are put to inconvenience and expenditure is
incurred on visits as incorrect data has been loaded. Thus
for the fault of the Assessing Officer in uploading correct
and accurate data, the assessees are penalized and suffer
harassment.
(b) This is a serious matter. It is alleged that the demands
have been uploaded in the server for several assessment
years, though no amount/demand is payable. It is stated
that the uploading/ demand created, is contrary to the
official records and wrong as the Assessing Officers have
failed and neglected to correctly upload the data despite
instructions of the Board. It will be stated whether this
correct and what action has been taken or contemplated by
the Board?
(iv) Whether it is possible to upload and mention on the
website details of intimation issued under Section 143(1) of
the Income Tax Act, 1961 ("Act", for short) with
particulars like amount adjusted, TDS or taxes which have
not been credited, when and how the intimation was
communicated/ served?
(v) The return itself is treated as an intimation under
Section 143(1), unless the Assessing Officer makes
adjustments. In case adjustment is made, the Assessing
Officer is required to communicate his order under Section
143(1). The general complaint/ grievance is that intimation
is not communicated to the assessee even in cases of
adjustments. If this is correct, what steps have been taken to
remedy the said grievance?
(vi) Whether prior intimation/ information is being sent to
the assessees before adjustment of refund as per Section
245?
(vii) Under the Act benefit of TDS can be taken in the year
in which the income on which TDS deducted is assessed
and shown as assessable. There can be mismatch between
the year in which the deductor has deducted the tax and the
assessment year in which the assessee had declared the
said income. The online form/ details do not take care of
such cases.
(viii) There are several cases where the deductors do not fill
up the correct details of the deductee. In such cases the
option is given to the deductor to rectify 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 cannot be filed. It is stated that in many cases
password or user name get misplaced or are forgotten. It is
very difficult to get a response and reply from the
authorities regarding the user name and password. What is
the procedure in such cases and whether any time frame is
fixed for response to such requests? What is the remedy for
the assessee in case there is delay and lapse on the part of
the authorities in furnishing password/ user name?
(xiii) The respondents shall examine and state whether on
line viewing of Form 26 AS can be made easier and
without use of password and the details available made
more elaborate and complete.
(xiv) The information and advantage of Rule 37BA of the
Income Tax Rules, 1962 must be disseminate and
published for the benefit of assessee public and deductors
so that assessee can claim benefit of tax deducted at source
in respect of income which is assessable in his hand."
5. Thereafter the respondents filed their counter affidavit dated 27 th
July, 2011 on 28th July, 2011. The respondents have also filed
additional affidavits thereafter in response to queries, and questions
which are dated 30th November, 2012, 29th January, 2013 and 5th
March, 2013.
6. In our order dated 31st August, 2012, we emphasized that two
specific problems being faced by the taxpayers were being examined
and considered. The first was the difficulties faced by the taxpayers
relating to credit of Tax Deducted at Source i.e. TDS which stands paid
by the deductors. This amount is deducted from the income earned by
the assessee but as noticed for several reasons which may not be
attributable to the taxpayers/assesses, they denied credit and, therefore,
may have to pay double tax. This is not warranted and acceptable.
Further the assessees suffer harassment and inconvenience both from
the Department and the deductor. The second category consists of
wrong or unpayable "past demands or arrears" which have been
uploaded in the Central Processing Unit (CPU) at Bengaluru, resulting
in adjustment of said arrears from the refund paid/payable in the
subsequent years.
7. However, two issues were specifically directed to be left out and
it was stated in our order dated 31st August, 2012 that these would not
be addressed in these PIL/writ petitions. The first issue relates to non-
implementation of the decision of the Supreme Court in Dr. Prannoy
Roy & Anr. 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
administration, fairness and arbitrariness. The magnitude of the
problem and the number of taxpayers adversely affected thereby is
apparent from the counter affidavit itself. Respondents have stated
that 43% and 39% of the returns filed by the deductors in Delhi zone
for the financial year 2010-11 and 2011-12 respectively were
defective. This effectively means that the assessee would not get credit
of the tax deducted from their incomes by the deductors. Rejection of
TDS or failure to get credit of TDS which has been deducted and paid,
huts the assessee and puts him to needless harassment, inconvenience
and costs. It also gives bad name to the Revenue. The problem being
systematic and institutional has to be addressed on a general scale. On
the issue of refunds, the respondent do not dispute and admit the
position that the data uploaded in the Centrally Processing Unit,
Bengaluru has errors and faults. In the counter affidavit, it is stated
that Rs.2.33 lac crores is due and payable, as per the data uploaded by
the Assessing Officers towards past arrears i.e. arrears payable on or
before 31st March, 2010. This is a substantial amount. Arrears, if
payable, must be paid. However, the position is that the taxpayers are
claiming and stating that arrears have been wrongly shown and the
Assessing Officers have not correctly uploaded the data. As noted
below, this is partly correct. The respondents also accept that the "past
arrears" as uploaded may not be correct. They have not quantified the
amount. The magnitude and the number of assessees adversely
affected, can be appreciated from the figure of Rs.2.33 lac crores.
Further, as per the counter affidavit on the basis of this data for one
assessment year alone Centrally Processing Unit, Bengaluru has made
about 23 lacs adjustments and the taxpayers have been denied the
refund claim i.e. the refund amount has been reduced or set off against
the arrears. This effectively means that 23 lac assessees have been
denied refund or have been refused full refund on account of past
arrears etc. The facts noticed above justify issue of notice and the
orders which have been passed and we are now passing to activate and
impress upon the Revenue to take remedial and effective action.
8. At the outset, we agree and accept that the respondents have
taken a right decision to computerise the income tax records, have
Central Processing 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 (2009-
10) of the Ministry of Finance (Department of Revenue) had
recommended uploading of arrears of demand in the CPU. On 18 th
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
verification of demands and thereafter create a manual D&CR for the
financial year 2010-11. CBDT instructions dated 28th October, 2010,
were issued for steps to be taken by the field formation and for
verification of arrears. The aforesaid exercise had to be completed by
the Assessing Officer before 30th May, 2010 and a certificate was to be
issued by them that they had verified the entries furnished. Range
Heads were directed to form Inspection Team of officers and staff to
verify and to give a certificate that verification of demand was
complete and demand had been correctly carried forwarded. This
inspection team had to complete this exercise by 15 th June, 2010 and
compliance report by the Chief Commissioner (CCS) was to be sent to
be sent to the CBDT by 30th June, 2010.
10. Inspite of the said effort and direction, the CBDT/Board accepts
and admits the position that incorrect and wrong demands have been
uploaded. This is clear from the further directions which have been
issued by the Board to the Assessing Officers on 30th September, 2010,
9th November, 2010 and 15th February, 2012. The aforesaid demands
relate to the period on or before 31 st March, 2010. In the counter
affidavit, it is indicated that 46.34 lac entries of demand aggregating to
Rs.2.32 lac crores have been uploaded on the CPC arrear demand
portal by the Assessing Officers.
11. Office of the Commissioner of Income Tax, Bengaluru, realising
that huge amount has been claimed as tax arrears, had written a letter
dated 21st August, 2012, to all Chief Commissioners. The relevant
portion of the said letter reads as under:
"Kind reference is invited to the above, wherein the
assessing officers have been instructed to verify and
reconcile the demands where such demand or
adjustment thereof by CPC is disputed by the
taxpayer. They have also been advised to upload
amended figure of arrear demand on the Financial
Accounting System (FAS) portal of Centralized
Processing Center (CPC), Bengaluru wherever there
is balance outstanding arrear demand still remaining
after aforesaid correction/reconciliation.
Against the arrear demands uploaded by the assessing
officers CPC has collected demands to the tune of
Rs.4800 crores by way of adjustment of refunds. The
particulars of adjustment already done by CPC in
specific cases need to be taken into account 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)."
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 problems
faced by the assesses. The letter specifically indicates that demands
recovered were not being recorded in the records maintained by the
Assessing Officer and credit was not duly reflected in the record of the
Assessing Officer.
13. The CBDT, after issue of notice in the writ petition, has issued
Circular No. 4 of 2012, which read as under:
"The Board has been apprised that in certain cases the
assessees have disputed the figures of arrear demands
shown as outstanding against them in the records of
the Assessing Officer. The Assessing Officers have
expressed their inability to correct/reconcile such
disputed arrear demand on the ground that the period
of limitation of four years as provided under sub
section (7) of section 154 of the Act has expired.
Further, in some cases, the Assessing Officers have
uploaded such disputed arrear demand on the
Financial Accounting system (FAS) portal of
Centralized Processing Centre (CPC), Bengaluru
which has resulted in adjustment of refund arising out
of processing of Returns against such arrear demand
which has been disputed by such assessees on the
grounds that either such demand has already been
paid or has been reduced/eliminated in the appeals,
etc. The arrear demands, in these cases also were not
corrected/reconciled for the reason that the period of
limitation of our years has elapsed.
2. The Board, in consideration of genuine
hardship faced by the abovementioned class of cases,
in exercise of powers vested under Section 119(2)(b)
of the Act, hereby authorise the Assessing Officers to
make appropriate corrects in the figures of such
disputed arrear demands after due
verification/reconciliation and after examining the
same on merits, whether by way of rectification or
otherwise, irrespective of the fact that the period of
limitation of four year as provided under Section
154(7) of the Act has elapsed.
3. In view of the above the following has been
decided:-
In the category of cases where based on the figure of
arrear demand uploaded by the Assessing Officer but
disputed by the assessee, the Centralised Processing
Centre (CPC), Bengaluru has already adjusted any
refund arising out of processing of return, the
jurisdictional assessing officer shall verify the claim
of the assessee on merits. After due verification of
any such claim on merits, the Assessing Officer shall
issue refund of the excess amount, 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/corrected-
whether 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."
14. A reading of the circular shows that the burden is put on the
assessee to approach the Assessing Officers to get their records
updated and corrected. In the given situation perhaps this may be the
easiest and most convenient option available, but this should not be a
ground for the Assessing Officer not to suo motu correct their records
and upload correct data. Each assessee has a right and can demand
from the respondents that correct and true data relating to the past
demands should be uploaded. CBDT should and must endeavour and
direct the Assessing Officers to upload the correct data. The CBDT
has already issued Management of Arrear Demand manual for the
Assessing Officer. The real issue is that the Assessing Officers must
comply and follow the said manual and upload the correct and true
data. Filing of applications under Section 154 i.e. application for
rectification and correction by the assessee would entail substantial
expenses on the part of the assessee who would be required to engage a
counsel or advocate or make repeated visits to the Income Tax office
for the said purpose. This would defeat the main purpose behind
computerisation i.e. to reduce involvement of human element.
15. As per Citizen Charter on the website of Income Tax
Department, refund along with interest in case of electronically filed
returns should be made within six months. In case of manually filed
returns, refund should be made within nine months. The time
commences from the end of month in which the return/application is
received. Similarly, the Citizen Charter states that a decision on the
rectification application under Section 154 will be made within a
period of two months. The Board has, however, issued instructions
that rectification application under Section 154 should be disposed of
within 4/6 months. There is a general grievance that the Assessing
Officers do not adhere to the said time limits and the assessees are
invariably called upon to file duplicate applications or new applications
in case they want disposal. It is stated that there are no dak or receipt
counters or register for receipt of applications under Section 154. Thus
there is no record/register with the Assessing Officer with details and
particulars of application made under Section 154, the date on which it
was made, date of disposal and its fate. Noticing this fact in the order
dated 5th February, 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 officers within two months, if not
already provided. The Board will also issue instructions that all
Assessing Officers and dak counters shall henceforth in the said
register, enter and allocate a serial number on the rectification
applications and the date of receipt and the serial number will be
mentioned on the acknowledgement, which is issued to the assessee.
Uploading of the details of the said registers as stated in the affidavit
should be made online preferably within a period of six months. This,
we reiterate would be in accordance with the mandate of the Citizen
Charter of the Department which states that the respondents believe in
equity and transparency.
17. In the counter affidavit filed on 5th March, 2013, it is stated that
Aayakar Seva Kendras provide for single window service to tax payers
for receipt of Dak/grievance and paper returns and applications under
Section 154 are also within the scope of Aayakar Seva Kendras.
Information in this regard will be disseminated and informed to the
assessees, who can take advantage and benefit of the same. It is stated
that there are already 75 Aayakar Seva Kendras and 57 more such
Kendras are being set up in the current year. Similarly, it is stated that
Sevottam Aayakar Seva Kendras are being set up in 112 income tax
offices.
18. Each application under Section 154 has to be disposed of and
decided by a speaking order. This is the mandate of the Act. The
order has to be communicated to the assessee and there is a relevant
column to be filled in the register, which is now required to be
maintained. The Board should issue specific directions to ensure that
there is full compliance of the said requirements and directions by the
Assessing Officers, Dak counters and Aayakar Sewa Kendras. This is
the first mandamus or direction we have issued in the present
judgment.
ADJUSTMENT OF REFUND CONTRARY TO THE MANDATE
OF SECTION 245 OF THE INCOME TAX ACT
19. Section 245 of the Act empowers and authorises an Assessing
Officer to adjust refunds against pending demands and arrears, and
reads as :
"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 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 14 th 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 28 th 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
ensure compliance of the aforesaid direction. Thus,
enough safeguards have been provided not only in the
I.T. Act, 1961 but also in the Instructions issued by
the CBDT."
(emphasis supplied)
21. The aforesaid statement reflects the correct position in law as
Section 245 mandates and envisages prior intimation to the assessee so
that he/she can respond before any adjustment of refund is made
towards the demand relating to any other assessment year. Thus, an
opportunity of response/reply should be given and after considering the
stand and plea of the assessee, justified and valid order or direction for
adjustment of refund can be made. The Section postulates two stage
action; prior intimation and then subsequent action when warranted
and necessary for adjustments of the refund towards arrears.
22. In the next paragraph of the counter affidavit, the respondents,
however, have taken a different stand on adjustment of refunds by
CPU, Bengaluru and have stated as under:
"After handing over of old demands to the CPC and
commencement of processing of returns by CPC, the
procedure u/s 245 of the Income Tax Act, 1961 is
being followed by CPC before making adjustment of
the refunds and assesses are being given full details
with regard to the demands which are being adjusted.
The intimation u/s 143(1) issued from CPC
incorporates the full details of the existing demands
that the adjusted against the refunds. Further, when
the processing of a return at CPC results in demand,
the communication u/s 245 is incorporated into the
intimation itself. As far as the demands uploaded by
the AOs to CPC portal are concerned, CPC has
already issued 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)
23. The said paragraph accepts that when a return of income
processed under 143(1) at Central Processing Unit at Bengaluru, the
computer itself adjusts the refund due against the existing demand, i.e.,
there is adjustment but without following the two stage procedure
prescribed in Section 245 of the Act. In these 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 option to the assessee to approach
the Assessing Officer. This is the second mandamus which we have
issued. As noticed above, the interim order passed in the writ petition
dated 31st August, 2012 has been implemented.
25. The problem relating to "past adjustment" before passing of the
interim order on 31st August, 2012, still persists and has to be
addressed. Noticing this fact in the order dated 31st August, 2012, we
had recorded as under:
"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."
26. Inspite of the opportunity given to the Revenue to take steps,
prescribe, adopt a just procedure, to correct the records, etc., nothing
has been done and they have not taken any decision or steps. The
affidavits filed subsequently after 31st August, 2012, are silent on this
specific point. In these circumstances, we direct and issue the third
mandamus and direction which will be applicable only to cases where
returns have been processed by the CPC Bengaluru and refunds have
been fully or partly adjusted against the past arrears while passing or
communicating the order under Section 143(1) of the Act, without
following the procedure under Section 245 of the Act. In such cases, it
is directed that:-
A. All such cases will be transferred to the Assessing Officers;
B. The Assessing Officers will issue notice to the assessee which
will be served as per the procedure prescribed under the Act;
C. the assessees will be entitled to file response/reply to the notice
seeking adjustment of refund;
D. After considering the reply, if any, the Assessing Officers will
pass 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 incorrect and wrong arrears being
uploaded in CPU Bengaluru and did not follow the statutory
requirements of Section 245 of the Act.
28. We clarify that the aforesaid directions are only applicable to
cases where two stage procedure under Section 245 of the Act has not
been followed and not to cases where procedure under Section 245 of
the Act was followed.
29. We are aware that this process may involve some expenditure
and paper work in about substantial number of cases but as noticed
above, the situation has arisen is due to the lapses on the part of the
Assessing Officers and failure to follow Section 245 of the Act. The
procedure under Section 245 of the Act is mandatory, just and fair and
the assessees cannot be made to suffer for the incorrect or wrong
uploading of arrears and wrong and incorrect adjustment of refund on
the part of the respondents.
30. There are two more issues connected with this question. The
first issue relates to interest under Section 244A of the Act. Revenue‟s
stand is that interest under Section 244A is not payable on self-
assessment tax but is payable on advance tax and TDS. The
respondents have further stated that interest is paid from 1 st day of
April of the assessment year till the date on which the refund is
granted. We are not examining the said stand of the Revenue and
leave these questions open.
31. In the affidavit filed on 29th January, 2013, the respondents have
stated as under:-
"Where an assessee makes a mistake in the claim of TDS in
the e-return and the return is processed and a demand is
raised and subsequently the assessee rectifies the mistake in
the claim and files an online rectification application, the
same is processed and on any excess TDS refunded, the
interest under section 244A is granted as per the I.T. Act
after excluding the period of delay attributable to the
assessee in terms of sub-section 2 of section 244A of the
Income Tax Act, 1961."
32. An assessee can be certainly denied interest if delay is
attributable to him in terms of sub-section (2) to Section 244A.
However, when the delay is not attributable to the assessee but due to
the fault of the Revenue, then interest should be paid under the said
Section. False or wrong uploading of past arrears and failure to follow
the mandate before adjustment is made under Section 245 of the Act,
cannot be attributed and treated as a 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 said orders/intimations. In
case the said orders/intimations under Section 143(1) were
communicated or dispatched to the assessees, the directions given by
us below would not be a cause for any grievance and will not be a
matter of concern for the Revenue. We also accept the contention of
the Revenue that where an order under Section 143(1) was sent and
communicated to the assessee but could not be served due to non-
availability/change of address or other valid reasons, should not be
treated at par with cases where there is no communication or no
attempt is made to serve the order whatsoever. But when there is
failure to dispatch or send communication/intimation to the assessee
consequences must follow. Such intimation/order prior to 31 st March,
2010, will be treated as non est or invalid for want of
communication/service within a reasonable time. This exercise, it is
desirable should be undertaken expeditiously by the Assessing
Officers. CBDT will issue instructions to the Assessing Officers.
34. The onus to show that the order was communicated and was
served on the assessee is on the Revenue and not upon the assessee.
We may note in case an order under Section 143(1) is not
communicated or served on the assessee, the return as declared/filed is
treated as deemed intimation and an order under Section 143(1).
Therefore, if an assessee does not receive or is not communicated an
order under Section 143(1), he will never know that some adjustments
on account of rejection of TDS or tax paid has been made. While
deciding applications under Section 154, or passing an order under
Section 245, the Assessing Officers are required to know and follow
the said principle. Of course, while deciding application under Section
154 or 245 or otherwise, if the Assessing Officer comes to the
conclusion and records a finding that TDS or tax credit had been
fraudulently claimed he will be entitled to take action as per law and
deny the fraudulent claim of TDS etc. The Assessing Officer,
therefore, has to make a distinction between fraudulent claims and
claims which have been rejected on ground of technicalities but there is
no communication to the assessee of the order/intimation under Section
143(1). In the later cases, the Assessing Officer cannot turn around
and enforce the demand created by uncommunicated order/intimation
under Section 143(1). This is the fifth mandamus which 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 28 th
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 approximately was raised in Delhi zone on the assessees
for the Financial Year 2010-11. After correction were made and the
consequent corrective orders were passed, the figure came down to
1900 crores, which is still a substantial amount.
37. In the counter affidavit filed on 28th July, 2012, the respondents
had pointed out that the following mismatches are normally noticed:
"
Mismatch relates to Possible reasons for Steps to avoid
mismatch Mismatch
TDS/TCS TAN of Furnish the correct
deductor/collector TAN Number of the
wrongly quoted in the Tax Deductor/Collector
return in the return of Income.
TDS relating to salary Use appropriate
wrongly indicated in the Schedules in the Return
TDS Schedule for other to report TDS on
than salary or vice-versa. Salaries, and TDS on
Incomes other than
Salaries.
TDS/TCS aggregated Indicate the TDS/TCS
under one TAN Number amounts effected by
even though TDS/TCS each
effected by several Deductor/Collector
Deductors/Collectors. separately in the
Schedules provided in
the return of Income.
Advance Tax/Self- BSR code of the bank Ensure that BSR code
Assessment tax branch/challan serial of the bank
number/date of branch/challan serial
payment/amount paid number/date of
stated in return does not payment/amount paid
match with information in as stated in return
26AS. matches with
information available in
26AS.
Advance Tax/Self Use appropriate
Assessment Tax Payment Schedule in the Return
particulars filled up to report Advance
wrongly in the Schedules Tax/Self Assessment
meant for TDS/TCS for Tax Payment
vice versa Particulars.
Mistake in PAN, Furnish the correct
Assessment Year etc. particulars to the bank
committed while branch where challan
preparing the challan. was paid and request
for uploading corrected
challan data to NSDL.
"
38. It is further stated in the counter affidavit as under:
"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
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
inconvenience which may be caused to smaller
taxpayers and has taken a very liberal view of the
matter."
39. However, the respondents have now reduced this figure of Rs.1
lac to mere Rs.5,000/-. Ex-facie, the reasoning that the reduction is to
check fraudulent claims by unscrupulous assesses does not appear to
be correct as in order to claim credit of TDS the following three core
fields must match. These core fields are: name of the assessee, the
PAN number and the assessment year. Benefit of Rs.1 lac or Rs.3 lacs
or Rs.5,000/- is only when there is a discrepancy in the amount and not
when there is a discrepancy in any of the three core fields, i.e. name of
the assessee, the PAN number and the assessment year. This being a
PIL, we are not issuing a specific direction but the Board must re-
examine the said aspect and if they feel that unnecessary burden or
harassment will be caused to the assessees, suitable remedial steps
should be taken.
40. However, we appreciate the stand taken by the respondents that
assessee would be given credit even in cases of mismatch or other
details not exceeding the specified amounts, in case the name of the
assessee, PAN number and the assessment year tally with the details
furnished in the return by the assessee and the data uploaded in form
26AS by the deductor. The said stand of the respondents is mentioned
in their affidavit filed on 5th March, 2013, the relevant portion of which
reads as under:
"1. That it is submitted that according the last
order of this Hon‟ble Court dated 05.02.2013 four
core fields were identified i.e. Name of Assessee,
PAN No, Assessment Years and the Amounts and it
was further explained that Central Board of Direct
Taxes on representation, has directed its officers to
give credit of Rs.5000/- in case of mismatch of
amount. However, it needs to be clarified that such
relaxation is for the „amount mismatch‟ but other
three core fields must match."
41. There can be mismatch because of deductor and the assessee
may be following different methods of accounting. Further, the
assessee may treat the income on which tax has been deducted as
income for two or more different years. The respondents must take
remedial steps and ensure that in such cases TDS is not rejected on the
ground that the amounts do not tally. Of course, while issuing
corrective steps, the respondents can ensure 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 deductor or inability of the Revenue to ask
the deductor to rectify and correct. Once payment has been received
by the Revenue, credit should be given to the assessee. Board will
issue such suitable directions in this regard and this is the sixth
mandamus which we are issuing.
43. As noticed above, one of the queries/issues raised in the order
dated 30th May, 2012 was as under:
"Whether Department has informed the deductors
about incorrect details and had asked them to rectify
the errors with in a time period? In case of failure,
what action is taken? What happens when a complaint
is made by a deductee?"
44. The said question was raised as several assesses have a grievance
in spite of written letters and approaching the deductors to rectify and
correct TDS details and the deductors fail and neglect to do so as the
failure does not entail any adverse consequence or action against them.
The deductee being taxpayer is harassed but the deductor does not
suffer when the deductee does not get benefit of tax paid.
45. The response by the respondents to the said question in their
affidavit dated 28th July, 2012 reads as under:
"(i) When returns are processed u/s 200A by TDS
assessing Officers the deductors are informed about
the errors in such returns. In case of failure to correct
such errors by the deductors, no penal provision is
provided under the Act. They can only be persuaded
to correct such errors.
(iii) While processing returns at CPC if any TDS credit
claimed by the taxpayer in the return doesn‟t match
with the details uploaded by the deductor list of such
mismatches is sent to the tax deductors total of 20119
such communications had been issued by CPC up to
April 2011. A deductor-wise 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."
46. The response is unfortunate and unsatisfactory. The response
purports to express complete helplessness on the part of the Revenue to
take steps and seeks to absolve them from any responsibility. This
aspect was highlighted in the order dated 31st August, 2012.
47. In the affidavit filed on 30th November, 2012 the respondents
have stated that by Finance Act 2012, Section 234E has been inserted
whereby fee of Rs.200/- per day can be levied for default of the
deductor/collector for failure to file 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 in Ghaziabad, U.P. had emphasised the need for „technology
driven tax administration‟ and had stated as under:
"This system will serve two people. As a deductee, I
know how much the taxpayer suffers if the TDS is not
credited to his or her account."
49. The statement reflects the true and correct position of a pique
assessee as a deductee, who has suffered tax deduction at source, but is
not given due credit in spite of the fact that the deductor has paid the
said tax. The respondents have received their due or money but credit
is not given to the person from whose income tax has been deducted.
Denying benefit of TDS to a taxpayer because of the fault of the
deductor, which is not attributable to the deductee, causes unwarranted
harassment and inconvenience. The deductee feels cheated. The
Revenue cannot be a silence spectator, wash their hands and pretend
helplessness. The problems highlighted here are normally faced by
small or middle class taxpayers, including senior citizens as they do
not have Chartered Accountants or Advocates on their pay rolls. The
marginal amount involved in several cases and
inconvenience/harassment involved makes it unviable and futile
exercise to first approach the deductor and then the Assessing Officer.
Rectification and getting corrections made by the deductor and to get
them uploaded is not an easy task. The second phase of filing a
revised return or an application under Section 154 is equally daunting
and "expensive". Invariably the assessees will write letters or even
visit the office of the deductors, but when there is no response or
desired result, they get frustrated and suffer. This causes distrust and
feeling that the assessee has not been treated justly, fairly and in an
honest manner. In our earlier orders, we had emphasised this aspect
and asked the Board to take appropriate steps to ameliorate and help
the small taxpayers.
50. It is unfortunate that the Board did not take immediate steps
after even noticing lacuna and waited till Finance Act, 2012, when
Section 234E was enacted. Mere writing of a letter by the Assessing
Officer to the deductor by no stretch can be treated as sufficient action
on the part of the respondents. Even this, it appears, was done in a few
cases as the respondents in the counter affidavit have stated that they
have written 20119 communications to the tax deductors, where TDS
credit 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 get in touch with the TDS circle in case he
requires clarification or confirmation. He is also at liberty to get in
touch with deductor by issuing a notice and compelling him to upload
the correct particulars/details. The said exercise must be and should be
undertaken by the Revenue, i.e. the Assessing Officer as an assessee
who suffers in such cases is not due to his fault and can justifiably feel
deceived and defrauded. We do not accept the stand of the Revenue
that they can only write a letter to the deductor to persuade him to
correct the uploaded entries or to upload the details. Power and
authority of the Assessing Officer, cannot match and are not a substitute
to the beseeching or imploring of an assessee to the deductor. The
directions given above, are in accord with the provisions of the Act,
namely, Section 133 and TDS provisions of the Act. If required and
necessary, the income tax authorities can obtain prior approval from
the Director or the Commissioner. The authorities can also examine
whether general approval can be given. The said exercise is
undertaken by the Assessing Officer while verifying or examining the
return. Section 234E will also require similar verification by the
Assessing Officer. In such cases, if required, order under Section 154
of the Act may also be passed. Circular No. 4 of 2012 will be equally
applicable. This is the seventh mandamus which we have issued.
51. The problem mentioned above will generally arise in cases prior
to financial year 2011-12 as the TDS certificate forms had undergone a
change and is now required to be down loaded from the Income Tax
Portal.
52. In some cases, it is possible that the assessee may not be able to
file his Income Tax Return because the deductor has not furnished the
TDS certificate. The assessee in question will be at liberty to
correspond with his Assessing Officer or the TDS circle pointing out
the said factual position and appropriate action, as directed in the
aforesaid paragraphs, will be taken by the Assessing Officers
concerned.
53. In the affidavit filed on 5th March, 2013, respondents have stated
as under:-
"5.1 That with regard to the query raised by the Hon‟ble
Court in order dated 05.02.2013, following is submitted
that
i) I state that Assessee is being given benefit of 20%
in case details are received subsequently by the
Department. Assessee has to refer 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 grievances as well as the comments by
the assessee regarding the inconvenience or harassment being faced by
them. Respondents have to be responsive and must meet the genuine
aspirations and desire of the assesses. If possible, response/reply to the
e-mails should be made. Most of the mandamus/directions given
above, are in tune with what has been stated and averred by the
respondents in the counter affidavit. On some aspects, we have partly
modified what has been accepted and agreed by the respondents. We
appreciate and understand that there can be and may be some practical
difficulties or the respondents may themselves find a proper or more
appropriate solution to the same. Therefore, we permit the respondents
or the petitioner All India Federation for Tax Practitioners or others, to
move an application for modification/clarification of this order.
However, no application by an individual assessee relating to his
personal or individual grievance will be entertained. In case, there is
non compliance of the directions/ mandamus issued above, the
individual assessee will be required to approach the writ court for
appropriate order or direction. We hope and trust that the respondents
will be responsive and comply with the directions mentioned above.
57. In nutshell, we have issued the following directions:-
(i) Directions given in paragraph 16 to 18 regarding maintenance of
register for applications under Section 154, receipt of the said
applications and their disposal.
(ii) We have confirmed the interim directions given in paragraph 13
of the order dated 31st August, 2012. (see paragraphs 23 and 24 above).
The said direction, we understand has been implemented.
(iii) With regard to past adjustments where procedure under Section
245 has not been followed, we have issued directions in paragraphs 26
to 28.
(iv) With regard to the interest under Section 244 A, we have issued
directions set out in paragraphs 31 and 32 that interest should be paid
when the assessee is not at fault.
(v) With regard to uncommunicated intimations under Section 143
(1), directions are given in paragraphs 33 and 34.
(vi) With regard to unverified TDS under the heading „U‟ in Form
26AS, directions have been issued in paragraph 42 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 officer.
(vii) The seventh direction/mandamus is regarding credit of TDS to
an assessee when the tax deducted has been deposited with the
Revenue by the deductor. Directions in this regard have been given in
paragraphs 50 and 51.
58. The writ petitions are disposed of. The Court appreciates the
contribution and efforts of Ms. Prem Lata Bansal, Sr. Advocate, Mr.
V.P. Gupta, Advocate and Mr. Nagesh Behl, Chartered Accountant.
Mr. Sanjeev Sabharwal, senior standing counsel has also contributed
and offered valuable positive assistance to enable us to dispose of the
present writ petitions.
(SANJIV KHANNA)
JUDGE
(SIDDHARTH MRIDUL)
JUDGE
MARCH 14th, 2013
KKB/VKR
