 "Court makes life less taxing")
Many tax payers have been subject to delays in getting refunds for the additional taxes paid by them or on account of the Tax Deducted at Source (TDS) being more than the tax payable for a year. In addition to these, with many tax payers opting to file their returns online using the e-filing utility provided by the Income Tax Department (the Department), the problems relating to non-grant of TDS credits and refunds have raised many folds.
In pursuance to the same, a Chartered Accountant had addressed a letter to the Delhi High court in April 2012 highlighting the various problems faced by the tax payers including mismatch of the TDS credit with the online statement of taxes called Form 26AS and the rectification processes required for the same. He even claimed that various tax payers were being harassed because of the Department's fault.
The Honourable High Court took judicial notice of the letter and converted it into a Public Interest Litigation (PIL), thereby, directing the Department to the queries raised by the CA in the letter along with other queries that the Court had raised in this matter. The department in its detailed reply did accept that tax payers are facing difficulties in receiving credit of TDS and refund on account of adjustments towards arrears.
The Honourable High Court took notice of all the points raised in the CA's letter and replies received from the Department and issued certain guidelines to the Department vide its order dated 14th March 2013. The order is a detailed 45 page order, wherein, the Court has given detailed directions to the Department on various matters. The following paragraphs highlight some of the important points that tax payers need to be aware of.
Wrong or fictitious demand
Post setting-up of the Central Processing Centre (CPC) at Bengaluru, which handles the processing of the returns filed online by tax payers, the tax officers were required to organise and upload data relating to the demands and refunds due to various tax payers with the CPC in order to facilitate processing of returns filed.
In many cases, tax payers have observed that incorrect and wrong data regarding the demands and refunds get reflected in the assessments made by the CPC in response to the returns filed. The Court observed that the Department had issued a circular in which the burden has been put on the tax payer to approach their tax officers to get the records updated and corrected by following the Rectification process.
The Court also noted that it is not right on the Department's part to expect the tax payers to follow the rectification process, as it entails substantial expenses and also defeats the main purpose behind computerisation of records.
In view of the above, the Court has directed that the tax officers should on their own ensure that correct data is uploaded and also maintain a register for the rectification requests received. The application for rectification has to be closed by a proper order and also communicated to the tax payer.
Adjustment of refunds
Under the provisions of the Income Tax Act, in case the tax officer wants to adjust the refund due to a tax payer with any demands pending against him; a prior intimation to the tax payer needs to be given. The Court observed that this process is not being followed at the CPC level, since the computers itself adjust the refund due against the existing demand. The Court, in its order, has directed that the Department has to follow the prescribed procedure and give the tax payer an opportunity to file a reply which has to be considered by the tax officer before the same is adjusted.
Non-grant of credit for TDS
The Court observed that many tax payers' claim for TDS credit is rejected in two cases. One where the deductors uploaded wrong particulars of the TDS which has been deducted and paid. Two, where there is a mismatch between the details uploaded by the deductor and the details furnished by the tax payer in his return of income.
The Court has directed that the Department must take suitable remedial steps to avoid unnecessary burden or harassment caused to tax payers. The claim for TDS should not be rejected on the ground that the amounts do not tally with the Form 26AS. It should fix a time limit within which the unmatched challans shall be verified and corrected.
The taxpayers as deductees, should not be made to suffer because of faults made by the deductors, as it causes unwarranted harassment and inconvenience to tax payers. Once the payment for the TDS is received by the Department, credit should be given to the tax payer. The tax officer should also take reasonable steps to ensure that the deductor corrects any wrong data uploaded of any tax payer.
Non-Communication of adjusted intimations issued u/s 143(1)
Under the provisions of the Act, once a return of income has been filed, the tax officer has to issue an order u/s 143(1) of the Act confirming the details filed in the return or to raise any objections / defects in the same.
The non-communication of intimations issued u/s 143(1) of the Act, where adjustments on account of rejection of TDS or tax paid has been made, is a matter of grave concern.
The Court has directed that if a TDS or tax credit claim has been rejected on a technicality, but there is no communication to the tax payer of the order u/s 143(1); the tax officer cannot enforce the demand created.
The Court, in the concluding paragraphs of the order, has noted that any non-compliance of the directions as issued in the Order; the tax payers will be required to approach the appropriate judicial authority for the appropriate order or direction.
This directive judgement is very useful for tax payers who have been facing the above issues over the past couple of years, but have no idea of the manner in which these grievances can be resolved.
In pursuance to the same, a Chartered Accountant had addressed a letter to the Delhi High court in April 2012 highlighting the various problems faced by the tax payers including mismatch of the TDS credit with the online statement of taxes called Form 26AS and the rectification processes required for the same. He even claimed that various tax payers were being harassed because of the Department's fault.
The Honourable High Court took judicial notice of the letter and converted it into a Public Interest Litigation (PIL), thereby, directing the Department to the queries raised by the CA in the letter along with other queries that the Court had raised in this matter. The department in its detailed reply did accept that tax payers are facing difficulties in receiving credit of TDS and refund on account of adjustments towards arrears.
The Honourable High Court took notice of all the points raised in the CA's letter and replies received from the Department and issued certain guidelines to the Department vide its order dated 14th March 2013. The order is a detailed 45 page order, wherein, the Court has given detailed directions to the Department on various matters. The following paragraphs highlight some of the important points that tax payers need to be aware of.
Wrong or fictitious demand
Post setting-up of the Central Processing Centre (CPC) at Bengaluru, which handles the processing of the returns filed online by tax payers, the tax officers were required to organise and upload data relating to the demands and refunds due to various tax payers with the CPC in order to facilitate processing of returns filed.
In many cases, tax payers have observed that incorrect and wrong data regarding the demands and refunds get reflected in the assessments made by the CPC in response to the returns filed. The Court observed that the Department had issued a circular in which the burden has been put on the tax payer to approach their tax officers to get the records updated and corrected by following the Rectification process.
The Court also noted that it is not right on the Department's part to expect the tax payers to follow the rectification process, as it entails substantial expenses and also defeats the main purpose behind computerisation of records.
In view of the above, the Court has directed that the tax officers should on their own ensure that correct data is uploaded and also maintain a register for the rectification requests received. The application for rectification has to be closed by a proper order and also communicated to the tax payer.
Adjustment of refunds
Under the provisions of the Income Tax Act, in case the tax officer wants to adjust the refund due to a tax payer with any demands pending against him; a prior intimation to the tax payer needs to be given. The Court observed that this process is not being followed at the CPC level, since the computers itself adjust the refund due against the existing demand. The Court, in its order, has directed that the Department has to follow the prescribed procedure and give the tax payer an opportunity to file a reply which has to be considered by the tax officer before the same is adjusted.
Non-grant of credit for TDS
The Court observed that many tax payers' claim for TDS credit is rejected in two cases. One where the deductors uploaded wrong particulars of the TDS which has been deducted and paid. Two, where there is a mismatch between the details uploaded by the deductor and the details furnished by the tax payer in his return of income.
The Court has directed that the Department must take suitable remedial steps to avoid unnecessary burden or harassment caused to tax payers. The claim for TDS should not be rejected on the ground that the amounts do not tally with the Form 26AS. It should fix a time limit within which the unmatched challans shall be verified and corrected.
The taxpayers as deductees, should not be made to suffer because of faults made by the deductors, as it causes unwarranted harassment and inconvenience to tax payers. Once the payment for the TDS is received by the Department, credit should be given to the tax payer. The tax officer should also take reasonable steps to ensure that the deductor corrects any wrong data uploaded of any tax payer.
Non-Communication of adjusted intimations issued u/s 143(1)
Under the provisions of the Act, once a return of income has been filed, the tax officer has to issue an order u/s 143(1) of the Act confirming the details filed in the return or to raise any objections / defects in the same.
The non-communication of intimations issued u/s 143(1) of the Act, where adjustments on account of rejection of TDS or tax paid has been made, is a matter of grave concern.
The Court has directed that if a TDS or tax credit claim has been rejected on a technicality, but there is no communication to the tax payer of the order u/s 143(1); the tax officer cannot enforce the demand created.
The Court, in the concluding paragraphs of the order, has noted that any non-compliance of the directions as issued in the Order; the tax payers will be required to approach the appropriate judicial authority for the appropriate order or direction.
This directive judgement is very useful for tax payers who have been facing the above issues over the past couple of years, but have no idea of the manner in which these grievances can be resolved.
The writer is a certified financial planner