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Delhi HC initiates suo motu PIL on problems of faulty return processing, TDS credit & refunds and asks CBDT to explain!

                          A Chartered Accountant Anand Parkash addressed a letter dated April 30, 2012 to the Delhi High Court, in which he set out numerous problems being faced by the taxpayers across the country owing to faulty processing of Income-tax Returns and non-grant of TDS credit & refunds. He pointed out that lakhs of taxpayers, for no fault of their own, were being required to face grave hassles on account of the current tax procedures and prayed that the Court may be pleased to issue suitable directions to the Income-tax Department to mitigate their genuine hardships and save them from the harassment in filing revised returns and rectification petitions every year.


                    In an almost unprecedented move in the history of Income-tax administration, it is indeed so heartening, that taking judicial notice of this letter, the High Court took immediate action by converting it into a public interest writ petition and passed an order dated May 4, 2012, directing the Central Board of Direct Taxes (CBDT) and other respondents to answer the following averments made in the letter: 


  • Taxpayers are called upon to pay huge demands, which are created because of mismatch of TDS claimed in the Income Tax return. This is primarily because of the fact that the Income-tax Department gives credit only for TDS which stands reflected in their online computer records i.e. Form 26AS.
  • Whenever any deductor, being a Government Department, Office, Bank etc., deducts TDS on behalf of a taxpayer, a quarterly statement of TDS deducted, along with PAN of deductee and other details is required to be filed. Even if there is a slightest mismatch in reporting the particulars of the deductee, the TDS deducted is not reflected in the Form 26AS and as such, no credit of TDS is allowed to the taxpayer, resulting in unnecessary demand and the hassle of getting rectification done.
  • To get the rectification done, the taxpayer has to request the concerned deductor to file a revised statement with correct particulars of the deductee and only after the revised statement is filed, the same comes to be reflected in the 26AS and only thereafter, rectification is possible, thus turning out to be a very lengthy procedure. In many cases the concerned deductor even refuses to revise the statement.
  • The Income-tax Department has communicated the demands outstanding for various years in their records to the Centralized Processing Centre (CPC) without carrying out the necessary rectifications lying pending at their end and without reconciling their records. Now, the CPC, while issuing refunds in the later years adjusts such demands for earlier years. Sometimes, the demands for the earlier years are not even communicated to the taxpayer. This is totally against the law. To get the necessary rectification done, the taxpayer has to first approach the assessing officer for necessary rectification for that assessment year. Then that is communicated by the assessing officer to the CPC online or as per their records. And thereafter CPC issues refund for the balance amount.
  • The returns of taxpayers who have expired are filed by their 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 the assessing officer.
  • Taxpayers 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. But, while processing the Income Tax returns, CPC is charging interest u/s 234B and 234-C in all such cases which is causing unnecessary rectification and paper work.
  • If a taxpayer has duly paid the taxes due to the 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 Pranab 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 stand paid.


 In addition to the above, the High Court has also sought specific response of the CBDT on the following issues: 


  • Whether procedure under Section 245 of the Income-tax Act is being followed before making adjustment of refunds and whether taxpayers are being given full details with regard to demands, which are being adjusted.
  • 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.
  • Whether and what steps are taken to verify and ascertain that the old demands against which adjustment is being made get communicated to the taxpayer?
  • What steps have been taken to ensure that the deductors correctly upload the TDS details and particulars on the Income-tax website?
  • What is the remedy available to the taxpayer and can he or she approach the Department in case the deductor fails to correctly upload such particulars?
  • Whether a taxpayer can get benefit of TDS deducted but not uploaded by the deductor and procedure to claim the said benefit?




                            The High Court has posted the matter for next hearing on May, 30. Taxpayers around the country are bound to eagerly watch the course of the proceedings, as they would for sure salute the High Court with admiration, for suo motu championing their cause! 

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