By Subash Agarwal, Advocate
Recently, Hon’ble Delhi High Court was seized of, inter alia, the matter under consideration in a case where one Sri Anand Prakash, FCA addressed a letter to the Hon’ble High Court raising various issues facing the helpless assessees and claimed that because of the fault of the department, assessees are being harassed. The Hon’ble High Court took judicial notice of the letter, converted it into a PIL and made CBDT a party. The said case has now been reported as Court On Its Own Motion vs. CIT 352 ITR 273 (Del.)
On the issue of denial of justifiable TDS credit by the A.O.s due to wrong uploading of data by the deductor of TDS, the court made hard hitting observations as under-
“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. The CBDT should issue suitable directions in this regard. The department’s response on the action taken against deductors for non-compliance is unfortunate and unsatisfactory and it purports to express complete helplessness on the part of the Revenue to take steps and seeks to absolve them from any responsibility. Denying benefit of TDS to a taxpayer because of the fault of the deductor causes unwarranted harassment and inconvenience. The deductee feels cheated. The Revenue cannot be a silence spectator, wash their hands and pretend helplessness. S. 234E has now been inserted by the Finance Act, 2012 to levy a fee of Rs.200 per day for default of the deductor to file TDS statement within due date. It is unfortunate that the Board did not take immediate steps after even noticing lacuna and waited till FA 2012. 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 is not acceptable. The AO must use his power and authority to ensure that the deductor complies with the law”
2. Pursuant to the Delhi High court’s order in the above mentioned case, CBDT has issued clarification vide letter dated 21.03.2013. In the said clarification, CBDT has dealt with and directed the A.Os to follow the procedure prescribed by section 245 to affording the opportunity to the assessees before making any adjustment of refund against the alleged arrear demands.
Unfortunately the instant issue has been left untouched.
3. In the earlier Circular 3/2011 dated 13.05.2011, CBDT has recognized the prevalent difficulty faced by the assessees due to wrong uploading of data by tax deductors but has fallen short of implementing / suggesting proper steps to mitigate the assessee’s (deductee’s) difficulty. It has merely declared that to overcome the challenge of mismatch between Form 16A and Form No. 26AS, a common link has been created between the TDs certificates in Form No. 16A and Form No. 26AS through a facility in the Tax Information Network (TIN Website) which will enable a deductor to download TDS certificates in Form No. 16A from the TIN website based on the figures reported in e-TDS statement filed by him.
Where there is wrong feeding of data or where the tax deductor fails to file TDS returns but has deducted TDS and the TDS credit is denied to the assessee, there is a stony silence on the part of CBDT. Can the deductee be denied the rightful claim of TDS which has been deducted while making remittance to him by the deductor, who is the agent of the government?
The CBDT’s inactivity / silence in this regard is despite the dressing down handed out by the Hon’ble Delhi High Court.
4. There is a duty on the part of the deductor to furnish TDS return with correct data and issue a certificate to the payee u/s 203 in the form prescribed by the rules. If the deductor does not conform to the requirements of law, there is violation by the deductor to comply with section 203, so that a penalty of Rs. 100/- per day for each day till the omission is made good is leviable u/s 272A(2)(g) of the Act. The power to ensure issue of TDS certificate after filing correct TDS return by the deductor is with department and not the deductee. The deductee is helpless in the situation and has no power to enforce correction or enforce filing of TDS return. Where a defect is found, it is the assessing officer who has to take action and get it rectified by the defaulter , being the deductor, who acts as the agent of the govt.
5. The most important provision again in this regard in section 205, which bars a direct demand on an assessee by specifically stipulating that “the assessee shall not be called upon to pay the tax himself to the extent to which the cash has been deducted from that income”. Though section 199 expects that furnishing of the prescribed certificate to be issued by the deductor, section 205 by barring a direct demand on the assessee, where deduction has been made, gives the right to credit. However, this provision is being overlooked by the department and the assessee’s refund is withheld or he is asked to pay the tax, which is actually paid on his behalf but whose credit is denied wrongfully.
6. CBDT could have obviated the unnecessary confusion and avoided unnecessary litigation by clarifying the issue by directing the A.Os to give the appropriate credit to the deductees in a petition u/s 154 wherever satisfactory proof of tax deduction is furnished and directing strict action upon the erring deductors.
7. Fortunately, the Courts/ Tribunals in the country are conscious of the injustice meted out to the assessees by the authorities and has rightfully restored the right of the assessees in the deserving cases.
8. In the case of ACIT vs. Omprakash Gattani 242 ITR 638 (Gau), the assessing officer refused to give credit for tax deduction at source on the ground that the date of actual payment to the government was not intimated. Assessee’s bank account was attached by initiating recovery proceedings. The assessee filed a writ petition and succeeded. The department filed a writ appeal. It was confirmed by the High Court that the assessee was entitled to credit for TDS even though the deductor might not have paid the amount to government account. The High court pointed out that where tax has been deducted, direct demand on the payee is not justified and the department should proceed against the deductor.
9. Where the employee is unable to get TDs certificate from his employer, but there is evidence to show that tax had been deducted at source, assessee cannot be denied credit. In such a case, the authorities were directed to exercise the powers to enforce the law, while staying the collection of tax. Pl refer Joseph (Capt. J. G.) vs. JCIT 303 ITR (AT) 395 (Mum.)
10. Even if the deductor did not deposit the tax deducted at source to the credit of the Central Government, revenue cannot recover the amount from the assessee. Pl refer Yashpal Sahni vs. Rekha Hajarnavis , ACIT 293 ITR 539 (Bom)
11. The remedy available to the assessee in the case of denial of TDS credit not reflected in the Form No. 26AS is to file appeal before the CIT(A) where the grievance, in most likelihood, will get redressed.
It is pertinent to note that appeal can be filed even where no assessment has been done u/s 143(3) but the return has been processed u/s 143(1).
Where the time for filing appeal has expired, the assessee may file the petition u/s 154 before the A.O. and produce the TDS certificates issued by the Bank. If he rejects the application, there is remedy in the form of appeal.