258 CTR 113(Del): 31 taxman.com 31(Del)
A letter dated 30-04-2012, written by a Chartered Accountant was treated as a public interest litigation and marked to the Court. Subsequently, the All India Federation of Tax Practitioners fied another writ petition on identical or similar lines. The attention of the Court was drawn towards the numerous difficulties faced by income-tax assesses, consequent upon computerisation and central processing of income-tax returns. The difficulties arose due to faulty processing of returns and uploading of details of tax deducted at source by deductors resulting in creation of huge demands because of mismatch between the tax deducted at source claimed in the return and that reflected in the online computer records, i.e., in Form No. 26AS. Moreover, the Central Processing Unit set up in Bangalore, while issuing refunds in the later years adjusted demands for earlier years which may not have been communicated to the assessee. The Petitioners prayed for suitable directions to the Income Tax Department. By an interim order dated 31-08-2012 certain directions were issued by the Delhi High Court which has been summarised in the November 2012 Issue of the BCA Journal (In the High Courts). Further directions have been now given in this order. Briefly, the directions are as under:
1. Uploading of wrong or fictitious demand and delayed disposal of rectification applications
1.1 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. Filing of applications u/s. 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 themain purpose behind computerisation i.e., to reduce involvement of human element.
1.2 As per Citizen Charter 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 u/s. 154 will be made within a period of two months. The Board has, however, issued instructions that rectification application u/s. 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 u/s. 154. Thus, there is no record/register with the Assessing Officer with details and particulars of application made u/s. 154, the date on which it was made, date of disposal and its fate. Therefore, the respondents are to examine the necessity for proper dak/receipt counters for receipt of applications u/s. 154 by hand or by post. It would 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 u/s. 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.
1.3 Uploading of the details of the said registers should be made online preferably within a period of six months. This would be in accordance with the mandate of the Citizen Charter of the Department which states that the respondents believe in equity and transparency.
2. Regarding adjustment of refund contrary to the mandate of section 245
2.1 Section 245 requires that an opportunity ofresponse/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 adjustment of the refund towards arrears.
2.2 CPC, Bengaluru stated that after handing over of old demands to the CPC and commencement of processing of returns by CPC, the procedure u/s. 245 was being followed by CPC before making adjustment of the refunds and assessees were being given full details with regard to the demands which were being adjusted. The intimation u/s. 143(1) issued from CPC incorporated the full details of the existing demands that were adjusted against the refunds. Further, when the processing of a return at CPC resulted in demand, the communication u/s. 245 was incorporated into the intimation itself. As far as the demands uploaded by the Assessing Officers to CPC portal were concerned, CPC had already issued a communication to 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 Assessing Officer and that such demand was liable for adjustment against refund u/s. 245.
2.3 The respondents accept that when a return of income is processed u/s. 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.
2.4 In the order dated 31-08-2012, the respondents were directed to follow the procedure prescribed u/s. 245 before making any adjustment of refund payable by the CPC at Bengaluru. The assessees must be given an opportunity to file response or reply and the reply must 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 would be as per the law. The assessees would be entitled to file their response before the Assessing Officer mentioned in the prior intimation. The Assessing Officer wouldthereafter examine the reply and communicate his findings to the CPC, Bengaluru, who would then process the refund and adjust the demand, if any payable. The final adjustment will also be communicated to the assessee.
2.5 The said interim order is confirmed. It is noticed that the respondents have taken remedial steps to ensure compliance of section 245 as they now give an option to the assessee to approach the Assessing Officer.
3. Regarding past adjustments
3.1 The problem relating to ‘past adjustment’ before passing of the interim order on 31-08-2012, still persists and has to be addressed.
3.2 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. In these circumstances, direction is issued, 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 u/s. 143(1) without following the procedure u/s. 245. In such cases, it is directed that :
A. All such cases will be transferred to the Assessing Officer;
B. The Assessing Officers will issue notice to the assessee which will be served as per the procedure prescribed;
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 u/s. 245 permitting or allowing the refund;
E. The Board will fix time limit and schedule for completing the said process.
4. Regarding interest on refund u/s. 244A
4.1 An assessee can certainly be denied interest if delay is attributable to him in terms of s/s. (2) to section 244. However, when the delay is not attributable to the assessee but is due to the fault of the Revenue, then interest should be paid under the said section.
4.2 False or wrong uploading of past arrears and failure to follow the mandate before adjustment u/s. 245, 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.
4.3 Interest cannot be denied to the assessees when the twin conditions are satisfied and in favour of the assessee.
5. Regarding uncommunicated intimations under section 143(1)
5.1 The grievance of the petitioner is with regard to the uncommunicated intimations u/s. 143(1) which remained on paper/file or the computer of the Assessing Officer. This is a serious challenge and a matter of grave concern. The law requires that intimation u/s. 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.
5.2 The onus to show that the order was communicated and was served on the assessee is on the Revenue and not upon the assessee. If an order u/s. 143(1) is not communicated or served on the assessee, the return as declared/ filed is treated as deemed intimation and an order u/s. 143(1) . Therefore, if an assessee does not receive or is not communicated an order u/s. 143(1), he will never know that some adjustments on account of rejection of TDS or tax paid has been made. While deciding applications u/s. 154, or passing an order u/s. 245, the Assessing Officers are required to know and follow the said principle. Of course, while deciding application u/s. 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 u/s. 143(1). In the latter cases, the Assessing Officer cannot turn around and enforce the demand created by uncommunicated order/intimation u/s. 143(1).
6. Regarding credit of tax deducted at source (TDS)
6.1 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 available in form 26AS.
6.2 This being a PIL, no specific direction is being issued 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.
6.3 Also, there can be mismatch because of deductor and the assessee 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. As it is a technical matter no specific direction is issued, but the respondents should take remedial steps in this regard.
7. Regarding unverified TDS under different headings
7.1 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 the 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.
8. Regarding failure of deductor to file correct TDS statements in time
8.1 It is directed that when an assessee approaches the Assessing Officer with requisite details and particulars, the said Assessing Officer should 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 deductors by issuing a notice and compelling them 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.
8.2 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 cannot be accepted. 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. Section 234E will also require similar verification by the Assessing Officer. In such cases, if required, order u/s. 154 may also be passed.
