The Delhi High Court, while giving its judgement on the problems encountered by the public in the matter of assessment of tax, said, “Rejection of TDS or failure to get credit for TDS puts the tax payer through needless harassment, inconvenience and costs. The problem, being systematic and institutional, has to be addressed on a general scale”

One more financial year has just come to an end and with that the job of collecting all income certificates, TDS certificates, etc has just begun to enable us to file our income tax (I-T) returns before the end of July 2013. Tax deducted at Source, or TDS for short, has been a pain in the neck for all middle class assesses and despite repeated representations, the government has not agreed to do away with the TDS, particularly in respect of bank deposits.
 

As per the amendment to the Finance Act last year senior citizens are not required to pay any advance tax before the close of the year, but need to pay appropriate tax, if liable, before filing the tax return. But this is only a half-hearted measure, as the government has not waived TDS even for senior citizens even though they are not required to pay advance tax, thereby putting them into great inconvenience.
 

Tax raised is fine but what about accountability in spending it?
 

Problems encountered by tax paying public:
 

Recently, the Federation of Tax Practitioners had filed a writ petition in the Delhi High Court seeking remedies for some of the following problems encountered by the public in the matter of assessment of tax.
 

1. While banks are prompt in deducting tax while paying interest, they do not bother to file TDS returns promptly due to which the tax deducted by them is not reflected in the Form AS 26 of the individual tax payer appearing in the Income Tax website, consequent to which the tax department sends notices to assessees demanding payment of tax.
 

2. Even if the TDS return is filed by banks, many a times, it is wrongly filed resulting in Income Tax Officers (ITOs) refusing to give appropriate credit to assessees for the tax paid by them, despite filing record of tax payments.
 

3. The Central Processing Unit (CPU) of the Income Tax department at Bangalore has, in respect of those assessees who have filed returns on-line, started issuing notices of late to assessees on the basis of wrong entries made in the income tax website showing tax due in respect of earlier years, and asking them to get the same rectified through their ITO, if it is not due from them. This is causing avoidable harassment to all those assessees who have no dues outstanding of earlier years and have a clean record of tax payment.
 

4. Even in such cases, when the assessees seek rectification of tax dues wrongly shown under their name, the ITOs do not respond promptly to such requests resulting in the CPU unilaterally adjusting the refund due for the current year to the non-existing dues shown as outstanding for earlier years, depriving the assesses the rightful refund due to them. 
 

Judgment of the Delhi High Court providing succour to tax payers:
 

Surprisingly the tax authorities have admitted to the Delhi High Court that the data uploaded in their website and relied upon by their Central Processing Unit has errors and mistakes. According to this data a sum of Rs2.33 lakh crore was due and payable as past arrears (payable before 31 March 2010) by the taxpayers.
 

The high court in its judgment dated 14 March 2013, observed as under: 
 

 “The magnitude and number of taxpayers adversely affected can be appreciated from the past arrears figure of Rs2.33 lakh crore, which the tax authorities accept may not be correct,” states the Delhi HC order.

“This effectively means that 23 lakh taxpayers were denied refund or have been refused full refund on account of past arrears,” observes the Delhi HC order.”
 

Should banks pay interest on current accounts as well?
 

The court further said, “Rejection of TDS or failure to get credit for TDS which has been deducted and paid hurts the tax payer and puts him through needless harassment, inconvenience and costs. The problem, being systematic and institutional, has to be addressed on a general scale.”
 

The court has, therefore, in its judgment has given directions to the tax authorities to ensure compliance of the following instructions for the benefit of the public:

1. Dispose off rectification applications filed by taxpayers regarding non credit of TDS expeditiously. (a separate register for such applications be kept)                             
2.  Do not adjust refunds against past outstanding demands without prior intimation to the taxpayers.  
3. If refunds have been suo-moto adjusted, transfer the matter to the concerned tax officer for remedial action in a time bound manner.
4. Pay interest on delayed refunds where the taxpayer is not at fault
5. If demand orders for past arrears (for the period prior to 31 March 2010) were not properly communicated to taxpayers, they will be treated as invalid, unless the tax authorities can prove otherwise 
6. Communicate with tax deductors in case of mistakes made by them in uploading TDS details and get it rectified 
7. Give the benefit of TDS when taxpayers furnish evidence, even if the tax deductor has made mistakes in uploading details.

If a tax payer faces any of the problems mentioned above, it is advisable to take up the matter with the jurisdictional income tax officer referring to this judgment of the Delhi High Court and seek redress if you find that the tax department is at fault and require remedial action. 

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(The author is a banking analyst and he writes for Moneylife under the pen-name ‘Gurpur’)