e-tds

1. Presented by
CA Ameet Patel
Sudit K. Parekh & CO.
Date
April 17, 2013

3. Return filed
MatchMismatch
Arithmetical validation of TDS/
Advance Tax/ SA Tax
CPC Processes the Return
File rectification
letter [ if required ]
Demand is
outstanding for
earlier years
No Yes
Verification with Form 26AS
Intimation issued with
no change in Return
filed/ Return filed will be
deemed intimation
Reduction in
Refund / Demand
raised
With e-TDS return
filed by deductor &
bank details
Refund due Demand
raised
No
refund/demand
tax payer to pay
the demand/File
rectification letter
Processing
of a
Return

4.  Mismatch due to difference in year of TDS claim [ by tax payer ] and
year of reporting [ by deductor]
◦ By law, TDS claim is allowed in the year in which the corresponding
income is offered to tax
◦ Form 26AS reflects TDS based on reporting's made by the deductor
◦ CPC grants TDS credit based on Form 26AS ONLY
◦ No specific guidance from the ITD to resolve mismatch in case of
difference in year of reporting by deductor and claim by tax payer
◦ Practically, the tax payer would approach the jurisdictional AO for
resolution, which is normally not entertained by the AO as the
processing is done by the CPC

5.  Mismatch due to incorrect details furnished in e-TDS returns / No e-
TDS returns filed / incorrect details uploaded by Bank
◦ Common errors in e-TDS Returns filed :
 Incorrect PAN
 Incorrect challan details – “U - Unmatched” status reflected in Form
26AS
 Incorrect amounts
◦ Common errors in details uploaded by Bank :
 Incorrect TAN
 Incorrect challan details
 Thus minor errors can result in major impact for non grant of TDS credit

6.  CPC does not grant TDS credit even for slightest mismatch in the Form
26AS and the details filed in the returns
 The tax payer has to undertake lengthy procedure of following up with
the deductor/bank to rectify the details. A lot of administrative and time
cost is involved resulting into undue harassment of the tax payers
specially for the small tax payers
 Deductor/Bank do not entertain the requests made by the tax payer
 AO is not using powers (under Section 133), to call for information from
deductor in cases where the tax payer is approaching him for resolution
The deductee being taxpayer is harassed but the deductor does not suffer

7. Relief Measures
 TDS mismatch details are provided for correction through e-mails and
online view in ‘My Account – Tax Credit Mismatch’
 For ONLY amount mismatch, credit without verification is granted for TDS
claims up to Rs. 5,000/- [ vide CBDT circular ]
 The Delhi HC in a response to a PIL has held that in cases where there is
unverified TDS under the heading “U” in Form 26AS, ITD must verify and
correct the challan details after intimating the deductors. Specific
directions from CBDT to give effect to the HC order is awaited

8. Relief Measures
 Amendments brought in by Finance Act, 2012 –
◦ Section 234E -
Fees Rs.200/- levied per day of default for non-filing of e-TDS
statements
◦ Section 271H –
Penalty of Rs.10,000 to Rs.1,00,000 for non-filing or incorrect filing of e-
TDS statements.

9.  Cases where TDS has not been paid by the deductor, due to which claim
is not granted to the tax payer
No specific guideline is available to deal with such cases
Currently the only mechanism available is as below -
 The ITD can treat such deductors as “Assessee in Default” & levy
interest/penalty for the same. Only on settlement of such cases the tax
payer would get the relief
 This is however very far fetched and despite the deduction of TDS, the
claim of the tax payer would be lost

10.  Other Open Issues
Clubbing provisions – Minor’s Income
 TDS deductedand reflecting in the Form 26AS of the minor.
 Income of the minor clubbed in the hands of the parent. However, the
CPC will not grant TDS credit on such clubbed income as the same would
not appear in the Form 26AS of the parent
 Jurisdictional AO do not entertain such cases as the returns are processed
by CPC

11.  Incorrect O/s demands are uploaded by the Assessing officers (for the
years prior to 31st March,2010) with CPC without giving effect to
rectifications/ reconciliations
 Such demands are further getting adjusted against refunds if any of
subsequent years
 In certain cases, such outstanding demands are not even communicated
to the tax payers.
 Harassment to tax payer due to incorrect adjustment of refunds

12.  Currently the following lengthy procedure is to be followed by the tax
payers -
◦ Approach the AO to carry out rectification of past demands
◦ Follow up with AO and get the rectified order
◦ AO to then communicate to CPC the impact of rectified order
◦ CPC to thereafter release the differential amount of refund
◦ ONLY then refund would be received
This would involve unnecessary time and administrative cost to the tax payer
Small tax payers cannot bear the cost of engaging professionals to tackle
such cases since the amount involved is lower than the costs of engaging
such professionals

13. Relief Measures
 Circular 4/2012 -
◦ CBDT has authorised the Assessing officers to carry out rectification of
such demands after examining the case on merits even for time barred
rectifications
◦ After rectification –
Burden is upon the Tax payer to get the demand corrected, whereas
ideally the ITD should have uploaded the correct demand in first place
Where demand is
dropped
Differential refund to be issued by the
AO only
Where balance demand
exist s
The AO to upload corrected demand
with the CPC

14. Relief Measures
 Demand Management Fortnight
Announced from 03rd to 14th Sept 2012 by CBDT. This failed to yield results
as -
◦ Clearance cells were not opened for all locations
◦ There was insufficient publicity of the cells which were opened
 Clean up drive for demands
In cases of Refunds claimed for FY 11-12, the Assessing officers were
directed to clean up the demand uploaded to CPC. Also, CCIT had been
directed to monitor the above and certify the demands within 21 days.
Despite the above measure many incorrect O/s demands still appear
which indicates that the AO has certified incorrect demands and the
assesses still do not have any relief from such adjustments

15. Section 245
 AO can set-off refunds due against O/s demand due from such tax payer
 AO must give
◦ An intimation in writing of the set-off before such adjustment is made
◦ Opportunity of response/reply should be given to the tax payer
After considering the stand and plea of the tax payer, valid order for
adjustment of refund is to be made.

16.  Practically the CPC has made adjustments of incorrect demands without
following the steps above
 It has directly adjusted the refunds and intimated the same in the
intimations u/s 143(1) issued
 No opportunity of being heard is given to the tax payer before the
adjustment of the refund. The same is causing irritation at the taxpayer’s
end

17. Where refund adjustment is
made for demands arising
out of returns processed by
CPC
Where refund adjustment is
made for the past demands
uploaded by AO without
following section 245
Where refund adjustment is
not yet made for past
demands uploaded by AO
without following section
245
Communication u/s 245
incorporated in the
intimations itself
Since due procedure is
followed, no grievance
regarding adjustments made
by CPC
Direct adjustments by CPC is
contrary to the provisions of
section 245
The Delhi HC in response to
PIL has held that such cases
are to be transferred and
closed by the AO
Specific directions from CBDT
giving effect to the above HC
order is awaited
CBDT circular issued on 27th
November 2012 wherein
step by step procedure for
adjustment of refunds have
been provided to ensure that
the provisions of section 245
are followed

18. Manual rectifications
 Time lines are not adhered to by the AO
 Repetitive applications are to be filed since no records are maintained by
the AO
Relief measures
 ITD has prescribed a register to maintain the records of the rectification
applications received
 Date and Serial No. mentioned in such registers will be mentioned on the
acknowledgements given to tax payer for the application
 The details would also be uploaded online
The ITD is yet to implement the above relief measures

19. Relief measures
◦ 75 Aaykar Seva Kendras are already set up as a single window service
for addressing rectification applications
◦ 112 Sevottam Aaykar Seva Kendras are in process of being set up for
addressing rectification applications

20. Online rectifications
 Repetitive applications are to be filed as applications are rejected by CPC
without providing proper reasons
 Taxpayer has limited options to furnish the matter relating to rectification.
Few case studies mentioned in next slide
 Redressal mechanism not available to deal with such situations since the
Jurisdictional AO do not entertain rectification requests for returns
processed by CPC
 Currently, there is no methodology available for transferring the cases to
the AO

21.  Case Studies:
 For uploading rectification application no option is available online to
explain the below mentioned errors to CPC
◦ Interest u/s 234C charged for the period prior to date of incorporation
by CPC
◦ Interest u/s 234A charged for the period from date of payment of Self
Assessment Tax to date of filing of return. SC has held that this should
not be charged. (Pranob Roy v/s CIT 309 ITR 231)
◦ Year mismatch issues for grant of TDS credit
 Relief measures - Not available

22.  Delay not attributable to tax payer
CPC has not granted interest for the period where delay in grant of refund
is on account of default attributable to ITD
The Delhi HC in response to PIL has held that interest cannot be denied to
the taxpayer due to mistake on part of the ITD
Specific directions from CBDT to give effect to the HC order is awaited
 Refunds issued in the name of deceased
Mechanism to get the same rectified online or through the AO is not
available

23.  In certain cases intimations have not been communicated to the tax
payer. However the demands arising out of such intimations have been
uploaded with the CPC
 As held by Delhi HC , intimations [ pertaining to years up to 31st March
2010 ] will be treated as invalid. Accordingly demand relating to such
intimations would have to be dropped by the AO
Onus is now on the ITD to establish that such intimations have been
communicated to the tax payer
Specific directions from CBDT to give effect to the HC order is awaited

24. TRACES under Maintenance !!!!
E-tds (Tedious) Returns

25.  In certain cases, fresh registration required on TRACES even for the
deductor who was already registered on TIN. However, FAQs & e-tutorials
on TRACES mention otherwise
 Lengthy & time consuming registration process. Some of the issues faced in
the same are mentioned below -
◦ The system automatically selects the Year, Quarter and Form type, for
which we then need to furnish the PRN , Challan and Deductee details
◦ Complex combinations of data is to be furnished
Further this data may not be readily available. Thus simplication of process
is required

26.  Systemic errors are occurring causing frustration at user end -
◦ For e.g. Even after providing all the correct inputs the website shows
details as invalid and after some time it gets accepted with the same
details

27. Issues in download of Consolidated files, Justification reports and Form
16, 16A and viewing / modifying profile details
 Lengthy & time consuming process. Complex combinations of data
required be furnished to make the request
 These check points can be removed since validation of authentic
deductor is done at the time of login
 Files can be made available for direct downloads to deductors simplifying
the process
 Even under current process, specific time line for response to request for
download not provided

28.  Consolidated files for period prior FY 2008-09 not available on TRACES.
Alternatively, TIN website is also not functional to address such requests.
 Other points already covered under common issues

29.  Data for defaults statements has not been migrated to TRACES. Difficulty
to download the defaults and take corrective actions on the same by
deductors
 Alternatively, TIN website is also not functional to address such requests
 Till date no clarification issued for when will be the site fully functional
 No relief specifically announced to exclude such time to reply to such
defaults
 Whether pending defaults would be displayed is unclear. This
functionality was available with TIN

30.  Again the TABs provided indicate that defaults for the period prior FY
2008-09 will not available on TRACES. No functionality again to deal with
such situation.
 Whether defaults would be communicated to deductors through mail is
unclear. Deductors presently would have to keep monitoring their
accounts to check if any defaults uploaded
 Other points already covered under common issues

31.  The 3rd Quarter of FY 2012-13 was the 1st Quarter where the processing of
TDS returns was done by TRACES
 The tax payer faced tremendous difficulty in downloading the Form 16A as
the returns filed were not processed and the data for download was not
available on the website
 This has resulted in delay in issuance of Form 16A which attracts penal
consequences. Further no relief was provided by the ITD for extension of
the date for issuance of Form 16A
 ITD must take steps to avoid such issues in the subsequent quarters.
Certificates are generated at a speed of only 2-3 certificates per minute
 Other points already covered under common issues

32.  Change of website without prior intimation to deductors -
Users have now been familiar with the TIN website. TRACES has made
several modifications in the processes, which the deductors now again
have to understand and cope up with. This adds frustration to the
taxpayer
 The site is under maintenance several times
 Locked accounts will get unlocked within 1 hour as per FAQs. Practically
the same is not working.

33.  Time lines for processing of original / revised e-TDS not available
Hardship on the tax payer to keep checking the website for the above
since he is required to furnish Form 16/16A after processing is complete
 Statement status –
◦ Status available ONLY for returns filed for Q3-FY 2012-13
◦ Status of revised returns submitted post launch of TRACES are not yet
uploaded
 As the TRACES website is in the initial phases administrative issues
relating to the same can be identified only once the website is tried and
tested by the tax payer

34.  AO Assessing Officer
 CBDT Central Board of Direct Taxes
 CCIT Chief Commissioner of Income-tax
 CPC Central Processing Center
 HC High Court
 ITD Income-tax department
 PIL Public Interest Litigation
 TAN Tax Account Number
 TDS Tax deducted at source
 TIN Tax Information Network
 TRACES TDS Reconciliation Analysis and Correction Enabling System

35. Any Questions ?????

36. patelameet@hotmail.com