© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated...
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated...
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated...
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated...
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TDS credit cannot be denied to the taxpayer on the grounds of mismatch of TDS amount with the details shown in Form 26AS

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Recently, the Allahabad High Court in the case of Rakesh Kumar Gupta (the taxpayer) held that the mismatch of Tax Deducted at Source, with the details shown in Form 26AS, is not attributable to the taxpayer, and the fault solely lies with the deductor. Accordingly, the taxpayer is entitled for a tax refund once the tax has been deducted and paid to the credit of the government account by the deductor. Further, the taxpayer is entitled to interest on the delayed refund since the delay in refunding the amount was attributable solely to the tax department, and there is no fault on the part of the taxpayer.

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TDS credit cannot be denied to the taxpayer on the grounds of mismatch of TDS amount with the details shown in Form 26AS

  1. 1. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG FLASH NEWS KPMG IN INDIA TDS credit cannot be denied to the taxpayer on the grounds of mismatch of TDS amount with the details shown in Form 26AS 4 June 2014 B Background Recently, the Allahabad High Court (High Court) in the case of Rakesh Kumar Gupta 1 (the taxpayer) held that the mismatch of Tax Deducted at Source (TDS), with the details shown in Form 26AS, is not attributable to the taxpayer, and the fault solely lies with the deductor. Accordingly, the taxpayer is entitled for a tax refund once the tax has been deducted and paid to the credit of the government account by the deductor. Further, the taxpayer is entitled to interest on the delayed refund since the delay in refunding the amount was attributable solely to the tax department, and there is no fault on the part of the taxpayer. Facts of the case  The taxpayer is a civil contractor and is deriving income by executing civil contracts in various government departments. During the assessment year (AY) 2010-2011, the taxpayer received certain payments from the North Central Railway on which INR3,14,766 as tax was deducted. _______________ 1 Rakesh Kumar Gupta v. Union of India and another [Civil Misc Writ Petition (Tax) No. 657 of 2013, dated 6 May 2014]  In the income-tax return, the taxpayer disclosed the income of INR6,86,650 and claimed a refund of INR2,32,370. Subsequently, the income-tax return was processed by the Central Processing Centre (CPC), Bangalore.  The income-tax return was accepted under the deemed assessment scheme. Thereafter, the CPC issued an income-tax refund of INR43,740 and no intimation was given to the taxpayer as to why the balance amount of INR1,88,630 was not refundable.  The taxpayer filed a rectification application under Section 154 of the Income-tax Act, 1961 (the Act) and expected the refund of the balance amount. Subsequently, reminders were sent and when it became known to the taxpayer that his application was not received by the tax department, the taxpayer filed a second application under Section 154 of the Act.
  2. 2. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.  When nothing happened, the taxpayer, grew frustrated and filed the writ petition under Article 226 of the Constitution of India before the High Court praying for a writ of mandamus 2 , commanding the respondents to refund an amount of INR1,88,630 along with the interest. High Court ruling  The difficulty faced by the taxpayers relating to the credit of TDS, which stands paid by the deductor was considered by the Delhi High Court in a Public Interest Litigation 3 .  Pursuant to the said decision of the Delhi High Court, the Central Board of Direct Taxes (CBDT) issued an instruction 4 , directing that where the taxpayer approaches the Assessing Officer (AO) with requisite details and particulars in the form of a TDS certificate as an evidence against any mismatch amount, the AO would verify whether or not the deductor had made payment of the TDS in the government account and, in the event, the payment had been made, credit of the same would be given to the taxpayer.  In the light of the decision of the Delhi High Court and the instructions issued by the CBDT, the High Court found that the returns in the present case were processed and accepted by the tax department.  On a perusal of the counter affidavit filed by the tax department, the High Court observed that the AO has not verified whether the deductor had made the payment of the TDS in the government account. However, the tax department has shown their helplessness in not refunding the amount on the sole grounds that the details of the TDS did not match with the details shown in Form 26AS.  The High Court observed that when the assessment was processed and a refund of INR43,740 was issued, no intimation was given by the tax department as to why the balance TDS amount could not be credited in favour of the taxpayer. The AO was under duty to verify whether or not the deductor had made the payment of the TDS in the government account. ______________ 2 A writ or order that is issued from a court of superior jurisdiction that commands an inferior tribunal, corporation, Municipal Corporation, or individual to perform, or refrain from performing, a particular act, the performance or omission of which is required by law as an obligation. 3 Court On its Own Motion v. CIT [2013] 352 ITR 273 (Del) 4 CBDT Instruction No.5 of 2013, dated 8 July 2013  The taxpayer has suffered a TDS, but has not been given due credit in spite of the fact that he has been issued a TDS certificate by a government department. There is a presumption that the deductor has deposited the TDS amount in the government account especially when the deductor is a government department.  Denying the benefit of TDS to the taxpayer because of the fault of the deductor, causes not only harassment and inconvenience, but also makes the taxpayer feel cheated.  There is no fault on the part of the taxpayer. The fault, if any, lies with the deductor. In the instant case, nothing had been indicated that the fault lies with the taxpayer in furnishing false details.  As per Section 237 5 of the Act, the taxpayer is eligible for a tax refund since a mismatch of TDS is not attributable to the taxpayer and the fault solely lies with the deductor.  As per Section 243 of the Act, the taxpayer is entitled to the interest on delayed refund; since there is a delay in refunding the amount, which was attributable solely with the tax department, and there is no fault on the part of the taxpayer.  Accordingly, the writ petition is allowed and writ of mandamus is issued commanding the tax department to refund an amount of INR1,88,631 along with interest, as per the law, within three weeks from the date of production of a certified copy of the order. Further, the tax department, is also liable to pay the cost of INR25,000 to the taxpayer within the same period. Our comments This is a welcome ruling from the Allahabad High Court where it has been held that the taxpayer is entitled for tax refund since a mismatch of TDS with the details shown in Form 26AS is not attributable to the taxpayer and the fault lies with the deductor. _____________ 5 If any person satisfies the AO that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess.
  3. 3. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. It is pertinent to note the decision of the Mumbai Tribunal in the case of Citicorp Finance (India) Limited 6 where it has been held that tax credit cannot be denied to the taxpayer even if the TDS certificate is not available with the taxpayer or TDS entry is not shown in the computer generated Form 26AS. The Tribunal had observed that the tax department was required to give TDS credit once a valid TDS certificate had been produced or where the deductor had not issued a TDS certificates, on the basis of the evidence produced by the taxpayer for deduction of tax and on the basis of an indemnity bond. The ruling would provide relief to the taxpayers who are facing similar difficulties. ______________ 6 Citicorp Finance (India) Limited v. ACIT (ITA No. 8532/Mum/2011)
  4. 4. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity“ are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. www.kpmg.com/in Ahmedabad Commerce House V, 9th Floor, 902 & 903,Near Vodafone House,Corporate Road, Prahlad Nagar, Ahmedabad – 380 051 Tel: +91 79 4040 2200 Fax: +91 79 4040 2244 Bangalore Maruthi Info-Tech Centre 11-12/1, Inner Ring Road Koramangala, Bangalore 560 071 Tel: +91 80 3980 6000 Fax: +91 80 3980 6999 Chandigarh SCO 22-23 (Ist Floor) Sector 8C, Madhya Marg Chandigarh 160 009 Tel: +91 172 393 5777/781 Fax: +91 172 393 5780 Chennai No.10, Mahatma Gandhi Road Nungambakkam Chennai 600 034 Tel: +91 44 3914 5000 Fax: +91 44 3914 5999 Delhi Building No.10, 8th Floor DLF Cyber City, Phase II Gurgaon, Haryana 122 002 Tel: +91 124 307 4000 Fax: +91 124 254 9101 Hyderabad 8-2-618/2 Reliance Humsafar, 4th Floor Road No.11, Banjara Hills Hyderabad 500 034 Tel: +91 40 3046 5000 Fax: +91 40 3046 5299 Kochi Syama Business Center 3rd Floor, NH By Pass Road, Vytilla, Kochi – 682019 Tel: +91 484 302 7000 Fax: +91 484 302 7001 Kolkata Unit No. 603 – 604, 6th Floor, Tower – 1, Godrej Waterside, Sector – V, Salt Lake, Kolkata 700 091 Tel: +91 33 44034000 Fax: +91 33 44034199 Mumbai Lodha Excelus, Apollo Mills N. M. Joshi Marg Mahalaxmi, Mumbai 400 011 Tel: +91 22 3989 6000 Fax: +91 22 3983 6000 Pune 703, Godrej Castlemaine Bund Garden Pune 411 001 Tel: +91 20 3050 4000 Fax: +91 20 3050 4010

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