Dear Department, Will You End Your TDS & Refund Harassment Now?

The author, one of the innumerable victims of the department’s gross inefficiency in matters of TDS credit & refunds, sees a ray of hope in the High Court’s tough stand in seeking to rein in the department’s wayward ways. The author urges all affected tax payers to raise their voices against the department’s harassment and strengthen the Court’s hands.

“Courts are not meant only for the rich and the well-to-do, for the landlord and the gentry, for the business magnate and the industrial tycoon, but they exist also for the poor and the down-trodden the have-nots and the handicapped and the half-hungry millions of our countrymen” Bhagwati J. in Peoples Union for Democratic Rights v. Union of India (AIR 1982 SC 1473)

When Anand Parkash, FCA, wrote a letter dated 30.4.2012 to the High Court, he did so in a sense of utter helplessness and frustration. He was voicing the angst of millions of tax payers across the Country at the numerous difficulties faced by them due to the faulty processing of Income-tax returns and TDS credit. In heart-felt emotion but with a clarity that years of professional training as a Chartered Accountant had bestowed, Anand Parkash meticulously listed out his litany of woes. Anand Parkash pointed out that in processing the s. 143(1) intimation, there was invariably a mismatch between the TDS credit claimed and the TDS credit granted and demands were raised on this score. The department ignores the figure of TDS credit claimed and mechanically grants credit for the credit shown in the online computer records of Form No.26AS. If the assessee writes a letter to protest against the department’s action and produces proof of the TDS, he is ignored. Against the bogus demand so raised, future refunds are adjusted.

Anand Parkash’s cry for help struck a chord with the Judges. They were quick to take judicial notice and convert the letter into a public interest litigation. What is more interesting is that the judges were not content to go by Anand Parkash’s litany of woes but shot their own barrage of questions at the department

Worse, Anand Parkash pointed out, if the deductor makes a slight mistake in entering the payee’s name or PAN, the TDS will not appear in the payee’s Form No. 26A and he will never get credit for the same. The only solution for this is to pursue the deductor and get them to file a revised TDS statement with the corrected details. This is easier said than done. If the deducted happens to be a government organization like the income-tax department, then even God cannot help you. The same problem arises if there is a problem with the challan number or the assessment year or if the bank makes a mistake while reporting the payment of TDS. Also, suppose a demand is raised because you haven’t been given credit for advance-tax or SA tax. You file an application for rectification with the CPC which is totally ignored. The amount continues to show as an arrear and you will continue to get threatening letters. Future refunds are promptly adjusted against the so-called demand.

Fortunately, for Anand Parkash and the millions of tax payers across the Country, we live in a time when a humble postcard from the poor and the oppressed is sufficient to move the conscience of the Court and it rushes forward, sword drawn, to defend the helpless sufferer from the heartlessness of the State.

The tone and quality of questions shows that the Judges are well versed in the subject and are very serious about the issue. Here, one must compliment the individual judges concerned because it is because of their deep knowledge of the subject, both theoretical and practical, that this kind of judicial activism is possible

Anand Parkash’s cry for help struck a chord with the Judges. Who knows, maybe they have also been victims of the department’s high-handedness at some stage or the other. Whatever the reason, the Judges were quick to take judicial notice and convert the letter into a public interest litigation. What is more interesting is that the judges were not content to go by Anand Parkash’s litany of woes but shot their own barrage of questions at the department. The Court demanded to know whether the department was taking care to communicate rejection of TDS certificates and non-grant of credit to the assessee or the demand was being raised behind the assessee’s back for surreptitious adjustment at a future date. The Court also wanted to know what steps had been taken to ensure that the deductors correctly upload the TDS details on the Income-tax website. Also, the Court queried whether an assessee can get benefit of TDS deducted or/and paid but not uploaded by the deductor.

Not content with getting abstract answers from the department, the Court has also demanded statistics from the department on the number of assessees where income tax refund has been adjusted against demand for earlier years, the quantum thereof and cases/instances in which action has been taken against deductors, who in spite of request made by the assessee, have not correctly uploaded the TDS

Also, not wanting to let the department wriggle out at any stage, the Court nominated two eminent senior advocates, Mr. O.S. Bajpai and Ms. Prem Lata Bansal, to assist it in the matter as Amicus Curiae and to keep an eagle eye on the proceedings. Both senior advocates have decades of experience and testified to the difficulty and harassment being faced by the assessees.

The tone and quality of questions shows that the Judges are well versed in the subject and are very serious about the issue. Also, the questions are loaded and designed to trap the department if they give wrong answers. For instance, if the department says that credit for TDS cannot be given if the deductor has not filed a TDS return, it will be going contrary to s. 199. On the other hand, if it says that credit has to be given, then the statistics do not support it because it has never given credit. Here, one must compliment the individual judges concerned because it is because of their deep knowledge of the subject, both theoretical and practical, that this kind of judicial activism is possible. Justice Sanjiv Khanna was the Senior Standing Counsel for the department and knows the ins and outs of its (mal)functioning. Justice R. V. Easwar needs no introduction at all. Having qualified as a Chartered Accountant and lawyer and being the President of the Tribunal, few judges can boast of his depth of knowledge on income-tax law.

So, the future does look bright for the beleaguered assessees. Under the heat of the Court’s glare, the department is bound to reform its wayward ways and this can only be good news for the assessees. Keep watching this space till then!

Vellalapatti Swaminathan Iyer

30 comments on “Dear Department, Will You End Your TDS & Refund Harassment Now?
  1. s k saini says:

    Mr Ramdev, Yog Guru has given a simple solution to this-btt i,e Banking Trnsaction Tax else there is no other solution as the most of the processing individuals are inefficient, hungary animals, always waiting for their prey.

  2. vishnu says:

    in one case the client has remitted Rs. 30 lakhs as TDS made on contracts. It is in fact that the client had only paid 1.2 crores and the tds is 2.4 lakhs. The assessee has shown income of Rs. 1.20 crores only. The DCIT is asking for a recon between income declared and the TDS made by the client ie tds reflected in form 26as. prima facie it will seem as if there is concealment of income. but it is not so. can the experts suggest how to proceed with this?

  3. Bhavin says:

    I am one of the lakhs of victims of this ‘scam’. I am a salaried s/w professional who has declared each and every income includoing salary, foreign, capital gains on Equity/MFs, FD interest and even the meagre savings acct interest of few hundred rupees. Yet, due to the mistakes of AOs, huge demands have been raised for AY 2009, 10 and my refund for AY 2012-13 has been wrongly adjusted against these fictitious demands.

    Moreover, I was not even sent an intimation about these demands and first time I came to know about these is via the CPC’s intimation saying my refunds will be adjusted against these demands !

    Now a days, I run my own consulting firm and was mulling moving my firm along with all employees (read jobs and their contributions to Indian economy etc) to Singapore mainly for moderate and startup friendly tax regimes. But, looks like I might have to do that just to get a ‘honest’ tax administration since this great country of ours take everything from it’s honest citizens and give only hardships and harrassments in return.

  4. K D Shah says:

    Can anyone cite the HC Order or provide copy of HC’s Order and Direction? I am facing similar issue where in AO credit was not given for the TDS claimed since it did not appear on FORM 26 AS. Since then the Deductor has corrected the mistake and now the Tax Deducted appears on Form 26 AS. I have already made an application for rectification under Section 154, but the ITO refuses to give credit and advises that if necessary I should go in appeal.

  5. Amit Shah says:

    The CPC is an inept organization. What CA Anand Prakash has done is highly commendable. What the court and others have not found till now is that : the IT system employed by CPC is extremely buggy. If you look at the Demand notices, it usually has very little co-relation to the actual filings. The system may have gotten better but in the first one -two years, it had lot of issues. This is acknowledged by all low level employees directly. There should be an audit of the system. I have been continuously harassed by CPC every year since online filing started. Most people dont even know they have demand notices because the email goes to the junk folder. The system should be independently audited by a third party to fix all issues. This is how the IT department reacts to honest citizens :

    1) The Call center keeps on repeating things that you are asking. If you ask them – ‘I have got a demand and I want to know how your calculated this’, they will say – ‘Sir, you have a demand as per the system”

    2) UMA K, Income tax office, Bangalore – If you meet her, she will just abuse you and ask you to send her a letter. If you write a letter, she will reply “As per system, you have demand”

    3) Tara KINI, CPIO for RTI – Her responses are polite but she will give you all the information that you dont want and just refer to some previous communication for questions she does not want to answer.

    If you are an honest taxpayer, the only thing you can do is hope this court order provides some dignity to the small percentage of people who pay tax in this nation.

  6. Nidhi Shah says:

    The step taken by CA Anand Prakash is highly appreciated. CBDT should take some immediate action in the said matter and issue diections to the AO to resolve the matters of the assessees. The AO should nullify the demand of earlier years which is being adjusted against refund of later asst years on complaint by assessee. they should also update the CPC records when the earlier year demand is nullified on production of Manual TDS certificates by the
    assessee. It is not the assessees fault of there is mistake by deductor in entering pan of deductee . The AO cannot escape from his duty to help the assessee by saying that they cannot do anything if the demand is raised by CPC

  7. S S Deogaonkar says:

    The simplest solution to this problem could be that the Systems administrators of the Income tax Department should open the portfolio of the payments lying in the suspense account at the site of the Department, with a limited facility to the accessing assessees to insert their PANs against the respective entries waiting adjustment of such missing credits. This would immediately enable the Department to give due credit to the aggrieved assessees within no time and to redress their grievances. The Central Board of Direct Taxes should think over the matter.


    Fantastic effort by CA. Anand Prakash and laudable support by Honourable Delhi High Court. In addition to above I would like to add that the department is issuing enormous no. of orders u/s.201(1)/201(1A) for short deduction /late remittance of taxes without giving any details of defaults/ without giving any opportunity to the assessee. Large no. of orders with demands are being issued by taking wrong due date of remittance say 07 th April instead of 31st May (as applicable for TDS deduction on outstanding liability on 31st March-upto FY 2009-10) i.e, inspite the assessee has remitted the TDS within the stipulated time. This state of affair is unfortunate. We hope the system will improve by judicial activism as above and with the introduction of accountability of the department/ department officials.

  9. CA Swanand Kulkarni says:

    It is the deductor who should be made liable to pay the tax deducted but not properly reflected in the tds returns by him. Why should deductee suffer due to fault of deductor. Deductee should be allowe credit on the basis of presentation of form 16/ 16A even if no entry appears in 26AS because of the reasons out of his control.

  10. Ca Bharat Raithatha says:

    Though ,thousands of rectification applications are pending before the officers,artificial demands are adjusted against valid refunds without informing to the assessees.This is horrible & unjust.

  11. Murali FCA Chennai says:

    Why should the deductee wait till the deductor files his TDS return in order to get credit for TDS? The present system should be amended to ensure that at the time of deposit of TDS, the deductor should quote the name and PAN of dedcutee in the TDS challan so that the deductee gets immediate credit for TDS. TDS return should not be basis for granting TDS credit to the deductee. The deductor can continue to file TDS returns for the limited purpose of providing information to the IT dept regarding the payments made by him to various deductees so that the dept can use this information at the time of making assessments of the deductees. Of course, under this proposed system, the deductor will have to prepare separate challan for each deductee, but it is certainly worth the effort. Moreover in the present system it appears highly unjustified on the part of the Govt. to say that they will collect the TDS amounts without even knowing to whose accounts these have to be credited and that they will await the TDS returns of the deductors to give credit to the accounts of the deductors. This has to replaced by a system as proposed above wherein the deductor is compulsorily required to quote the name and PAN of the deductee while depositing TDS with the Govt. so that the deductee gets immediate credit of the TDS. Any suggestion on this proposed new system is welcome.

  12. G.MOHAN KUMAR FCA says:

    Similar is the situations faced by the assessees in 143(1) proceedings completed by the department for returns filed manuallywhere credit for TDS and advance tax paid were not given given credit for technical reasons and huge demand created and carried forward from year to year in their records. Repeated petitions for rectifying the mistakes remains still unattended. Every year arrear notices comes and assessees replies with proof. Department seems to help some paper manufacturing companies since tons of paper are consumed all over India for these types of pettions filed year to year. Now after the CPC has born, the assessees has lost the statutory right of making a representation before his assessing officer and availing a personal hearing and produce evidences in support of his claims. The electronic era has struck down the principles of natural justice in all counts

  13. CA. Y. M. Agarwala says:

    Billions of Rupees are lying in credit with the government in suspense account due to improper furnishing of the TDS returns by the tax deductor. The taxpayers are holding the receipts for the payment of taxes and they are also holding TDS certificates. but credits are being denied as staff and officers do not devote time for rectification of the bogus tax demand or they are not prepared to cooperate with the assessee for the reason best known to them.

    in case the tax payer is holding TDS certificate and it is not appearing in AS26, the assessing officer should give credit to the tax payer and initiate proper steps against the tax deductor. it is suggested that non furnishing of TDS return should invite penalties and procecution.

    in case tax payment and TDS is appearing in AS26, the assessing officer should consider all the items and give proper tax credit.

    time has come to awaken the tax payers, tax practitioners, lawyers and solicitors and chartered accountants so that proper credit is made available for the taxes paid. otherwise bogus tax demand will haunt the tax payers in years to come and bogus tax demand will be adjusted against excess taxes paid in future.

  14. CA Avinash Rajopadhye says:

    Deductee should be allowed to browse and check TDS returns submitted by the dedutor from time to time during the year itself like 26AS from the department’s site if there is any regularity he can bring to the notice of the deductor .

  15. CA Avinash Rajopadhye says:

    We all are missing one important point the deductor acts as an agent of the income tax department. The deductee has neither control over the deductor nor on the department . There is no provision in the Income Tax Act whereby the deductee can ask the assessing officer to take action against the erring deductor or to direct the deductor to rectify irregularities in his return till that time no notice of demand will be issued . The assessing officer without proper reconciliation of information from the bank as to TDS deposited by the deductor and TDS return submitted by him he issues demand notices on the deductee.
    The Finance Minister should introduce a new concept of ” Assessing Officer in default” in Income Tax Act on the line of “Assessee in default” who will be liable for interest and penalty.

  16. kirit sanghvi says:

    Kudos first to CA Anand Prakash who shed cynicism and took the matter in hand. Kudos also to the learned and eminent judges who rushed to the hapless taxpayer. The largest law breaker as far as the Income-tax Act is concerned is the Department itself. It is often tiring pursuing silly matters which otherwise should be taken care of without any extra efforts. It is our experience that even for small matters we have to file grievance petitions and rush to Ombudsman. (Though I believe very few make use of the office of Ombudsman).

  17. Raj Rani says:

    This is all being done even department internal circular issued each year which says that assessing office should issue refund without matching the TDS but who bothers .

  18. I whole heartily support the cause and appreciate court stands . The situation has been worsened with adjustment of old demands which are either paid or demand are fictitious due to wrong processing which are pending for rectification. How department can adjust the demand unless the demands are accepted by the assesses. The whole situation has become one sided in name of Centralized processing , Local ITD takes no responsibility of wrong processing and refunds due but ready to collect demands by issuing 221 notices and garnishing proceedings. The CPC is still in trial and error mode their processing software is not geared to process the return strictly within four corners of Law, I feel software is put into use without proper debugging, though it is said that software provider is one of the biggest IT company of World. E.g of Errors in processing. 1. 234C interest are applied in cases of 44AD. 2. Return Filed on 31/03/2012 ITR-V send to Bangalore on 3-Apr-2012 but ITR-V receipts mention dates as 31/03/2012. How its Possible.? The CPC call centre are handled by Person not aware of Income tax Law. Income tax Officer sitting at CPC are unreachable , no contact details are provided. When RTI application are filed with CPC most of the questions are denied saying its in Purview of CBDT… All kinds of irregularities and irresponsibility are persisting and Government Still wants People to Pay there Taxes sincerely. If You need any evidence regarding above facts feel free to call me @ 9422835931.

  19. vkshah says:

    (i) FORM 26AS should be made as Statutorily binding information and the TDS credit should accordingly be allowed in all cases, irespecive of claim for TDS credit in tax return.
    (ii) Additional table should be inserted in Return Forms, where in the assessee should provide the information in respect of each TDS amount for which the information is not uploaded in 26AS. Based on this information provisional credit should be allowed to the assessee providing the information, raising coresponding demand against the tax deductor. The demand so raised against the tax deductor be settled separately by the AO/CPC with the Tax deductor with penalty and interest as per law.

  20. Vipul Shah says:

    The root cause for all the issues with TDS lies with ITO TDS. In the Income tax department, post of ITO TDS is seen as penalty posting. No ITO is interested in doing the job. Once assigned the job, he will either become lax or go on leave. If the ITO TDS are forced to do their duties of penalising the deductors, who either don’t deposit after deduction, if deposits, doesn’t upload the return and even if uploads, the data are incorrect. All this is happening because of the lax attitude of ITO TDS and CIT (TDS). Most of the harrasment is because of the state Government and Central Government Deductors. They hardly upload the returns. Stringent action in form of survey and penalties need to imposed on such defaulters. Only then the machinery could be improved.

  21. Jayesh Mistry says:

    It seems that in many cases department is not giving credit which shows in Form 26 AS & on the otherside they are adjusting in refund, therefore its double taxation. Even if we write to the department they says write it to the CPC.
    Hence nobody takes the responsibility.

  22. Govind Krishna says:

    It is true that despite best efforts due credit for TDS made by deductor is not being allowed to the assessee. In some cases the position is worse. In one of my case, the Department has not given credit of TDS in the assessment despite there being credit in Form 26AS and also in a number of cases even without giving any formal or informal notice, The Department has sub silentio, adjusted a huge amount, along with interest, against the refund due for the next assessment year. On being aggrieved with the action application filed before the AO for release of excess amount recovered but the excess amount recovered is not being released despite repeated requests. Obviously, such acts make harassment of honest taxpayers as otherwise there can be no reason to deny credit of TDS shown in Form 26AS. It is high time that the Hon’ble High Court directs payment of penal interest to the taxpayers victims of the machinations of officials of the Department.


    The cognizance of the petition filed by CA.Anand Prakash by Honourable Delhi High Court is laudable. One more point needed to be added to the letter and reply to be sought from Department regarding the number of cases reopened U/S 147 by Department across the country basing on the mismatch of TDS claimed by the assessee with that of 26AS data. Such cases are alarming in nature and its a usual threat by the Department to the innocent assessee.

  24. Mukesh Trivedi says:

    This is an interesting and very important article. accountability of bureaucracy is need of the hour. unabated powers without accountability may lead to huge crisis. God save the honest tax payers.

  25. K S Dhingra says:

    In the letter to the Hon’ble High Court, it has been pointed out that the department ignores the figure of TDS credit claimed and grants credit for the credit shown in Form No.26AS. In some cases the position is worse. In my case, the Department has not given credit of TDS in the assessment despite there being credit in Form 26AS and without notice. The Department has sub silentio adjusted a huge amount, along with interest, against the refund due for the next assessment year. The excess amount recovered is not being released despite a formal application to that effect and repeated requests. Obviously, such acts manifest corrupt motives of the official of the Department otherwise there can be no reason to deny credit of TDS shown in Form 26AS. It is high time that the Hon’ble High Court directs payment of penal interest to the taxpayers victims of the machinations of officials of the Department, recoverable from the salary of the officials responsible.

  26. Sanjay Sharma says:

    Assessee is at the mercy of the deductor who failed to upload the tax deducted at source inspite of repeated request and reminders. I think Income Tax Department should take serious action against defaultor who failed to upload the TDS return within the stipulated period. I think Assessee is helpless in this matter as he has to face the demand raised by the depatment due to non filing /non credit of TDS deducted in his favour by the deductor. We are really thankful to Sh.Anand Parkash who has taken initaitive in this regard.

  27. This action was overdue. For multiple reasons, including the transition process, the poor assessee has been left fending the bouncers on demands!

  28. Mayur A Shah says:

    The Income Tax Department is one of the many arms of the Government which functions without any foresight or vision. Most of its acts are in the form of knee jerk reactions. No planning goes into whatever it does . This has resulted in a criminal act on its part in maliciously and without reason adjusting the refunds of tax payers causing undue harrasment, hardship and torture to them. It is very unfortunate that the Department does not think of service to the taxpayers as its main functions and thinks of tax collection and harassing tax payers as its only objective. It is possible that in order to cut the huge budgetary deficit the Department has at the instance of the Government adjusted the refunds. After all what does the Government lose as at the most it will have to pay interest at 6 % per annum which is easily affordable. And further to add insult to injury no attempt has been made by the Government to redress the tax payers grievances in this behalf. It is also unfortunate that professional bodies such as the ICAI, the BCAS or the CTC etc have done nothing except for writing polite letters to the Chief Commissioner long after the Department inflicted such a heavy damage on the tax payers. We have to thank the learned Chartered Accountant Mr Anand Parkash for taking a bold initiative at his own cost to get redressal for the tax payers

  29. Nitin Shah says:

    It is high time and right time that the court has taken up the matter. The issue really needs to be addressed.

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