A new procedure announced by the income tax (I-T) department on Saturday will coerce you to pay unethical and punitive tax demand even for clerical errors
The Centralised Processing Cell (CPC) of Income Tax (I-T) Department has mandated by a communication dated 9 August 2014 that “Short Payment Defaults” in the quarterly tax deducted at source (TDS) statements due to unmatched challans has to be closed before you are allowed to download the “consolidated” files from the website of TDS Reconciliation Analysis and Correction
Enabling System (TRACES) for relevant statements.
This is another step to offload the job from the I-T department to the taxpayer. Now the assessee will do the job of matching unmatched challans for the department, which will reduce the unmatched tax suspense credit lying with the Government. It will also help the deductee to get his tax credit and avoid undue stress for non-receipt of tax credit.
But what about the hardship for both the deductor and deductee when say through clerical error a wrong permanent account number (PAN) is written into the return and the return gets uploaded? In such a situation there are two likely scenarios:
(i) The PAN entered is completely wrong and not in the IT database.
(ii) The PAN entered exists in the database but it is that of some person other than the actual deductee.
In situation (i) above, the error is thrown up by the TRACES software and one needs to rectify the error by giving the correct PAN in the revised return.
The hardship in this is when the error report appears, the law mandates that for incorrect or non-existing PAN the tax rate should be 20%.
In this case, the deductor has correctly deducted the tax at the rate of say 10% (for professionals and rent) and paid it in time, filed the return too in time, he will still get a default notice and be asked to pay the differential tax and interest thereon!
Even if he files a revised return giving correct PAN, his liability will stand and he will HAVE to pay this unethical demand!!
Is the Government so bankrupt of ideas for raising funds that they are now resorting to taxing clerical errors? If so, then I think tax paying citizens have a right to put the Government in the docks for all the taxes collected and grossly misused/ abused as reported by the Comptroller and Auditor General (CAG) and various exposes, which come out in the media from time to time. Because those errors of omission and commission (deliberate or otherwise) are not clerical they are made by highly educated and qualified people in Government!
Now, if the deductor does not pay this amount, he will not be allowed to download the next quarter’s Consolidated file to correct any errors therein. This is nothing but blackmail and coercion.
In situation (ii) the PAN entered is correct but does not reflect in the actual deductees' Form 26A as a result he gets in touch with the deductor asking the deductor to rectify the mistake. This error actually should not arise at all, as the tax department should have a PAN validation utility being run in the background at the time of data entry into the return form itself. In fact the moment PAN is entered and there is a mismatch of the name in the tax database with that of the name in the return, the return should throw up the error at the time of filing the return – this happens while filing income tax returns (ITRs). When such an error takes place, the tax credit appears in the name of a person who has no clue about the tax credit in his Form 26AS. If he is not aware of the same and files his return through a chartered accountant (CA) or tax practitioner, who uploads the TDS details in the return without verification, then the assessee will get a notice for not disclosing the income relevant to the incorrect tax credit claimed. Then begins the process of hearing etc and trying to prove that the tax reflected in his form 26AS does not belong to him.
The best part is that the I-T department expects a person, who receives such incorrect tax credit, to get in touch with the deductor and have him file a revised return! Can there be something more illogical and stupid than this? Does the assessee have any clue who has deposited the tax into his PAN? How can he find out who the deductor is, in any case?
There is an option for obtaining “REFUND” of excess TDS paid – in fact the TRACES site has a “refund” tab, which has not been activated. Cases of refund may arise when a deductor pays tax under section 194C by mistake instead of 194J, and subsequently pays tax under section 194J. He does not have any payments under section 194C for the rest of the year, thus he is entitled to a refund. There is a provision under law for obtaining this refund, but I suppose this refund process has not been activated as crores of rupees may go out of the Government kitty, which it is currently enjoying. Given below are two screen shots which show the above.
To conclude, I would like to say that the overall computerisation of the I-T Department is a commendable effort, it still has a lot of room for improvement and making the entire system transparent and user friendly. Using a hammer when a sweet could do the job is not the way of making the system transparent and user friendly.
The Centralised Processing Cell (CPC) of Income Tax (I-T) Department has mandated by a communication dated 9 August 2014 that “Short Payment Defaults” in the quarterly tax deducted at source (TDS) statements due to unmatched challans has to be closed before you are allowed to download the “consolidated” files from the website of TDS Reconciliation Analysis and Correction
Enabling System (TRACES) for relevant statements.
This is another step to offload the job from the I-T department to the taxpayer. Now the assessee will do the job of matching unmatched challans for the department, which will reduce the unmatched tax suspense credit lying with the Government. It will also help the deductee to get his tax credit and avoid undue stress for non-receipt of tax credit.
But what about the hardship for both the deductor and deductee when say through clerical error a wrong permanent account number (PAN) is written into the return and the return gets uploaded? In such a situation there are two likely scenarios:
(i) The PAN entered is completely wrong and not in the IT database.
(ii) The PAN entered exists in the database but it is that of some person other than the actual deductee.
In situation (i) above, the error is thrown up by the TRACES software and one needs to rectify the error by giving the correct PAN in the revised return.
The hardship in this is when the error report appears, the law mandates that for incorrect or non-existing PAN the tax rate should be 20%.
In this case, the deductor has correctly deducted the tax at the rate of say 10% (for professionals and rent) and paid it in time, filed the return too in time, he will still get a default notice and be asked to pay the differential tax and interest thereon!
Even if he files a revised return giving correct PAN, his liability will stand and he will HAVE to pay this unethical demand!!
Is the Government so bankrupt of ideas for raising funds that they are now resorting to taxing clerical errors? If so, then I think tax paying citizens have a right to put the Government in the docks for all the taxes collected and grossly misused/ abused as reported by the Comptroller and Auditor General (CAG) and various exposes, which come out in the media from time to time. Because those errors of omission and commission (deliberate or otherwise) are not clerical they are made by highly educated and qualified people in Government!
Now, if the deductor does not pay this amount, he will not be allowed to download the next quarter’s Consolidated file to correct any errors therein. This is nothing but blackmail and coercion.
In situation (ii) the PAN entered is correct but does not reflect in the actual deductees' Form 26A as a result he gets in touch with the deductor asking the deductor to rectify the mistake. This error actually should not arise at all, as the tax department should have a PAN validation utility being run in the background at the time of data entry into the return form itself. In fact the moment PAN is entered and there is a mismatch of the name in the tax database with that of the name in the return, the return should throw up the error at the time of filing the return – this happens while filing income tax returns (ITRs). When such an error takes place, the tax credit appears in the name of a person who has no clue about the tax credit in his Form 26AS. If he is not aware of the same and files his return through a chartered accountant (CA) or tax practitioner, who uploads the TDS details in the return without verification, then the assessee will get a notice for not disclosing the income relevant to the incorrect tax credit claimed. Then begins the process of hearing etc and trying to prove that the tax reflected in his form 26AS does not belong to him.
The best part is that the I-T department expects a person, who receives such incorrect tax credit, to get in touch with the deductor and have him file a revised return! Can there be something more illogical and stupid than this? Does the assessee have any clue who has deposited the tax into his PAN? How can he find out who the deductor is, in any case?
There is an option for obtaining “REFUND” of excess TDS paid – in fact the TRACES site has a “refund” tab, which has not been activated. Cases of refund may arise when a deductor pays tax under section 194C by mistake instead of 194J, and subsequently pays tax under section 194J. He does not have any payments under section 194C for the rest of the year, thus he is entitled to a refund. There is a provision under law for obtaining this refund, but I suppose this refund process has not been activated as crores of rupees may go out of the Government kitty, which it is currently enjoying. Given below are two screen shots which show the above.
To conclude, I would like to say that the overall computerisation of the I-T Department is a commendable effort, it still has a lot of room for improvement and making the entire system transparent and user friendly. Using a hammer when a sweet could do the job is not the way of making the system transparent and user friendly.
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