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Administrative Issues in e-TDS Returns Filing, Rectifications &

Refunds

Presented byCA Ameet PatelSudit K. Parekh & CO.

Date April 17, 2013

Rectifications and Refunds

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

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

Credit for Tax Deducted at Source

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

Credit for Tax Deducted at Source/Advance Tax and SA Tax

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


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


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.


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


Other Open IssuesClubbing provisions – Minor’s Income

TDS deducted and 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


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

Uploading of Wrong or Fictitious Demand

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


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

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


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.

Refund Adjustment contrary to section 245

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


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


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

Issues in rectifications u/s 154

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


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


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


Delay not attributable to tax payerCPC 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 tothe 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

Issues pertaining to grant of interest on refunds

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

Non receipt of intimations

TtttttTRACES under Maintenance !!!!

E-tds (Tedious) Returns

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

Issues in registration process and change of user ID /password

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

Issues in registration process and change of user ID /password

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

Common issues

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

Issues in download of consolidated files

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

Issues in download of Justification reports

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


Issues in download of Justification reports

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


Issues in Form 16A generation

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.

Other Issues

Time lines for processing of original / revised e-TDS not availableHardship 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

Other Issues

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

Glossary

Any Questions ?????

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