Whether assessee can be denied TDS credit on basis of form 26AS mismatch without fault of assessee?

Judgement and facts of the case

HIGH COURT OF JUDICATURE AT ALLAHABAD

A.F.R

Court No.33

Civil Misc Writ Petition (Tax) No.657 of 2013

Rakesh Kumar Gupta

Petitioner

Versus

Union of India and another

Respondent

Corum:-

Hon'ble Tarun Agarwala,J.

Hon'ble Dr. Satish Chandra,J.

Judgement delivered on 06.05.2014

(Per: Tarun Agarwala,J.)

The petitioner is a civil contractor and is deriving his income by executing civil contracts in various Government Departments. For the Assessment Year 2010-11, the petitioner, in the course of his business, received certain payments from the Government Departments, which in the instant case is, the North Central Railway and a total sum of Rs.3,14,766/- as tax was deducted at source by the Government Department (hereinafter referred to as “TDS”). For the Assessment Year 2010-11, the petitioner filed his income tax return in Form-4, showing his gross income at Rs.6,86,650/-. The petitioner disclosed that he was liable for payment of tax amounting to Rs.82, 295/- and consequently, claimed a refund of Rs.2,32,370/-.

The returns were processed by the Central Processing Centre of the Income Tax Department at Bangalore. The returns were accepted under the deemed assessment scheme. The Central Processing Centre, Bangalore issued an income tax refund of Rs.43,740/-. No intimation was given to the petitioner as to why the balance amount of Rs.1,88,630/- was not refundable.

The petitioner, accordingly, filed an application under Section 154 of the Income Tax Act (hereinafter referred to as “the Act”) for rectification of the mistake and praying for the refund of the balance amount. Reminders were sent and when it became known to the petitioner that his application was not received by the Department, the petitioner filed a second application under Section 154 of the Act. When nothing happened, the petitioner, being frustrated, filed the present writ petition under Article 226 of the Constitution of India praying for a writ of mandamus commanding the respondents to refund an amount of Rs.1,88,631/- along with interest to the petitioner.

The Income Tax Department has filed a counter affidavit admitting that the return was processed and was accepted and that a refund of Rs.43,750/- was issued to the petitioner. The Department, however, denied having received the first application filed by the petitioner under Section 154 of the Act and submitted that the second application was not entertained since the said application was not signed by the assessee nor any power of attorney was attached to the application. On the issue of refund of the TDS, the respondents in paragraph 14 of the counter affidavit admitted that the refund was allowed only of that amount which matched the TDS in Form 26AS and that the balance amount was not refunded since it was mismatched and, therefore, credit was not given on these TDS certificates.

In the light of the aforesaid stand taken by the parties, we have heard Sri Nitin Kesarwani, the learned counsel for the petitioner and Sri Shambhu Chopra, the learned counsel for the Income Tax Department.

The difficulty faced by the tax payers relating to credit of tax deducted at source, i.e., TDS, which stands paid by the deductor was considered by the Delhi High Court in a Public Interest Litigation in Court On its Own Motion vs. Commissioner of Income Tax , 2013 (352) ITR 273. The Court found that a large percentage of cases were coming up where an assessee was entitled to be given the credit of TDS, which had been deducted by the deductor, but, was not being given credit by the Income Tax Department on account of the fact that the TDS was not reflected in Form-26AS for various reasons. The Court noticed that there were cases where the deductor failed to upload the correct and true particulars of the TDS, which had been deducted, as a result of which, the assessee was not given credit of the tax paid. The Court also noticed that there were cases where the details uploaded by the deductor and the details furnished by the assessee in the income tax returns were mismatched and, on this ground, credit was not given to the assessee.

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