Tax Credit Mismatch – TDS not deposited by deductor – Instruction by CBDT

There is good news to the assesee facing problems of mismatch of tax credit. The department has put the onus of correcting the tax credit on the deductor.

Instruction No 275/29/2014 dtd 1-06-2015 has been issued by the department instructing all the Assessing Officers that if the facts of the case so justify, the assessees are not to be put at any inconvenience on account of default of deposit of tax into the Government account by the deductor.

This means that the assesee has to prove to the officer that tax was actually deducted. The original TDS certificate signed by the deductor will be sufficient proof of deduction. If TDS Certificate is not available then it has to be proofed sufficiently to the AO that tax was deducted and the deductor is in default .

Grievances have been received by the Board from many taxpayers that in their cases the deductor has deducted tax at source from payments made to them in accordance with the provisions of Chapter-XVII of the Income-tax Act, 1961 (hereafter ‘the Act’) but has failed to deposit the same into the Government account leading to denial of credit of such deduction of tax to these taxpayers and consequent raising of demand.

As per Section 199 of the Act credit of Tax Deducted at Source is given to the person only if it is paid to the Central Government Account. However, as per section 205 of the Act the assessee shall not be called upon to pay the tax to the extent tax has been deducted from his income where the tax is deductible at source under the provisions of Chapter- XVII. Thus the Act puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch cannot be enforced coercively.

Earlier the defaulting deductors were not penalized for non filing of returns. Later on from Finance Act 2012, interest was levied @ 1.5% on non-deposit of TDS (increased from 1% p.m) and a penalty of Rs 200 per day of delay in filing of return was introduced. Moreover the whole processing of TDS returns has been computerized, resulting in much faster processing and levy of penalty. All this came as a welcome change and much awaited relief to the deductee assesee.

Even though all this has to a great extent reduced the delay and defaults in TDS compliance on the part of the deductors in recent cases , but this has not urged them any further in getting the past defaults and delays rectified. Also the deductor might not find it worthwhile to file the revised TDS return just to rectify the details of a few deductees.

From 2012, along with online processing of TDS returns, the issue of TDS certificates is also made online,. This has virtually removed any chance of mismatch of TDS in the future. Now on wards TDS certificates can be generated only based on the records filed in the TDS return. The tax credit can also be verified online by the assessee by viewing his Form 26AS.

Therefore the the instruction issued by the department has come as a welcome development to the assesees facing Tax mismatch in the earlier assessment years.

CA. Roshan Thomas