Taxman disallows Rs 4.5L TDS, irks ITAT

(This story originally appeared in on Aug 13, 2022)

Mumbai: The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has come down heavily on the I-T department for its failure to take cognisance of a tax deducted at source (TDS). The TDS was on professional income earned by a taxpayer and, consequently, the I-T department also raised a tax demand on her — along with penal interest.

A majority of taxpayers invariably incur TDS against their income — be it against salary, professional income or interest income. To carry on with this illustration, it is the employer organisation, the client and the bank which are respectively responsible for deducting tax at source and depositing it with the government.

This TDS amount is available as a deduction in the hands of taxpayers against their final I-T liability. In cases where the aggregate of advance taxes paid and TDS is higher than the final I-T liability, it results in a refund, which has to be paid by the I-T department.


In the recent case, which was heard by the ITAT, the taxpayer Kirtida Rameshchandra Chandarana had duly claimed as a deduction a sum of Rs 4.5 lakh as it had been deducted at source, against professional fees paid to her. For the financial year 2012-13, the year in dispute, she deducted the TDS and the advance taxes paid by her against her final I-T liability and claimed a refund of Rs 19,816.

However, she was sent a ‘rectification’ order. The I-T assessing officer denied the TDS sum and an aggregate penal interest figure of Rs 79,539 was also raised on her. The Commissioner (Appeals) also upheld this course of action, despite the TDS being reflected in her Form 26AS. This form, which is available on the I-T department e-filing website, contains all tax-related information of a taxpayer, such as TDS and advance taxes paid.

The ITAT bench — composed of judicial member Aby T Varkey and accountant member Gagan Goyal — explicitly expressed their displeasure, especially as a rectification order can be issued only if there is a mistake apparent on record.

The bench pointed out, “The taxpayer filed her I-T return on the basis of records generated by the tax department itself, viz Forms 26AS and 16A. These are documents which have been processed and issued by the tax department itself, on which the taxpayer has relied. How can there be a case of mistake apparent from record? We declare this whole action of the Centralised Processing Centre at Bangalore and in turn jurisdictional I-T officer is ‘bad in law’, hence it is set aside.”

The ITAT gave directions that the taxpayer should be given full credit of the TDS claim, be granted refund (together with interest to be paid by the I-T department for the delay) and be refunded any other money she may have deposited after the issue of the rectification order.

The ITAT bench held that such action by the I-T authorities and the insensitive decision of the Commissioner (Appeals) was in clear violation of equity and the citizen charter issued by the Central Board of Direct Taxes (CBDT).

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