Mumbai : Nowadays Income Tax Department is issuing letters to taxpayers demanding them to pay tax which they already paid. These letters being sent out as a result of the income-tax department moving on to a computerised system, wherein taxes cut by your employer and those with whom you share a business relationship get listed under your name. The problem arises at the last link — where tax deducted by any organisation against your name has to appear. The system is not being able to connect the two fields, and hence, thinks you have not paid tax.

Therefore, an automatically-generated letter is sent to you, asking you to clear the amount, pay interest for the delay (1.5% per month) and a penalty (equivalent to tax amount). These letters come to you as “Intimation Under Section 143 (1) of Income-Tax Act.”

So, if you too receive a letter asking you to pay up tax you don’t owe, don’t worry, as it is in most cases just be an erroneous letter generated by the system.

Chartered accountants in the city have been complaining about the menace, as thousands of replies are required to be sent back to the income-tax department. “The client doesn’t pay us any fee for this, but we end up spending time on it,” one CA told to reporters.

The tax department says these letters will continue for another three-four months, by when the system will be rectified. “We are moving towards a scenario where there is lesser interface between the (income-tax) department and the taxpayer. Everything is put on the system when you file tax, TDS is reflected in NSDL (National Securities and Depository) and the refund goes directly into the bank account. We are almost successful. There are some processing problems because of which the (tax) demands were generated. We have given instructions for rectifying that problem,” SSN Moorthy, chairman of the central board of direct taxes (CBDT) said in Mumbai.

Asked how long will it take to rectify the systemic problem, Moorthy told reporters that, “It will take around three-odd months.”

In case you have received a letter, and do not owe any tax, you will have to reply back telling the income-tax department that the claim is incorrect. If not done, chances are the ‘tax dues’ may be deducted from your refund. The procedure to reply is mentioned on the back of the letter sent to you.

You have to write a letter to the income-tax officer who has signed the letter sent to you. State as subject — Rectification under Section 154.

Say that the tax claimed on your PAN have already been paid and attach the proof to indicate the same — such as Form 16 in case of salaried people, tax challan used to pay taxes or tax deduction at source (TDS) certificate given to you.

“There is no need to come in person to the income-tax department and submit the letter. You can send it by post or courier the same to the address mentioned on the envelope,” an income-tax officer told reporters.

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Category : Income Tax (26307)
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Tags : CBDT (683) income tax act (507) Income tax department (263) nsdl (112)

0 responses to “A Bug in I-T department’s computer system causing erroneous tax demand, here’s what to do if you receive demand letter”

  1. NIKHIL says:

    I believe the CA fraternity should collectively represent these problems with the CBDT / F.M / Courts. The ICAI should take some initiative to stop this unnecessary harassment to the members & the common man…..
    Its resulting in over all loss to the nation by wasteful use of resources, adding to the unnecessary use of paper in a phase where we are promoting “save trees, save earth”.
    The IT dept. is not only harassing the common man, but also contributing to Global Warming & Ecological Imbalance and wasting the Central Govts funds.

  2. Samadhyay says:

    Most of the law abiding tax payers are literally living in a blissful heaven of ignorance and still believe that the actions of the officers and officials of the IT deptt. Are governed by a law called the Income Tax Act. And so they still send by habit applications/petitions u/s 154 to their AOs for “rectification of mistakes”-all adverse to them- like calculation mistake, in granting the correct refund or demanding more tax than due, etc., without being aware that the IT deptt has stopped, more than 20 years ago, doing anything as per that Act. So, these applications are NOT even seen. In fact, the CBDT and even the Ministry of Finance also DO NOT WANT ANY IT authority to care for the law and go after tax payers as they wish or as they are ordered, especially in respect of recovery (if you are not a big and influential tax payer) and in refusing to grant any refund during October to March of every year or in granting any interest on delayed refunds or (for appeal Commissioners) not to take up any appeal during that abovesaid period if they think the result will be refund or deleting the demand. The result of the scrapping of the Act under the directions of the govt is that, in thousands of cases of women employees, by deliberately “altering” the sex into “Male” or denying senior citizens’ benefit to old people and invariably by denying any deduction whatsoever u/s 80C. This is the established practice in the IT deptt for at least 20 years and interestingly, all are done under section 143(1) under which, as per the erstwhile Act, no adjustment/change is legally permissible.This is simply deliberate (but permitted) harassment of the small taxpayers who cannot afford to go to a professional for advice/redressal of grievance-what to talk of going to High Court. And if someone shows thae “audacity” of filing an RTI application, he/she is ruined, because as has been commented by someone, Ombudsman is NOT MEANT TO WORK and deal with the grievances of taxpayers as they depend on the hospitality of the IT officers/officials. After all these years of computerization in the Deptt, this is all strange, but all this cannot happen without the tacit support of the powerful bureaucrats. Hence, all this news must be bogus.

  3. VINOD PANDEY says:

    This is really causing a lot of inconvenience to tax payers and professionals. How department can deny deduction under section 80G in the order passed u/s 143(1)?

  4. C.Jyoti says:

    There is yet another problem. The BUG (or corruption in the deptt) is also sending refunds, if at all, direct to banks, through ECS and much less than is due/claimed. No intimation or asstt order is sent. So tax payers do not know reason for reduced amount of refund and if any interest is paid on delayed refund (NEVER PAID IN ACTUAL PRACTICE). I don’t know why the IT deptt behaves as if they are authorised dacoits and also the ordinary public is fool. What the IAS secretary really does is not known, bur that the whole IRS is corrupt is well known. Like the sanitary inspectors, inspectors/assessors of MCD, police people in general, sales tax inspectors or Malaria inspectors.

  5. K.Gopalakrishnan says:

    Intimation /letter come to the assessee by post. In case of original TDS/Donation receipts are to be sent by only ordinary post but for the copy of the letter we do not have any proof of having submitted to the I.tax dept. In case of refund with different bank a/c , how one can have the proof?

  6. Shriniwas Bhutada says:

    In many cases of income from Business, the amount of income is exactly doubled while processing the return by the I.T. Dept. This has unnecessarily increased the work of CAs as well as I.T. Dept.I wonder why and how such situation has arisen? Whether the trial run of the software used by the I.T. Dept. was not carried out? What is the cost to the nation for such negligence on the part of Govt. Machinery.

  7. Narayanan says:

    The CPC at Bangalure does not accept rectification petitions. They are sent back. We have to file a petition to the jurisdiction officer with a copy of the intimation from CPC and there is time frame for answering the petitions. Again we have to visit the office for follow up action. Paper filing is safe in this situation wherever e-filing is not required.

  8. NIKHIL says:

    THERE ARE MANY NOTICES OF DEMAND BEING RAISED. THE REASON BEING INCOME TAX DEPT. IS NOT CONSIDERING THE AMOUNT OF DEPRECIATION CLAIMED IN THE RETURN. DUE TO THIS THE PROFIT AS PER IT DEPT IS MORE & HENCE THEY ARE RAISING DEMANDS WITH INTEREST. THIS IS NOT IN CASE OF 2-3 ASSESSEES BUT NEARLY ALL. NOT ONLY IN OUR CASES BUT MANY OTHER FELLOW MEMBERS CASES TOO.
    PROFIT AS PER ACKNOWLEDGMENT AS OBTAINED FROM INCOME TAX DEPT WEBSITE AFTER UPLOADING THE RETURN IS CORRECT BUT IN THE INTIMATION LETTER IT IS DIFFERENT.

    AND SAID IN THE ABOVE ARTICLE, ITS TRUE THAT CLIENT WILL NOT PAY FOR THIS BUT WE HAVE TO SPEND TIME ON SUCH ISSUES…..

  9. Bidhy says:

    With ref. to Mr. N.Udayasimha’s, Mr.Bidup’s and Mr. Ahhilesh’s comments, I want to add that the claim made by the unnamed income-tax officer that “There is no need to come in person to the income-tax department and submit the letter. You can send it by post or courier the same to the address mentioned on the envelope” is false and a total untruth. Even the Delhi Ombudsman has been repeatedly and routinely asking thousands of aggrieved tax payers for the last 6-7 months to “contact” the concerned “AO”. Why? Because the rule is that, you cannot bypass the ITO/ITO’s staff who keep the entire machinery well oiled by regular “supply lines”-reaching to the topmost of the bureaucrats, and even political masters. How many clerks/ITOs in IT deptt. in Mumbai, Chennai, Delhi, Calcutta, Hyderabad, etc. have benami taxi services, service provider companies and rendering services to the very department? How can ITOs with 6 months stint or their clerks buy brand new cars without taking loans? Let falsehood stop and the deptt./govt. legalise corruption.

  10. akshat says:

    actually I-T department should make their system more secure… This is ridiculous when we getting false demand from govt..As there is bug in system who knows our return data may also be corrupted some day…

    This is strongly recommended that I-T dept must secure their systems…

  11. akhilesh says:

    I.T. authorities cannot deny our claim (TDS) under section 143(1).

  12. Bidup says:

    The name of the BUG is “CORRUPTION” !

  13. N.UDAYASIMHA says:

    I had earlier given a detailed note on this subject.Eventough, Dept says we need not visit any office, they have so far not confirmed, whether, they have recieved our application u/s 154 and the status of the same.Experience shows that sec 154 applications are not rectified even after SIX months as per the provisions.

  14. CA.M. Lakshmamnan, Madurai says:

    The assessees receive intimation from the CPC, Bangalore without adjusting the loss due to interest payment on Housing loan from the Income from Salaries, for which they have to file rectification petition with CPC, Bangalore and stay petition with the concerned ITO for which we, the CAs spend time without any fees. Rectification petitions, if sent by Regd.A.D. they are rejected and to safegaurd the interests of the assessees to certain extent,the same are sent by Cerificate of Posting. Corrective steps are to be taken by the Department at the earliest to avoid unnecessary paper work.

  15. Arvind Karnik says:

    This is fine so far as the Demand is errorneous, but what if you have Refund due per correct tax credits and Department send heafty demand. You are stuck for the Refund for system error, not giving you credit of taxes paid.

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