Section 119 of the Income-tax Act, 1961 – Income-tax authorities – Instructions to subordinate authorities – Authorization of AOs in certain cases to rectify/reconcile disputed arrear demand

Circular No. 4 of 2012, dated 20-6-2012

The Board has been apprised that in certain cases the assessees have disputed the figures of arrear demands shown as outstanding against them in the records of the Assessing Officer. The Assessing Officers have expressed their inability to correct/reconcile such disputed arrear demand on the ground that the period of limitation of four years as provided under sub-section (7) of section 154 of the Act has expired.

Further, in some cases, the Assessing Officers have uploaded such disputed arrear demand on the Financial Accounting System (FAS) portal of Centralized Processing Center (CPC), Bengaluru which has resulted in adjustment of refund arising out of processing of Returns against such arrear demand which has been disputed by such assessees on the grounds that either such demand has already been paid or has been reduced/ eliminated in the appeals, etc. The arrear demands, in these cases also were not corrected / reconciled for the reason that the period of limitation of four years has elapsed.

2. The Board, in consideration of genuine hardship faced by the abovementioned class of cases, in exercise of powers vested under section 119(2)(b) of the Act, hereby authorize the Assessing Officers to make appropriate corrections in the figures of such disputed arrear demands after due verification/reconciliation and after examining the same on merits, whether by way of rectification or otherwise, irrespective of the fact that the period of limitation of four years as provided under section 154(7) of the Act has elapsed.

3. In view of the above the following has been decided:—

(a)  In the category of cases where based on the figure of arrear demand uploaded by the Assessing Officer but disputed by the assessee, the Centralized Processing Center (CPC), Bengaluru has already adjusted any refund arising out of processing of return, the jurisdictional Assessing Officer shall verify the claim of the assessee on merits. After due verification of any such claim on merits, the Assessing Officer shall issue refund of the excess amount, if any, so adjusted by CPC due to inaccurate figures of arrear demand uploaded by the Assessing Officer. The Assessing Officer, in appropriate cases, will also upload amended figure of arrear demand on the Financial Accounting System (FAS) portal of Centralized Processing Center (CPC), Bengaluru wherever there is balance outstanding arrear demand still remaining after aforesaid correction/ reconciliation.

(b)  In other cases, where the assessee disputes and requests for correction of the figures of arrear demand, whether uploaded on CPC or not uploaded and still lying in the records of the Assessing Officer, the jurisdictional Assessing Officer shall verify the claim of the assessee on merits and after due verification of such claim, will make suitable correction in the figure of arrear demand in his records and upload the correct figure of arrear demand on CPC portal.

4. It is specifically clarified that these instructions would apply only to the cases where the figures of arrear demand is to be reconciled/ corrected – whether such arrear demand has been uploaded by the Assessing Officer on to Financial Accounting System (FAS) of CPC or it is still in the records of the Assessing Officer.

This may be brought to the notice of all the officers of your CCA region.

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  1. dilip says:

    i am employee. in nov.2009 i took 8 day leave(ML) & not recieved leave payment that year but i add leave payment in my total income & calculat tax on full payment & tax paid in 2010. but that leave payment i recieved current year and my boss calculat tax on it in form 16. how i save double tax on my leave pay.

  2. V P Nayak says:

    Comment by Tira T has really hit the bull’s eye. most of the so called ‘sysem faults’ are deliberately committed by the ito officials, with the clear motivation to extract bribes when the poor assessee comes forward to deemand delayed refund or seek correction in excess demand . I am a victim of this excess demand scandal as well as unpaid tax refunds. I received my refunds delayed for mor than three years only after bribing the official. Recently I received a demand for pending tax that was already paid by me some three years ago. However in my haste(since the deemand was for small amount of Rs.580) without cross checking I immediately paid the amount. Afterwards I found out that the amount paid earlier is clearly reflected in my form26as form , when I went back a few assessment years earlier. I even have the paid challan copy. All due documents along with proof of original paid amount as well as excess amount paid has been submitted with the letter to refund my exess payment. If I am willing to pay bribe even for this small amount I would have received my refund immediately. Since I am not willing, I believe that actually getting back my refund is as good as getting back my leg trapped in a crockodile’s jaws.

  3. Tira T says:

    Once upon a time, there used to be low-key but very effective team of officers, directly reporting to and working under the Chairman of CBDT, and was known as the “Inspection Division of CBDT” [I happen to know this as, many years ago, while travelling by train, I came across two officers of this team and, coming to know their job content, I gave them details of my own agonies of the ITO demanding huge money before cancelling bogus demand against me, though the taxes had already ben paid. In one month’s time, I was informed by the same corrupt officer in writing that the demand had been cancelled! I also got a personal letter in response to my petition (written in the running train) from Chairman that the matter had been attended to and the inconvenience was regretted.]
    I learned from these oofficers that, one of the agendas of this (now abolished) Division was to verify and reconcile bogus and huge demands, despite taxes were already paid but not accounted for as the TROs and ITOs and even their superiors were not “paid”. Another job of these people, as I recall, was to verify the large no. of bogus cases shown by ITOs in their records just to show bogus “disposals” (whatever that meant) and to keep their posts secure. I do not understand or know why.
    I have come to know that, after 1990, this division has been wound up since many officers had lost their jobs because of its work in the regime of VP Singh as FM.
    My point is, the higher ups had been aware of this malaise in the IT offices in those days and did try to take necessary action. This was not attended to for three decades until this missive from CDBT has now been issued, undoubtedly because of pressures from some very highly influential tax payers against whom such bogus demands remain (mainly to squeeze bribes, hnecessarily in salary and mall traders’ cases). This is clear from huge claims of refunds are pending for want of non-reconciliation of TDS made by Banks from interest, etc., and other interest-paying offices, with IT database. Despite the huge salaries drawn by the top IT officers and unthinkably huge no. of foreign trips made in the name of technology transfer in e-governance, CBDT has NOT cared to also order the release of the delayed refunds with interest on all valid refunds based on the TDS certificates alone. I know of many IT officers who after retirement are disgusted with the so called “system” problems cited as the causes for bogus tax dues and non-granting of refunds.

    Is it not corruption? What petty Inspection Division people could do, with their meagre salaries, by touring the whole country in the 80s cannot be done by the spoiled brats in the department as easy money is just for the asking!
    There must be deliberate motives behind all these “system faults”.

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