On the income tax side, countless assessees have faced difficulties owing to the tendency on the part of the assessing officers to arbitrarily adjust refunds against demands, many of them artificially created, without any reference to the assessees, which is a most unjust and unreasonable approach. The magnitude of the harassment resulting from the non-matching of TDS and the resultant denial of refunds led the Delhi High Court to issue detailed directions, in the form of a 7- point mandamus, following which the CBDT issued a series of instructions to address the issue . The fact that it took stern orders from the High Court for the CBDT to seriously address the burning issue of inflicting harassment on a large body of taxpayers, can only be a reflection its attitude towards the taxpayer. Had the impact of the change to centralised processing on the taxpayer been properly considered and included in change management planning, many of the difficulties eventually faced by the taxpayer would have been anticipated and plans put in place to mitigate them. This would have avoided the widespread inconvenience to the taxpayers and criticism of the department.

Public interest litigation in TDS issues

In April 2012, Shri Anand Prakash, wrote a letter to the Delhi High Court voicing the agony of countless taxpayers, after he experienced utter helplessness and frustration due to numerous difficulties faced by taxpayers arising from the faulty processing of income-tax returns and TDS credit. Shri Anand Prakash pointed out that in processing the tax return under Section 143(1) of the I-T Act, there was invariably a mismatch between the TDS credit claimed and the TDS credit granted and demands were raised due to such mismatch. The department ignored the figure of TDS credit claimed and mechanically granted credit only for the credits shown in the online computer records, as available in Form No26AS. The taxpayers’ protests were ignored even when proof of the TDS deduction was produced. Thereafter, demands were raised and often adjusted unilaterally with refunds that may be due to the taxpayer in future.

The mismatches were primarily due to errors or failure on the part of deductors and the only recourse for the taxpayer was to chase the deductors, many of them being government departments against whom the taxpayer was helpless. However, when it came to issuing demands, or adjusting fictitious demands against refunds, the department seemed to show remarkable promptitude.

The letter also pointed out that before fully or partly adjusting the refunds against past arrears, no opportunity was being given to the taxpayer though Section 245 of the Act provides for this.

The Delhi High Court took notice of the letter, treating this as public interest litigation. After a detailed and critical examination of the issues, it delivered detailed orders in Writ Petitions (Civil) Numbers 2659/2012 and 5443/2013 on July 31, 2012 and March 14, 2013, respectively. These orders included a 7-point mandamus to the CBDT. Based on the mandamus, the CBDT issued necessary instructions implementing the directions of the Delhi High Court.


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  1. K K Mahajan says:

    I am of the view that the problem is with the mindset of the officials of the Income Tax Department. Prior to the introduction of 26AS, the credit was allowed on the basis of production of original TDS certificate. Now credit is allowed on the basis of 26AS and production of original TDS certificate is ignored. This is to be checked. Even if some amount is not appearing in 26AS, than the credit should be allowed on the basis of original TDS certificate. In the case of any doubt, who stops the Department from seeking a confirmation from the Deductor or checking the deposit of tax in the Government account. But it requires real working. Which no body wants to do.

  2. NEEHARIKA says:

    i had deposited Income tax 2003-04 on 26.7.2004 and 2004-05 on 26.10.2004. After that I got several notices, every time I had again deposited the copy of Challan in the Department.
    In the year 2011-12 refund was adjusted by CPC after words lot of correspondence amount was refunded. It is happening 2012-13 and 2013-14 and 2014-15.
    Why Department not taking against erring employee rather than harassing honest Tax Payer. I had filed a complaint in Delhi High Court in 2012 despite this nothing happened.

  3. vswami says:

    Sorry ! Believe,for valid reasons,many are under the impression that the CPC is a part and parcel, and very much a vital wing, of the IT Department itself- not an outsource !

  4. Dr. Arun Draviam says:

    I am not on the subject of adjustment of refunds due to the assesse against demands raised by IT Department. I am on the basic issue of whether it is citizen’s responsibility to match the Form 26AS at all.
    As an assesse, I have filed the TDS (form 16A) to support my return. The person who deducted the TDS has failed to submit the return required on his part for whatever reason (I don’t know that Form no; I do not want to know either). How does it become my duty to match the same ? Why does the Tax Department has a standing permanent staff besides the outsourced Central Processing Center?

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June 2021