Representation on Incorrect Income Tax Return processing & TDS credit denial

The Karnataka State Chartered Accountants Association (R) (KSCAA) has submitted a representation to the Commissioner of Income Tax, CPC, Bengaluru, regarding issues with the processing of Income Tax Returns (ITR) under Section 143(1) for the Assessment Year 2024-25. The representation highlights that the Central Processing Centre (CPC) has unjustly denied proper TDS credit, leading to erroneous tax demands or reduced refunds despite accurate TDS credit claims in accordance with Section 199 and Section 37B of the Income Tax Act. The CPC has cited issues related to Form 26AS not matching TDS/TCS claims, resulting in discrepancies between reported and claimed credits. KSCAA requests a review of the processing system to correct technical glitches and urges for system enhancements to facilitate effective online rectification. They also seek guidance on addressing such discrepancies and propose reprocessing of returns if necessary. The representation emphasizes the need for prompt corrective measures to address these issues and to provide clarity on procedures for resolving the discrepancies faced by taxpayers.

Karnataka State Chartered Accountant Association (R)

CA. Vijaykumar M Patel, President
CA. Praveen S Shettar, Secretary

To,
The Commissioner of Income Tax, CPC, Bengaluru

Date: 13^th September 2024 Ref No: 002/2024-25

SUBJECT: REPRESENTATION REGARDING INCORRECT PROCESSING OF INCOME TAX RETURNS U/S 143(1) FOR THE AY 2024-2 5 [BY UNJUSTLY DENYING PROPER TDS CREDIT)

The Karnataka State Chartered Accountants Association (R) (in short ‘KSCAA’) is an Association of Chartered Accountants (CAs), registered under the Karnataka Societies Registration Act, in the year 1957. KSCAA is primarily formed for the welfare of CAs and represents before various regulatory authorities to resolve the professional problems faced by CAs and the business community.

We wish to bring to your attention, an issue regarding incorrect processing of Income Tax Returns (ITR) under section 143(1) for Assessment Year (AY) 2024-25 by Central Processing Centre(CPC), Bengaluru. Apposite TDS credit has been denied in the intimations processed by CPC and wrong adjustments have been made even if TDS credit has been claimed in the ITR in accordance with Section 199 read with 37B of the Act. This has resulted in erroneous demands or a reduction in the refunds.

The CPC has cited the following reasons for the denial of TDS credit: “Form 26AS does not contain amount of TDS/TCS with respect to the TAN mentioned in schedule TDS 1/TDS 2/ TCS” or “Form 26AS contains partial amount of TDS/TCS with respect to the TAN mentioned in schedule TDS 1/ TDS 2/ TCSǤ”

ISSUES:

1. Incorrect denial of TDS/TCS Credit:

An intimation under Section 143(1) of the Act is a communication sent by the Income Tax Department after processing the ITR filed by assessee. It involves a preliminary validation and adjustment of the ITR to address any apparent mismatches and notify the taxpayer of any errors found in the return. The intimation summarizes the Income Tax Department’s assessment of the ITR, including income, tax liability, and any refund or tax demand based on the available information.

It has been observed that numerous ITRs have been processed with discrepancies. Specifically, there is a variance between the TDS/TCS credit reported in the intimation under Section 143(1) and the TDS/TCS credit claimed in the ITR. The claimed TDS/TCS amounts are in accordance with those reflected in Form 26AS and the Annual Information Statement (AIS). The discrepancy in processing of the ITR has led to incorrect tax demands or reduced refunds, despite the TDS/TCS credit being accurately claimed in the ITR as per Section 199 and Section 37B of the Act.

2. Impact of Technical Glitch:

The supposed technical glitch is causing considerable confusion and hardship to taxpayers. The assessees are unable to apply for online rectiication of the returns under section 154 for correction of TDS/TCS credit, leaving them with no remedy/resolution.

Even if the ITRs are thereafter allowed to be rectiied or revised, the issues mentioned supra may persist if these technical problems and glitches, that have led to the above grievance, remain unresolved.

REPRESENTATION:

1. Request for System Review and Correction:

We kindly request directions to the relevant authorities to review and correct the processing system to address the technical glitch. Additionally, we urge that erroneous communications issued in this context be recalled and corrected on suo moto basis.

2. Provide Resolution in Handling Such Intimations:

In the interim and before we expect the suo moto rectiications u.s 154 r.w.s 143(1), we also seek guidance on how to appropriately address and respond to the intimations received under these circumstances. Filing an appeal against the impugned intimations may not be a viable option, hence considering the mistake apparent from the records, an option may be provided to opt for reprocessing of the return.

3. Facilitate Online Rectiication/Revision:

Enhance the functionality of the online rectiication system under section 154 of the Act, to allow taxpayers to correct TDS/TCS credit discrepancies effectively.

In light of the considerable dificulties faced by the taxpaying community, we urge immediate and decisive action to address these discrepancies. Prompt attention to this matter will help in the implementation of corrective measures to resolve these issues. Also, providing clarity on the correct procedures and necessary actions to resolve these discrepancies would be greatly appreciated.

Yours sincerely,

Cc:
1. Nirmala Sitharaman, Hon. Union Minister of Finance and Corporate Affairs, Government of India
2. Pankaj Choudhary, Hon’ble Minister of State, Finance.
3. Sanjay Malhotra, Hon’ble Revenue Secretary
4. Ravi Agarwal, Chairman, Central Board of Direct Taxes 5. Shri. Shelly Jindal, PCCIT, Karnataka and Goa