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TDS not payable for mere mismatch in data due to Technical Flaws

Appellant has been held liable as assessee in default merely due to technical flaws. Demand has been raised merely due to fault of system and in view of the CBDT's Instruction No.5/2013 dated 08.07.2013, the demand cannot be sustained.

It is seen that the order u/s 201(1) and 201(1A) is merely system generated. The appellant is a Government company. I am of the considered opinion that the appellant cannot be saddled with the financial liability merely due to mismatch in data furnished by the appellant by way of Quarterly TDS Return/Statement on one hand and that furnished by the bank or for that matter due to mismatch on processing of data by the computerized system in place. It is not the case of the A.O that the challan particulars mentioned in the TDS Return for the Quarter were actually not paid by the appellant being fake challans. It is not the case of the A.O that the appellant has failed to substantiate deposit of TDS from its bank statement. Appellant has been held liable as assessee in default merely due to technical flaws. Demand has been raised merely due to fault of system and in view of the CBDT’s Instruction No.5/2013 dated 08.07.2013, the demand cannot be sustained.  

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1. For the Assessment Year 2007-08, the Assessing Officer passed order u/s 201(1) and 201(1A) of the I.T. Act, 1961  holding, assessee as an “assessee in default” for short payment/non payment of TDS pertaining to Form No. 24Q4 amounting to Rs. 64,83,640/- and interest amounting Rs. 39,79,790/-.

2. Aggrieved by the orders passed u/s 201(1) and 201(1A) of the Act, assessee preferred an appeal to the first appellate authority. The CIT(A) held that assessee cannot be made liable for a technical flaw and relying on the Board CBDT Instruction No. 5/2013 dated 08.07.2013, allowed the appeal of the assessee.

3. Aggrieved, Revenue is in appeal before the Tribunal. The Ld. DR relied on the orders passed u/s 201(1) and 201(1A) of the Act. Ld. AR on the other hand, strongly relied on the finding/conclusion of the CIT(A).

4. We have heard the rival submissions and perused the material on record. The CIT(A) after elaborately considering the issue had held that it is only a technical flaw and assessee cannot be made liable u/s 201(1) and 201(1A) of the Act. The CIT(A) relying on the CBDT Instruction No. 5/2013 dated 08.07.2013 allowed the appeal of the assessee. The relevant finding of the CIT(A) reads as follows:

“4. I have carefully gone through the order appealed against and submissions of the appellant. It is seen that the order u/s 201(1) and 201(1A) is merely system generated. The appellant is a Government company. I am of the considered opinion that the appellant cannot be saddled with the financial liability merely due to mismatch in data furnished by the appellant by way of Quarterly TDS Return/Statement on one hand and that furnished by the bank or for that matter due to mismatch on processing of data by the computerized system in place. It is not the case of the A.O that the challan particulars mentioned in the TDS Return for the Quarter were actually not paid by the appellant being fake challans. It is not the case of the A.O that the appellant has failed to substantiate deposit of TDS from its bank statement. I am of the considered opinion that the appellant has been held liable as assessee in default merely due to technical flaws. I am convinced that the demand has been raised merely due to fault of system and in view of the CBDT’s Instruction No.5/2013 dated 08.07.2013, the demand cannot be sustained.  

The Honourable Delhi High Court vide its judgement in the case Court on its own Motion vs. UOI and Ors’ (W.P. (C) 5443/2012 dated 14.03.2013) has issued seven mandamuses for necessary action by Income Tax Department, one of which is regarding the issue of non-credit of TDS to the taxpayer due to TDS mismatch despite the assessee furnishing before the Assessing Officer, TDS certificate issued by the deductor.

In view of the order of the Honourable Delhi High court (reference: para 50 of the order), it has been decided by the Board that “when an assessee approaches the Assessing Officer with requisite details and particulars in the form of TDS certificate as an evidence against any mismatched amount, the said Assessing officer will verify whether or not the deductor has made payment of the TDS in the Government Account and if the payment has been made, credit of the same should be given to the assessee. However, the Assessing Officer is at liberty to ascertain and verify the true and correct position about the TDS certificate. Such verification may be made with the relevant AO (TDS), The AO (TDS) may also, if deemed necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down; that in this regard, the AO (TDS) may invoke all the powers and authority as available to him/ her as per the Income tax Act. If required and necessary, he/she can obtain prior approval of the Director or Commissioner of Income tax. The authorities can also examine whether general approval can be given. Thus, the manner laid down by the Honourable HC in the above mandamus is a method of due verification.”  

5. I find that the demand has been raised due to mismatch in challans and system related issues, the appellant is unable to file the correction statement for want of necessary files from the A.O, hence, the demand raised against the appellant cannot be sustained as the same is merely based on the report generated from the system. The appeal is disposed of accordingly.”

6.1. Assessee is a Government Company. The Revenue does not have a case that the TDS collected by assessee has not been paid to the Government account. The mismatch is only on account of processing of data by the computerised system, for which assessee cannot be penalised. The assessee, on the other hand had substantiated that it had deposited all the taxes that was deducted at source into the government account. There is no error in the conclusion of the CIT(A). Therefore, we uphold the same as correct and in accordance with law. It is ordered accordingly.

7. In the result, appeal filed by the Revenue is dismissed.

(Order was pronounced in the open court on 04.05.2017)

Categories: Income Tax
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