Faceless assessment rectification and appeals- Authorities must look into records of all related proceedings information on portal of department and should not act unreasonably to harass taxpayers by raising huge demands.

[DEV KUMAR KOTHARI]

Faceless assessment rectification and appeals-

Authorities must look into records of all related proceedings   information on portal of department and should not act unreasonably to harass taxpayers by raising huge demands.

Section 143, 154, 194, 199 , related Rules and forms  other provisions relating to TDS were under consideration.

Recent case law

KIRTIDA RAMESHCHANDRA CHANDARANA VERSUS CIT (APPEALS) , NATIONAL FACELESS APPEAL CENTRE, DELHI [2022 (8) TMI 679 - ITAT MUMBAI]

In above case ITAT   found that the I-T department has failed to take cognizance of a tax deducted at source (TDS), and as a consequence raised huge demand in a rectification order. The honorable Tribunal has therefore, criticized the departmental authorities including frist appellate authority – the CIT(A).

In case of assesse / appellant the TDS was on professional income of assesse. The TDS was shown in Form 26AS and TDS certificates, corresponding income was also declared, still credit was not disallowed and in rectification order demand was raised for tax and also interest.

The Commissioner (Appeals) also upheld rectification order passed by AO, despite the TDS being reflected in  Form 26AS of assessee as submitted with documents before the CIT(A).

Honorable members  expressed their displeasure, especially  because a rectification order can be issued only if there is a mistake apparent on record. The scope of S. 154 is limited.

The bench noted that the  taxpayer filed her I-T return on the basis of re-cords generated by the tax department itself, viz Forms 26AS and forms 16A  both of which have been processed and issued by the tax department itself, on which the taxpayer has relied.

Bench questioned - how can there be a case of mistake apparent from record?

 And declared this whole action of the Centralised Processing Centre at Bangalore and in turn jurisdictional I-T officer as ‘bad in law’.

The Tribunal directed that the taxpayer should be given full credit of the TDS claim, be granted refund (together with interest to be paid by the I-T department for the delay) and be refunded any other money assesse  may have deposited after the issue of the rectification order.

In order of tribunal it is inter alia stated that

This appeal by the assessee is directed against the order of National Faceless Appeal Centre [hereinafter referred to as (‘NFAC)’) dated 17.12.2021 for the Assessment Year (AY) 2013-14.

“ On 10th of August 2018 assessee received a rectification order u/s 154. In this order TDS credit of Rs 4, 13,570/- was disallowed and consequential interest of Rs 66,963/- and Rs 12,576/- u/s 234B and 234C respectively also charged. Against this order u/s 154 assessee preferred an appeal before the Ld. CIT (A)-46 (Mum.)

Assessee received a rectification order u/s 154 wherein TDS credit was disallowed and consequential interest u/s 234B and 234C respectively  were also charged.

It is nowhere from the record established that on what basis CPC Bangalore and jurisdictional ITO ward-35(1) (5), reduced the claim of the assessee from Rs 4, 53,605/- to Rs 39,605/-.

 It is further noted that the proceedings u/s 154 can be done only in the cases where there is a mistake apparent from record and no debatable issue is involved in this case the record before us clearly established that there is no mistake apparent from record as far as assessee is concerned.

 Reference of Form no 26AS which assessee downloaded on 29-12-2021, form no 16A which was last updated on 17-10-2013 and reconciliation of TDS claim clearly substantiate the claim of the assessee about true declaration of income and correct claim of TDS.

Tribunal noted that the department nowhere is able to establish the fact as observed by the Ld. CIT (A) in his order.

12. Such type of actions by the assessing authorities and insensitive decision of Ld. CIT(A) is not appreciable and are clear violation of equity and citizen charter issued by the parent authority i.e., Central Board of Direct Taxes. It is expected from the higher authorities and cadre controlling authorities of the station to take cognizance of such type of actions of assessing authorities and insensitive and injudicious decisions of Ld. CIT (A).

13. In the result appeal of the assessee is fully allowed with consequential relief in terms of reversal of interest charged u/s 234B and 234C with immediate grant of refund if any with consequential interest.

Observations of  author:

On reading of order it seems that no show cause notice was issued and any opportunity of hearing was also not allowed to assessee.

 This is in spite of mandatory provisions of sub-section (3) of section 154, for such notice and opportunity of hearing before raising any new demand or reduction of refund and other adverse actions against assessee.

Relevant portions of the  sub-sections (1) and (3) of S. 154  reads as follows:

Rectification of mistake.

154. ¹[(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,-

(a) amend any order passed by it under the provisions of this Act ;

[(b) amend any intimation or deemed intimation under sub-section (1) of section 143.]]

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(3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of ¹⁴[the assessee or the deductor] ²⁰[or the collector], shall not be made under this section unless the authority concerned has given notice to ¹⁴[the assessee or the deductor] ²⁰[or the collector], of its intention so to do and has allowed ¹⁴[the assessee or the deductor] ²⁰[or the collector], a reasonable opportunity of being heard.

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Therefore, jurisdiction of AO to rectify the mistake u/s 154  and passing the order was an important  issue.  Absence of following prescribed procedure was also important.

Although specific ground of appeal was not raised in this regard. Honorable Tribunal has considered this aspect.

In the order u.s. 154

It was alleged that the tax deductor has withdrawn certain TDS and revised its TDS return  and based on that order was passed straight away without allowing opportunity of hearing to assessee.

However, assessee has shown form 26AS in which credit was shown as final. This was not disputed by the Departmental Representative.

May be for some technical reasons or due to mistake TDS was withdrawn and it might have been restored again. Therefore, final outcome should have been considered by CIT(A).

Furthermore, if at the time of withdrawal AO passed an order to withdraw credit then he must have allowed again when credit was restored in the form 26AS.

It appears that learned CIT(A) has not considered latest position and confirmed withdrawal of credit for TDS, forcing assessee to file  appeal and represent her case before Tribunal

Suggestions for  assessee and Department:

Assessee need to keep a track about any corrections made by tax deductor and tax collector. If correction made is not correct, the assessee must take steps with tax deductor and tax collector to make further correction and restore the credit.

In case of some corrections in TDS/ TCS by tax deductor or tax collector, effect should not be given immediately without the same being final. And opportunity to assessee should be allowed so that he can take necessary steps to restore credit of TDS/TCS if that is required or he can express his consent to such corrections.

This will reduce unnecessary litigation.