TDS Deductors may witness notices on deduction, if the counter-party disagrees

[Vivek Jalan]

Advance income tax collection through TDS/TCS mechanism has been a top target of the Government, along with tracking of the flow of income on goods or services. Over the years we have witnessed the TDS/TCS mechanism getting wider and more stringent. Earlier in this FY, the Income Tax Department has set a target of 50 cases per Assessing officer to be picked up for survey/online TDS verification. It has prescribed 16 parameters on which these cases could be picked up. These parameters include negative growth in TDS payment against healthy growth in Advance tax payment, cases of sick units or units with negative operating margins, cases showing a negative trend in payment etc. However, it is a fact that mere deduction of TDS would not allow a deductor to take the deduction of expense in case the deductee does not report the corresponding income.

Taxpayers are aware that Information on payments received, and tax deducted on such payments under various provisions of Income Tax Act is being displayed in the AIS of the Taxpayer available to the taxpayer in the compliance portal of Insight. The Taxpayers have been given functionality to verify the information displayed in AIS and to furnish their feedback (about the correctness of Information). In case of any disagreement with the reported Information, the taxpayer’s feedback (as gathered in AIS) is shared with the Information Source through an automated information exchange system and a notice u/s e-Verification Scheme 2021 is generated to the Information Source for their confirmation. In case correction is required in the information furnished by the source, a correction statement is required to be filed.

If the information source does not submit its response to the confirmation request or does not provide updated information within the specified time as mentioned in the notice under e-Verification Scheme 2021 and subsequent reminders sent, a Compliance Case is created against the relevant Information Source.

Now the CBDT has issued e-Verification Instruction No. 1 of 2024 vide which Compliance Case of Deductors on Taxpayers feedback in TDS/TCS shall be created against the relevant Information Source. These Compliance cases will then be assigned to the appropriate Income Tax Authority to ensure compliance from the Information sources in accordance with law. For Information Source Type of Deductors/ Collectors (reporting through TAN), the Relevant Income Tax Authority shall be TDS A.O. - assignment based on the mapping available for TAN and TDS A.O. The following activities can thereafter be performed by the TDS AO for the Compliance cases –

1. Re-assign Case (Re-assignment to a superior officer or subordinates)

2. Issue Notice u/s 133(6)

3. Mark case as Non-responsive

4. Mark case as Untraceable

5. Mark case as Responsive

6. Mark case as Traceable

7. Enter Comments

8. No Action Required

9. Submit Case Closure Report

Hence, now Deductors may witness notices on deduction of TDS. They have to be more vigilant in their TDS compliances.