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TMI Blog2017 (7) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... osited with the Government revenue. Since the PAN does not match, the deductor i.e. the petitioner would pay additional 18% which though is styled in the name of tax deducted at source, would be additional to what M/s. Star (India) Pvt. Ltd. would have paid by way of tax to the department. Essentially, “the tax deducted at source” would have to be given credit to the payee on whose behalf such tax is being deducted. In the present case, payee having already discharged its tax liability independently, such amount would remain in Government coffers not accounted for anyone's tax liability. In the result, we hold that the decision of department in not permitting the petitioner to correct PAN of the deductee in the statement of tax deducted at source was impermissible. In the present case, department shall verify the petitioner's claim of actual deduction of tax at the prescribed rate in case of M/s. Star (India) Pvt. Ltd., verify that the PAN sought to be corrected by the petitioner belongs to the said agency and that the tax was actually deposited in case of such deductor. If these questions are answered in favour of the assessee, the department shall not insist on raising higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the effect of provisions of subsection( 1) of section 206AA would follow. We may notice that in terms of subsection( 1) of section 206AA, when the person entitled to receive any sum on which the tax is deductible under Chapter XVIIB fails to furnish the PAN, the tax would be deducted at a higher rate, in the present case at the rate of 20%. The authority proceeded on the footing that the petitioner who was required to deduct tax at the rate of 20% had deducted the same at the rate of 2% and after adjusting such tax deducted, raised demand of remaining tax. A copy of such adjustment dated 27.11.2007 is produced at AnnexureA by the petitioner. Before this, an intimation dated 24.11.2014 was issued by the department to the petitioner calling upon the petitioner to explain the short deduction of tax at source of a sum of ₹ 2.04 crores (rounded off) for the financial year 2010-2011. We may record that this communication includes shortpayments for other financial years also. However, these are not in dispute and therefore, we are not concerned in this litigation with the same. Along with the said communication, the authority also provided the full working of the mismatch of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n( 1) of section 206AA, he would have to deduct tax at source at 20%, instead of 2% deducted by it. With respect to the possibility of making correction in the declaration once made, in the said affidavit, it is stated as under : However, there may be a case that a deductor has correct and valid PAN of the deductee in his possession whereas he may have quoted invalid PAN in TDS statement due to typographical errors. Accordingly, CPCTDS has provided for a relaxation on account of typographical (data entry) errors for invoking provisions of charging higher rate of deduction of tax at source. The relaxation logic built into the application code is to accept typographical errors upto 2 alpha 2 numeric fields out of total 10 alphanumeric fields. Effectively out of 10 characters PAN, 40% of mistakes are taken as data entry mistakes. This relaxation is not provided in the act or rule. However, the same is part of the application code to avoid any undue charging of higher rate of tax deduction on account of bonafide data entry errors of deductors. The difference in the PANs quoted in the original statement and correction statement by the petitioner is as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osits the tax deducted at source with the department, the deductee would get the benefit of such deductions in its tax assessments. As per the above quoted portion of the affidavit in reply, we also gather that the department does not rule out the possibility of genuine errors in feeding PAN numbers of the deductees. However, the online computerised system of the department permits corrections limited to extent of four characters, two numeric and two alphabets and no more. A presumption is therefore, raised that a genuine typographical error would not lead to mistakes beyond two characters each. Large volume of transactions and TDS entries and the requirement of completion of timely processing of such entries are cited as reasons to limit the scope of corrections. 7. Short question is, in the present case, did the department commit an error in not allowing the petitioner to correct the declaration of tax deducted at source? In this context, we may refer to the relevant statutory provisions. Chapter XVII of the Act pertains to collection and recovery of tax. PartB thereof pertains to deduction at source. As is well known, various provisions contained in the said Chapter cast a du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from any information in the statement shall mean a claim, on the basis of an entry, in the statement- ( i) of an item, which is inconsistent with another entry of the same or some other item in such statement; ( ii) in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act. ( 2) For the purposes of processing of statements under subsection (1), the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said subsection. 8. It can be noticed that under subsection( 1) of section 200A, there is reference to the statement of tax deduction at source or a correction statement. Such a statement would be processed in the manner provided therein. Subclause( ii) of clause(a) of subsection( 1) of section 200A permits the authority to make adjustment of an incorrect claim, apparent from any information in the statement. Explanation to subsection (1) clarifies that the expression an incorrect claim apparent from any information in the statement would mean on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of tax deducted at source or a correction statement. We may recall subsection (3) of section 200 refers to requirement of filing a statement of tax deducted at source. This provision though does not refer to any mechanism for correction of such a statement, subsection( 1) of section 200A specifically refers to a statement of tax deduction at source or a correction statement thus, clearly leaving the possibility of correcting a declaration once made by the assessee. Even the department does not dispute that there is absolutely no mechanism permitting such corrections. The department however, points out that all the forms are to be generated online and corrections can also be therefore, made only online. It is also pointed out and in our opinion with justification that looking to the large number of such statements and entries in such statements, it would be impossible to process individual claims of corrections, whether they are based on bona fide mistakes or otherwise. We have noticed that even as per the department, the online system permits corrections limited to two alphabetical and two numerical errors in the PAN number. This has clearly been stated in the affidavit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PAN instead of another while filling up and uploading the statement. It is not necessary nor possible for us to envisage different situations under which such errors could crop up and it need not necessarily be confined to limited figures on the letters of the PAN being incorrect. 18. It is entirely one thing to suggest that the department would not accept any change once certain entries are uploaded or at any rate no change would be permissible beyond a certain date. However, it is entirely another thing to suggest that the corrections may be permitted but should be limited to a number of characters where correction is needed. We are not unsympathetic to the department's view that late corrections can derail assessments of the deductees. If the legislature therefore, had laid down that no corrections would be permitted or the department had provided that no correction would be permitted beyond a particular period, we could have examined the issue in different light. However, that is not the present situation. In the present case, as noted, section 200A itself refers to correction statement of tax deducted at source. The intimation sent to the petitioner of shortfall in dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of delay in processing the refunds, provisions could easily have been made in law either through statute or through delegated legislation, imposing restriction on time upto which corrections can be made or even allowing conditional corrections. Nevertheless, putting the limitation of permitting corrections of only four characters has no rationale relation to the department's anxiety of possible interest liability in case of the deductees. 21. In the result, we hold that the decision of department in not permitting the petitioner to correct PAN of the deductee in the statement of tax deducted at source was impermissible. In the present case, department shall verify the petitioner's claim of actual deduction of tax at the prescribed rate in case of M/s. Star (India) Pvt. Ltd., verify that the PAN sought to be corrected by the petitioner belongs to the said agency and that the tax was actually deposited in case of such deductor. If these questions are answered in favour of the assessee, the department shall not insist on raising higher demand from the petitioner of failing to deduct tax at source in terms of subsection( 1) of section 206AA of the Act. 22. Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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