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2015 (11) TMI 1376 - ITAT AHMEDABAD

2015 (11) TMI 1376 - ITAT AHMEDABAD - TMI - Mistake in quoting correct PAN of the deductee in the TDS returns - Rectification of mistake - Held that:- There has been no finding by ld. CIT(A) to show that there was any intention on the part of the deductor or deductee to furnish wrong PAN details. Therefore, we are of the view that the system is erroneous to the extent if it restricts the deductor to revise its TDS return/statement within some corners which in this case was correction of PAN deta .....

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e to filing of wrong PAN of deductee it has been deemed as assessee in default and accordingly 18% of remaining TDS (20% (-) 2%) has been demanded from the assessee. Had the assessee been provided an opportunity as per the proviso of subsection (1) of section 201 of the Act referred abve then it may have filed requisite details of the deductee in form of proof of furnishing of return under section 139 of the Act, proof of taking into account such sum for computing income in such return of income .....

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o that it can furnish relevant details/information as required by the above said proviso to sec.201(1) of the Act, as discussed above. - Decided in favour of assessee for statistical purposes. - ITA No.1984, 1985, 1986 /Ahd/2015 - Dated:- 23-11-2015 - Shri Rajpal Yadav, JM, & Manish Borad, AM For the Appellant : Shri S. N. Soparkar, AR For the Respondent : Smt. Smiti Samant, Sr.DR ORDER Per Manish Borad, Accountant Member. These are three appeals of assessee out of which one is directed agai .....

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in these three appeals relates to TDS returns filed by the assessee for quarter 1, quarter 2 & quarter 3 of FY 2013-14 in which due to mistake in quoting correct PAN of the deductee in the TDS returns, DCIT, Centralized Processing Cell-TDS, has raised demands for quarter 1, quarter 2 & quarter 3 and interest. The details of demand and interest for each quarter are mentioned below :- ITA No. A.Y. Quarter Demand (Rs.) Interest (Rs.) 1984/A/2015 2014-15 1st 35,97,360.80 3,59,730 ITA No. A.Y .....

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ter of financial year 2013-14, whereby ONGC s request for correction of PAN of the party and consequential deletion of demand for tax & interest u/s 201, was not accepted. 2. Without prejudice to the preceding ground, the ld. CIT(A) ought to have directed the Dy. CIT, Centralized Processing Cell-TDS, to verify whether the deductee had furnished its return of income after including the amount paid to it by the appellant and paid the tax due and, if so, to not treat the appellant as an assesse .....

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proximately 69% of shares are held by the Government of India and the appellant has been calculating, deducting and depositing income deducted at source as per the provisions of Income-tax Act, 1961 (hereinafter referred to as the Act). 5. During quarters 1, 2 & 3 of F.Y. 2013-14 assessee deducted tax at source from one of the contractors namely Gujarat Energy Transmission Corporation Ltd., a Government of Gujarat Undertaking (in short GETCO Ltd.) and the assessee was required to deduct 2% f .....

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reated demand for all the three quarters by imposing a burden of 18% as difference of low TDS deducted because as per the provisions of section 206AA of the Act in the cases when any sum is paid to deductee who does not furnish PAN, the deductor is liable to deduct TDS at rate specified in the relevant provisions of the Act or at the rates in force or @ 20%, whichever is higher calculated on the sum paid/credited to the deductee. 6. The appellant-assessee tried to rectify the mistake by filing c .....

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ction of TDS in cases when a deductee does not furnish PAN to deductor or furnishes incorrect PAN. CIT(A) has also appreciated the instructions made by Centralized Processing Cell in regard to correction of two alfa & two numerical characters to permit the genuine typing mistake and thereafter confirmed the demand raised by DCIT(CPC) TDS, Ghaziabad. 8. Aggrieved, the assessee is now in second appeal before the Tribunal. The ld. AR of the assessee has raised two folds of contentions in suppor .....

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ame to the Government. The rate of tax prescribed for deduction from payments to contractor i.e. GETCO Ltd. was 2% and the same was duly deducted and deposited but in the TDS return at the place of correct PAN of GETCO Ltd. it was AABCG 4029 R, inadvertently mentioned as AABCG 2412F and due to this small clerical mistake which was done on the part of assessee, differential TDS of 18% was imposed. The ld. AR further submitted that the correction statement was filed to make the correction in the P .....

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stice because this harsh processing is only affecting the deductor and not the deductee as a deductee is being allowed full credit on revision of returns. The ld. AR also submitted that the processing system of TDS returns keeps on changing, so much so that the correction system accepts the entry of deductee of whom no PAN was mentioned in the original return and now some new softwares have been developed which do not accept wrong PAN in the details furnished while filing TDS returns and many mo .....

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ibunal was upheld which set aside the penalty order. 8.1 The ld. AR of the assessee in his second fold of contention has referred to the proviso to sub-section (1) of section 201 inserted by the Finance Act 2012 w.e.f. 1.7.2012 which reads as under - 201. [(1) Where any person, including the principal officer of a company,- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct .....

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ited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed] Provided [further] that no penalty shal .....

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erest,- (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 2 .....

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such resident.] The ld. AR submitted that this proviso is applicable to the facts of assessee s case, the deductee i.e. GETCO Ltd. is a Government of Gujarat Undertaking and regularly filing its return of income and if an opportunity has been provided to the deductor then the same would have certainly proved that there is no loss to the Revenue as the deductee has duly paid its tax liability for the relevant Asst. Year including the sum paid by the deductor in its total income and, therefore, th .....

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not bring anything new before us. 10. We have heard the rival contentions, perused the material on record and gone through the judicial pronouncement referred hereto. First we will deal the issue in the light of first fold of contention raised by the ld. AR of the assessee that once the correction statement is allowed to be filed then it should not be restrictive in nature and should give full opportunity to the deductor to make all the corrections which he intends to make in the TDS quarterly r .....

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029R and regularly filing income-tax return and paying due taxes. However, due to internal processing guidelines between the Income-tax Department and the Centralized Processing Cell which allow rectification of PAN only to the extent f two alfa and two numerical characters but the assessee s correction statement could not bring down the demand because there was change in four numerical characters and one alfa character and for this reason the demand has been created in all the quarters 1, 2 &am .....

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come-tax. As per provisions of the Act deductor is further required to furnish details of various types of tax at source/collected from the deductees in prescribed formats, wherein many details are required to be furnished. Earlier these details had to be prepared and submitted manually but since few years with the improvement in information technology system, the quarterly statement of TDS returns are furnished in soft-copy format and even online submission facilities are available. These TDS r .....

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ascertain from its books of account as to which payments/expenses are covered under TDS provisions. (b) Check up monthly record for applying the TDS provisions when payments exceed certain thresh-hold limits mentioned in the Act. (c) Collect PAN details from the deductee which normally are either verbally spoken by the deductee or sent by message/copy of PAN Card. (d) Deductee does not have any mechanism to easily check the correctness of the PAN verbally spoken/received by message. (e) To dedu .....

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ed at source. (i) Furnishing the forms manually/electronically in the way provided by Centralized Processing Cell TDS which gets some changes regularly due to advancement in technology. 12. The appellant-assessee has adhered to all the above requirements in case of all the deductees except for one deductee which too is a regular tax payer and State Government Undertaking of which invalid PAN has been mentioned. The basic reason due to which ld. CIT(A) could not bring any relief to the assessee w .....

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nsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:- (i) at the rate specified in the relevant provision of this Act; or (ii) at the rate or rates in force; or (iii) at the rate of twenty per cent. (2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A shall be valid unless the person furnishes his Permanent Account Number in such declaration. (3) In case any .....

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h other. (6) Where the Permanent Account Number provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the provisions of subsection (1) shall apply accordingly.". The main intent of the law for inserting this provision could have been the reasons that various types of deductees which are normally not filing return of income and not possessing PAN or intentionally provides .....

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ade by the deductors. But certainly it cannot be the intent of the law to impose 20% of TDS rate on deductees who are regularly filing their incometax returns and paying their due taxes and for this purpose there were some changes made in the system of furnishing of quarterly TDS returns. Earlier TDS returns were submitted manually and the system of filing revised TDS returns/correction of details was not that smooth. However, to tackle the genuine problems arising in this detailed process of TD .....

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eme discusses about furnishing of correction statement of tax deducted at source, processing of statement and rectification of mistake and the relevant portion of this scheme in this regard are mentioned herein below :- Furnishing of correction statement of tax deducted at source 4. (1) A deductor shall furnish the correction statement of tax deducted at source in the form specified by the Director General- (a) at the authorised agency through electronic mode; or (b) online through the portal. ( .....

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tax deducted at source, if any, furnished by the deductor before the date of processing. (2) The Commissioner may- (a) adopt appropriate procedure for processing of the statement of tax deducted at source; or (b) decide the order of priority for processing of the statement of tax deducted at source based on administrative requirements. Rectification of mistake 6. (1) An Income-tax authority of the Cell may, with a view to rectifying any mistake apparent from the record under section 154 of the .....

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the form and manner specified by the Director General. (4) Where an amendment has the effect of reducing a refund already made or increasing the liability of the deductor, the order under section 154 of the Act passed by an Income-tax authority of the Cell shall be deemed to be a notice of demand under section 156 of the Act. 13. Further the power to specify procedure and processes for effective functioning of the Cell in an automatic and mechanized environment are given to the Director General .....

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horised agencies for improving the TDS mechanism as well as smooth working of portal and in this process various types of procedural check points are made but all these communications are not available to the assessee(s) as they are not mentioned in the Income-tax Act and Income-Tax Rules. The deductor comes to know about these check points when the TDS returns are presented for filing and further these check points are amended/rectified/removed as per the convenience of the system being apprais .....

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kind of mistake which has been inadvertently made by it at the time of filing original return and also this correction statement can also be filed for multiple times. Applying the facts of the case of assessee to the above discussion made by us we are of a clear view that refusal of the various agencies not to accept change in character in PAN details filed by deductee in its correction statement was not correct and justifiable. So much so that the deductee should be given further opportunity o .....

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for further details which can be viewed/downloaded from TRACES (www.tdscpc.gov.in). (b) You are advised to correct the Invalid/No PAN entries in the TDS/TCS statement through a correction statement. (c) You are advised to download consolidated TAN-PAN master from TRACES (www.tdscpc.gov.in) and use it for populating the PAN of deductees in TDS statement to avoid PAN errors. (d) Specify PAN verification is also available on TRACES (www.tdscpc.gov.in) From the above, it is cystal clear that the sys .....

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justifiable cause within the meaning of section 273B of the Act on the basis of which it could be said that sufficient cause had been shown by the respondent -Superintendent of Police in wrongly quoting PAN in respect of 196 employees of the department. The CIT(A) had recorded as under :- In the instant case as already observed the appellant deducted TDS correctly and revised PAN and filed the revised statement on form No.26Q, hence there is sufficient compliance of the provisions of section 139 .....

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ong quoting of PAN by the deductees t the assessee. The assessee had rectified the mistake by furnishing the correct PAN as soon as it came to its notice. The revised PAN and the revised statement were accordingly filed. Following findings recorded by the Tribunal may be read :- 6. In the instant case, the only question before us is whether there was reasonable cause for alleged failure on the part of the assessee. In the instant case, the ITO (TDS) while going through the quarterly return in fo .....

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lly observed that the assessee deducted TDS correctly and revised PAN and filed the revised statement on form no.26G, hence there was sufficient compliance of the provisions of section 139A. There is no dispute that the assessee quoted invalid PAN for 196 deductees which was corrected on being pointed out by ITO (TDS). In the instant case, failure to quote right PAN has occurred as the concerned depositor had misquoted PAN. There is also no dispute that the PAN was corrected after ascertaining t .....

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nancial Cooperative Benk Ltd. vs. ITO, Ward-2(3), Surat (supra), we hold that there was reasonable cause of the default if any committed by the assessee and hence no penalty under section 273B of the Act is leviable. In our view the ld. CIT(A) has correctly appreciated the facts f the present case as well as settled legal position and therefore, we do not find any valid ground in interfering with the order of CIT(A). Consequently, appeal filed by the revenue is devoid of any merit and deserves t .....

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we are of the view that the system is erroneous to the extent if it restricts the deductor to revise its TDS return/statement within some corners which in this case was correction of PAN details subject to change of two alfa and two numberical characters and, therefore, correction statement filed by the assessee needs to be accepted after ascertaining the correctness of the correct PAN furnished by the deductor. Accordingly, the order of CIT(A) is quashed and assessee s ground of appeal is allo .....

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ection 201- 201. [(1) Where any person, including the principal officer of a company,- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assesse .....

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in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed] Provided [further] that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.] [(1A) Without prejudice to the provisions of sub-sect .....

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t of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200:] [Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to .....

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