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Purnima Advertising Agency Pvt. Ltd. Versus Deputy Commissioner of Income Tax - TDS Circle & 1

TDS liability - permitting the petitioner to correct PAN of the deductee - system is programmed to permit correction only in case four digits/characters are to be changed and no more - Held that:- 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 deduction of tax also referred to the possibility of correction but limited it to certain characters. In the affidavit in reply also same st .....

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x deducted by the petitioner and already deposited 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 al .....

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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. - SPECIAL CIVIL APPLICATION NO. 18631 of 2014 - Dated:- 10-7-2017 - MR. AKIL KURESHI, AND MR. BIREN VAISHNAV, JJ. For The Petitioner : .....

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nged in this background an order dated 29.11.2014 which was in the nature of an intimation and demand for unpaid dues of the tax required to be deducted at source. 2. Brief facts are as under : 3. The petitioner is a company registered under the Companies Act and is engaged in the business of advertisement. In the course of business, the petitioner would make payments to various recipients, on which the petitioner as per the law, would deduct tax at source at 2%. One of the recipients of such pa .....

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rescribed format provided in Form No. 26Q. The petitioner had not immediately noticed such error. During the course of processing this declaration, the respondent authority however, found that the PAN indicated by the petitioner of the deductee in the declaration did not match with the actual PAN of M/s. Star (India) Pvt. Ltd.. The authority therefore, proceeded on the basis that the PAN provided to the deductor did not belong to the deductee and, therefore, in terms of subsection( 6) of section .....

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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- .....

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Short Deduction occurs due to following reasons: A. Pan ERRORS B. Certificate u/s197 C. Other Reasons (egThrreshold, Tax Rate,etc.) A. PAN Errors Notes : 1. Invalid PAN or PAN Applied or PAN Not Available is considered as PAN Error 2. In case of PAN Error, TDS to be Deducted (Column 14) is calculated at 20% or at the rate specified in the relevant provision of Income Tax Act, 1961 or at the rate or rates in force, whichever is higher. 3. Short Deduction (Column 15) is equal to TDS to be Deducte .....

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th communication dated 24.11.2014 raising substantial demand of ₹ 2.04 crores for default in deducting tax at source correctly, the petitioner realised the error leading to such high demand. As stated in the petition, the petitioner therefore, tried to correct its PAN declaration. However, the online system of the department would not permit the correction. According to the petitioner, this was so because the system is programmed to permit correction only in case four digits/characters are .....

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orrect PAN of the deductee and that provided by the deductor, deductor would be deemed to be in default since under subsection( 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 i .....

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d 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: PAN in original A A I C S 2 5 3 5 C PAN after correction A A A C N 1 3 3 5 Q Difference √ √ Х √ Х Х Х √ √ Х In this instance, out of 10 .....

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em from the perspective of genuineness of mistake in quoting of PAN in TDS statement. Implication of further relaxation: It is to be reiterated that the Income Tax Act or Rules provide for reporting of correct PAN without exception. However, the Department has provided for relaxation in PAN discrepancy upto two alpha and two numeric characters to account for genuine typographical errors by the deductors for the benefit of deductors and taxpayers. In case of further relaxation, distinction betwee .....

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. It was only when the deductor files periodic declarations within the prescribed time and deposits 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 t .....

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tion 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 duty on the payer to deduct the tax at source from the payee at the prescribed rates. Section 200 of the Act pertains to duty of person deducting tax. Under subsection( 1) of section 200, any person deducting an .....

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f statements of tax deducted at source. 200A. (1) Where a statement of tax deduction at source or a correction statement has been made by a person deducting any sum (hereafter referred to in this section as deductor) under Section 200, such statement shall be processed in the following manner, namely:- (a) the sums deductible under this Chapter shall be computed after making the following adjustments, namely:( (i) any arithmetical error in the statement; or (ii) an incorrect claim, apparent from .....

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y way of tax or interest or fee; (e) an intimation shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (d); and (f) the amount of refund due to the deductor in pursuance of the determination under clause (d) shall be granted to the deductor:] Provided that no intimation under this subsection shall be sent after the expiry of one year from the end of the financial year in which the statement is fi .....

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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 .....

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) of section 201, if any person required to deduct tax at source, does not do so or does not pay the same in the Government revenue, he would be deemed to be an assessee in default in respect of such tax. 10. Section 206AA pertains to requirement to furnish Permanent Account Number. As noted, under subsection( 1) of section 206AA, if the person receiving sum of money where tax is required to be deducted at source, does not give his PAN, the deduction of tax would be at higher rate. Under subsect .....

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ormats depending on the situation. In the present case, such declaration would have to be made in Form No.26Q. 12. From the materials on record, it can be easily gathered that Chapter XVIIB of the Act contains important statutory provisions for deduction and collection of tax at source. Various provisions have been made enjoining duty on the payer to deduct tax at source, at the time of making certain payments to the payee. Such tax would have to be within the prescribed time deposited with the .....

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ompletely rules out the possibility of genuine and bona fide typographical or even mechanical errors. It is in this context, section 200A refers to a statement 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 .....

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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 reply filed by the department, portion of which, we have reproduced earlier. This is also conveyed to the petitioner in the detail working out of th .....

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as Centralised Processing of Statements of Tax Deducted at Source Scheme, 2013 ( the Scheme for short). This notification contains detail provisions for the processing statements of tax deducted at source. Para. 4 of the Scheme also refers to a correction statement of tax deducted at source. Para. 11 of the scheme authorises the Director General to specify the procedures and processes for effective functioning of the Cell where such declarations would be processed which includes receipt of corr .....

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a typographical error would travel beyond such characters and the second is that looking to the millions of statements and entries being filed by the assessees across the country, it would open flood gates, if corrections are permitted without any limit. 17. In our view, once the department recognises the possibility of errors and also makes provisions for making corrections, it would be wholly illogical to limit such corrections on arithmatical working out of only two alphabets or two numerics .....

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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 .....

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to certain characters. In the affidavit in reply also same stand has been taken. 19. Some anomalous situations would arise if genuine and bona fide errors are not allowed to be corrected only on the basis that such correction travelled beyond two alphabets and two numeric characters which the system would not accept. As is contended in the present case, the deductee i.e. M/s. Star (India) Pvt. Ltd. has already discharged its full tax liability. If the full effect of the department's decisio .....

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ch 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. 20. We can well imagine the predicament of the department if individual cases were allowed to be brought before the authority requiring examination of genuineness of the errors and justification for allowing corrections. We are therefore, not suggesting that such cases may be dealt with individ .....

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