As per CAG report, many taxpayers harassed for TDS mismatch

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1. More than 82 per cent of individual taxpayers faced TDS mismatch problems during the last three years resulting in disallowance of refund and the creation of avoidable harassment of taxpayers, the latest CAG report on the Department of Revenue has pointed out. The apex audit body in its report tabled in Parliament last week also said the actual reasons of the large scale mismatch could not be ascertained because of non-submission of the relevant data by the ministry to the CAG.

2. While launching a platform called ‘Transparent Taxation – Honouring the Honest’ in August, PMNarendra Modi had emphasized that the tax system should be seamless, painless and faceless.

“During last three years, more than 82 per cent individual taxpayers faced TDS mismatch problem due to the difference in the amount available in Form 26AS and that claimed by the assessees through their ITR, majority being salaried taxpayers,” the CAG said. 

“Due to such mismatch TDS credit is denied to the assessee (taxpayer) despite receipt of the revenue by the ITD or presence of Form 16/16A issued by the deductor in support of his claim. This results in disallowance of refunds and also in the creation of infructuous demands for tax resulting in avoidable harassment to the taxpayer,” the report said.

3. Tax Deducted at Source (TDS) aims to ensure collection of revenue at the instance of the transaction. TDS collection, which was Rs 3.43 lakh crore in FY 2016-17, increased to Rs 4.51 lakh crore in FY 2018-19 and now contributes more than 35 per cent to the gross direct taxes collections. 

4. TDS on salary payment is the biggest component of TDS and has been around 43 per cent in the last three years. The CAG said it could not examine the assessment records of the sample selected as the assessment records were not available with the jurisdictional assessing officers as the same was not provided to them by the CPC-Bengaluru even after two years of the assessment year.

5. As a result, the reasons for the TDS mismatch, status of their resolution, the mode of the resolution, , as well as correctness and completeness of information shared by the I-T department could not be ascertained in the audit.  

“The inability of the department to furnish relevant information to complete the audit has prevented the CAG from fulfilling the constitutional mandate,” it said. 

6. The CAG said the I-T department needs to ascertain whether the mismatches were due to the IT systems or the failure of deductors in furnishing correct returns/information. “It needs to be ascertained in how many cases the department raised demand from taxpayers because of mismatch, as such causing harassment to the taxpayer.

“In cases of failure of the deductors, necessary action may be taken against the defaulting deductors under the IT Act,” it said.

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