Several Tata Consultancy Services (TCS) employees have received demand notices from the income-tax department over alleged discrepancies in their tax deduction at source (TDS) claims.
India’s largest IT services company has asked the employees to wait for further instructions before paying the demanded amount. The tax demand varies from Rs 50,000 to Rs 1.5 lakh, sources said.
“Associates that received the notice will receive a rectification intimation in due course and are not required to pay any demand amount. Once the tax authorities send the rectification intimations, the discrepancies should be resolved,” the Mumbai-headquartered company told its employees in an internal mail reviewed by Moneycontrol.
There is a possibility that authorities committed a mistake in processing the filed returns, sources said, adding the assessing officer has the power to amend the notice.
In the mail, the company said tax authorities will reprocess the returns after which TDS would be in sync with Form 26AS issued by the department and Form 16A by TCS.
The Form 26AS details TDS/TCS amounts deducted from income sources and tax paid by a taxpayer, while 16A is issued by the employer carrying all amounts of TDS deposited with the I-T department.
Aggrieved employees may also seek advice from their tax advisers or reach out to the company, TCS said in another mail.
Moneycontrol has reached out to the company for comments and the story will be updated when the response comes in.
According to Section 154(2) of the I-T Act, rectification can be done by the department in two ways. First, by its own motion and second, by an application made by an assessee or the tax deductor.
In this case, it is believed that the tax deductor (TCS) has taken up the matter with the authorities and returns are being reprocessed, Prabhakar KS, founder and CEO, Shree Tax Chambers, said.
“Upon rectification, the TCS employees who received intimation for tax demands should expect a ‘rectification order’ under Section 154, stating the reason why the mistake occurred in the first place,” Prabhakar said.
The issue might be resolved without employees having to take any steps, as the department might, suo moto, withdraw the demand notices, experts said.
"If it is not rectified, a month later, they can file a reprocessing request through the income-tax filing portal," said Mumbai-based chartered accountant Chirag Chauhan.
The mistake is apparent on the record and proposed rectification by tax authorities, experts said.
“In any case, if such rectification reduces tax refund or increases the tax liability of the assessee, the income tax authority will have to provide an opportunity to the taxpayer or to hear his stand,” Prabhakar said.
TDS mismatch
TDS mismatch notices are often automated, sent when there is a difference between the TDS amount claimed in the returns and the amount reflected in AIS/Form 26AS.
If the error is from the Central Processing Centre (CPC), which is responsible for all primary assessments, the IT department will quash the notices, said Naveen Wadhwa, vice-president of tax consultancy firm Taxmann.
Deducting TDS and filing TDS returns is the employer's responsibility, which in this case rests with the Tata Group company.
“Multiple courts, over the years, have held that in the case the deductor (employer) has withheld TDS but has failed to deposit it with IT department then the demand for the shortfall in TDS payment should not be sent to employees. Instead, the department ought to go after the employers," Wadhwa said.
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