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On filling income tax return, one of the crucial part is to fill the TDS claim during the relevant financial year which should be match with TDS Credit reflects in Form 26AS.

On non-matching of TDS claimed with TDS credit reflected in Form 26AS, demand will be raised by IT department on processing of return under section 143(1) of Income Tax Act. Further, interest under section 234B & C is also added up in the aforesaid demand.

So usually when the problem un-matching of TDS with Form 26AS arise?

The TDS credit is reflected in deductee’s Form26AS, when the respective deductor of TDS filled the TDS return in accordance to section 200(3) of Income Tax Act. Hence, unless TDS deductor didn’t file the accurate TDS return, assessee’s (i.e. deductee) Form 26AS never reflects correct amount of TDS credit which was actually deducted.

Other common reason for non reflection of TDS credit in Form 26AS are as follows:-

- Unintentionally/ mistakenly skip PAN of deductee in TDS return.

- Typological errors while typing PAN of deductee in TDS return.

Non reflection of TDS credit in assessee’s Form 26AS on account of above two problem can be sort out only through revising the TDS return by deductor. Hence, until the deductor will not revise the TDS return the respective deductee cannot claim TDS amount in his Income Tax Return. Even though if he claims non reflected TDS amount, he may face demand later on while serving intimation under section 143(1).

Let understand the problem with the help of illustration:-



Assessment Year


Assessee Status


Due date of filling IT Return

31st July,2012

Income earned by Assessee


TDS deducted by deductor u/s 194A @ 10%


Payment made by deductor to assessee


In aforesaid case let say, deductor made the payment of INR 1,80,000/- after deducting 10% TDS amounting to INR 20,000/- and deductor timely deposit TDS and filled TDS return. However on filling TDS return, deductor made typological errors while typing PAN of deductee in TDS return which will lead to non reflection of TDS of INR 20,000/- in Form 26AS of respective assessee (i.e. deductee).

In the month of filling income tax return (i.e. July) assessee come to know that Form 26AS is not reflecting correct amount of TDS which was actually deducted & cannot able to claim TDS of INR 20,000/- while filling his income tax return.

In this scenario assessee use to approach deductor and practically deductor do not respond expeditiously to address the above problem of deductee. However, deductee has his own deadline for filling income tax return as per section 139(1) of Income Tax Act (i.e. 31st July, 2012). In this hurry situation, deductee has two options while filling income tax return:-

1. File income tax return of INR 2,00,000 in which tax liability will be INR 2,060/- and claim the refund of INR 17,940/- after adjusting TDS of INR 20,000/- which may later on lead to demand of INR 2,060/- if deductor wouldn’t file the revise corrected TDS return.

So effective tax cost may borne by assessee will be INR 22,060/- plus interest. (i.e. 20,000+2,060)

2. Since assessee was received only INR 1,80,000/- after deduction and couldn’t able to claim TDS of INR 20,000/- which was turned into bad debts assessee bonafidely file income tax return of INR 1,80,000/- equivalent to payment received in which tax liability will be NIL in AY 2012-13 and not claim the TDS amount in IT return since it was not reflected in Form 26AS.

In this option, assessee effective tax cost will be INR 20,000/- as a bad debt.

Since the due date of filling Income Tax return coming nearby (i.e. 31st July, 2012) and from another side deductor not taking action expeditiously to correct the mistake & revise the TDS return, deductee generally use to opt the 2nd option to avoid demand on later stage.

In current scenario, TRACES issuing the demand for last 8 years on account of short deduction of TDS. One of the reasons for short deduction of TDS is typological errors while typing deductee’s PAN in TDS returns because on reporting invalid/incorrect PAN of deductee, TDS will be deducted at the higher rate of 20% as per section 206AA of income tax act.

In response of the demand raised by TRACES, deductor is revising the last 8 years TDS return which will lead to correction of deductee’s PAN and TDS of INR 20,000/- which was not reflected earlier is now automatically reflecting in “Assessment  Year 2012-13 Form 26AS” of respective deductee.  

Since the assessee used to opt aforesaid 2nd option (disclosing income of INR 1,80,000/- at lower side) to avoid the demand u/s 143(1) but now after filling corrected revise TDS return by deductor, Form 26AS of assessee automatically reflects the income of INR 2,00,000/-  which will lead to income escape assessment of INR 20,000/- (i.e. 2,00,000 – 1,80,000).

In this situation assessee has left with only alternative of revise his income tax return by showing correct income of INR 2,00,000/- and claim TDS of INR 20,000/-. However, as per section 139(5) of income tax act ITR can be revise maximum upto one year from the end of the relevant assessment year (i.e. 31st March 2014 in above illustration) 

Since the Form 26AS is update the correct position after the expiry of period for revise income tax return (i.e. 31st March, 2014), assessee is left with no choice except waiting for notice issue under section 148 of income escape assessment because time period of serving intimation u/s 143(1) (i.e. 31st March, 2014) and time period of serving notice u/s 143(2) (i.e. 30th September, 2013) is already expired.

In the abovementioned situation, assessee has to face assessment u/s 148 and concealment penalty u/s 271(1)( c ) which is seems harsh to assessee in spite of he was bonafidely filled the income tax return of INR 1,80,000/- since he was received only INR 1,80,000/- after deduction and couldn’t able to claim TDS of INR 20,000/- which was turned into bad debts.

As there is a provision u/s 139(5) for expiry period of filling income tax return and on another side there is no provision for expiry period of filling revise/corrected TDS return, creates the problem for deductee facing income escape assessment & concealment penalty.


Further, even though there is a recent judgment of Honorable Madras High Court on “TDS credit given to deductee even if deductor has not paid TDS amount to government” in the case of Executors of the Estate of S. Shanmuga Mudaliar Versus ACIT but practically computerize processing of income tax return serve the intimation u/s 143(1) & raise the demand on account of wrongly claim TDS credit because the Form 26AS doesn’t reflect the same TDS credit.

So in a nutshell, there should be a provision in income tax act for expiry period of filling revise/correct TDS return which should align with the expiry period of revise income tax return u/s 139(5) to avoid the above explained situation.


Published by

Pulkit Gupta
(CA in Practice)
Category Income Tax   Report

4 Likes   281 Shares   129456 Views


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