Various experts cited the Centralised Processing Centre (CPC) of the income tax department as making errors in the ITR processing. A representation has been sent by the Karnataka State Chartered Accountants Association (KSCAA) to the CBDT in the same concern.
The representation of the KSCAA cited that the CPC has made a mistake in acknowledging the last date to file the ITR and has levied penalties even for those who have furnished the ITR by the said deadline.
As Per KSCAA CPC Processing Errors
From the representation of KSCAA the ITR processing errors witnessed through them are cited as
NTR: Various assesses have obtained intimations via CPC incorrectly computing their tax obligation under the old tax regime even after these assesses have opted for the new tax regime while furnishing their returns.
Wrong Due Date Acknowledged: Specific assesses particularly the partners of the firms that are obligated to tax audits have furnished their ITRs by the extended last date of November 15, 2024. But CPC has furnished the demand notices to such assesses wrongly acknowledging the deadline as July 31, 2024, and imposing the late filing fees of Rs 5000 u/s 234F.
Interest Wrongly Charge U/S 234A and 234B: Many assessee have reported obtaining demand notices in which the CPC has wrongly computed the interest under sections 234A and 234B of the Act, directing in the inflated tax obligations. Also, the lack of a detailed breakdown of calculations of interest in the intimation is making issues for the assesses to validate and address the discrepancies.
Late Fees for Revised ITR u/s 234F: In a specific matter, the assessee has obtained a demand notice levying a late fee of Rs 5000 u/s 234F towards filing the revised returns u/s 139(5) of the act. It is not correct since in these matters the original return was furnished on the due date cited u/s 139(1) of the act and as per that, no late fee must be imposed to file a valid revised return.
Proportionate TDS Credit Permitted: In the matters in which the TDS is deducted on the non-income segments such as GST or other reimbursements the credit of the TDS is not permitted in total, but the taxpayer faces the deduction. The same develops unfair circumstances in which the assessee would need to give up the TDS credit forever.
Defective ITR Notices Issued Wrongly: Income head categorization based on TDS deduction section- Specific assessees have obtained defective notices wrongly recommending that the income is required to be categorised under the head “Profits and Gains from Business and Profession” instead of “Income from Other Sources” only based on the section under which tax was deducted (such as Sections 194J or 194C of the Act), as per the representation.
The same income treatment ignores the fact that the income classification by the deductor could not override/overshadow the true nature of income as obtained and recorded via the assessee. The representation cites “Further, such an exercise requires application of mind which is often debatable and outside the domain of the adjustments stipulated under section 143(1). Therefore, such issues cannot be the subject matter of automated proceedings by CPC under Section 143(1) of the Act.”
Notice Issuse Due to Incorrect TDS Classification in Form 26AS
It was cited by KSCAA in its representation that various assessees have obtained the notices for filing the defective ITR post filing the income tax return in Form ITR-1, where the Tax Deducted at Source (TDS) on the income of interest that was initially and wrongly depicted under Sections 194J and 194C in Form 26AS.
Therefore form 26AS was corrected/updated to show these deductions under the related section of interest income (Section 194A of the Act). Even after the correction, the CPC has furnished the defective notices disregarding the updated and precise classification in Form 26AS during the filing return.
