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Burdensome TDS information

Many educational institutions, banks and companies have received notices under Sec. 133 (6) to comply with the request to furnish a copy of their accounts for the financial year 2004-05 and for the three quarters ended December 31, 2005.The information called for relates to capital expenditure under capital work in progress, repairs and maintenance, and loans taken for the three quarters with full details regarding TDS made, outright purchases, interest paid, etc. I want to know whether the ITO (TDS) has the authority to call for such information even before the assessment year begins and assesses submit their IT returns along with the statement of accounts.

I think such power can be exercised only when any proceeding is pending with the IT authorities. But here there is no such proceeding is pending. In the A. P. Wine Dealers Association case (AP High Court) it has been decided that when the power has not been conferred by law no such action can be taken.

Please enlighten me whether we have to respond to the notices issued by the ITO (TDS).

The right to call for information under Sec. 133(6) cannot be questioned so long as the officer requiring information is duly authorised under proviso to Sec. 133(6) as was held by the Supreme Court in Karnataka Bank Ltd. v Secretary, Government of India (2002) 255 ITR 508 (SC). The decision in A.P. Wine Dealers Association v Dy. Director of I.T. (Inv.) (2005) 276 ITR 225 (AP) was in relation to exercise of powers to issue summons under Sec. 131 requiring original demand drafts, but even on the same facts, there is a different decision of Allahabad High Court, where the exercise of such powers under Sec. 132 by way of search was upheld in Babu Lal v Dy. Director of I.T. (Inv.) (2006) 281 ITR 70 (All).

Ignoring such notice in the wrong view that the notice is not legal will render the assessee liable for the consequences of non-compliance by way of penalty under Sec. 272A(2)(c) of Rs.100 for every day of default.

Where the collection of information is likely to take time, request for extension of time for compliance can be made. Such accommodation is bound to be given.

Information as to whether tax has been deducted may also be indicated. Where there is failure to deduct tax, such enquiry letter puts the assessee on guard by giving an opportunity to set right the matter by delayed deduction.

Attention may also be invited to Sec. 40(a)(ia), which provides for disallowance, where tax is not deducted at source in respect of items covered by Sec. 30 to 38, so that it becomes an important duty to ensure tax deduction.

If the format, however, is devised in a manner not convenient to the assessee and not necessary for purposes of enquiry, it can always be thrashed out with the authorities, so that the information can be given in a different format.

To avoid future difficulties in complying with such requisition, information can be compiled in a manner that it will be readily available on demand. The fact that such information is already available with the assessing officer or in quarterly returns is really no answer, not only because they may not give information where TDS is not deducted, but also because a statutory notice can be ignored by an assessee only at his own peril.

S. RAJARATHNAM

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