TDS Demand for earlier assessment years, without Notice or Order: Legal Position and Remedies

TDS Demand for earlier assessment years, Without Notice or Order: Legal Position and Remedies       – CA Mohan Patel

One of the recurring issues faced by taxpayers and professionals today is the sudden appearance of old TDS demands on the Income Tax Portal, especially for Assessment Years like 2012-13, without any accompanying notice, intimation, or order being served in the past.

This raises serious concerns from both a legal and procedural standpoint—especially where the assessee has no records for such an old period and no opportunity to respond was ever provided.

🔍 The Issue at Hand

A demand is reflected in the income tax portal for AY 2014-15 or earlier periods, against a taxpayer’s PAN, often without:

• Any Show Cause Notice (SCN),
• Any order passed under section 201 or 154, or
• Any prior communication by post or electronically.

Further, the taxpayer is unable to trace any records, which is understandable as record-keeping beyond 6 to 8 years is not mandatory under most statutes.

📜 Legal and Procedural Framework

1. Service of Notice or Order is Mandatory

• Section 282 of the Income-tax Act governs valid service of notices.
• Rule 127 of the Income-tax Rules allows service by electronic means, but such notices must be visible on the portal or sent to the registered email ID.
• Without proper service, the demand violates principles of natural justice.

2. TDS-Related Demands

Demands may relate to:

• Section 201(1) – Failure to deduct or deposit TDS.
• Section 201(1A) – Interest on delayed deduction/deposit.
• Section 271C / 272A – Penalties for TDS non-compliance.

Each such demand must be supported by a properly passed and communicated order.

3. Rectification Demands (Section 154)

• Some demands are raised due to TDS mismatches and processed by CPC under Section 154.
• However, even rectifications require an intimation to the assessee.

4. Adjustment of Refunds (Section 245)

• Under Section 245, refunds can be adjusted only after giving prior intimation and opportunity to respond.

🛠️ Step-by-Step Action Plan

✅ Step 1: Check if Order/Notice Was Served

• Check Income Tax Portal: e-Proceedings, Outstanding Demand, and My Account
• Verify with client if any email/postal communication was received.

✅ Step 2: Write to CPC & AO

• Send a formal letter to CPC and Jurisdictional AO requesting:
  • Copy of the demand order, notice, or SCN.
  • Details of the section and computation basis.

✅ Step 3: Submit RTI or Letter

• If no documents are available, submit a request or file RTI to obtain:
  • Copy of the order.
  • Service details (email/post).
  • Backup of demand computation.

✅ Step 4: File Grievance or RTI (if no reply)

• File grievance via e-Nivaran or submit RTI to CPC.
• Grounds: no order or intimation was served; statutory records not available after so many years.

✅ Step 5: Challenge the Demand (If No Order)

• If no valid order was ever served:
  • File a written objection to CPC and AO.
  • Request to drop the demand as it violates natural justice.

✅ Step 6: Rectify (If Order Was Served)

• If it is later found that order was served but missed:
  • File rectification u/s 154 for factual errors.
  • Apply for waiver of interest/penalty under Section 273A or CBDT hardship circulars.

⚖️ Legal Support & Precedents

• Delhi HC – Court on its own motion vs. CIT: Refund adjustment without Section 245 notice held invalid.
• PCIT vs. Tata Communications Ltd. – ITAT held demand invalid where no SCN/order was served.
• CBDT Circular No. 275/34/2006-IT(B) – Requires prior opportunity before recovery.

📘 Relevant Provisions

✅ Conclusion

Old demands without records or notices can be disputed effectively. No taxpayer is liable to pay such demand unless:

• A valid order is passed,
• A proper notice is served,
• And an opportunity to respond is granted.

Always follow up with documentation, grievance filings, and formal representations to protect your client’s interests.

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