Resolving a TDS Default Notice of Over 4 Years
A construction contractor faced a ₹19 lakh TDS demand built up over four years of late filings and wrong section codes. A proper TRACES reconciliation brought the real number into view — and it was a fraction of that.
What the engagement demanded.
A proprietor running a mid-sized construction contracting business received a TDS default notice covering four financial years, with a demand of ₹19 lakh in tax plus interest and penalty. The defaults had built up quietly: his previous accountant had been deducting TDS but filing the returns late and, in some quarters, using the wrong section codes for contractor payments. By the time the demand landed, the previous accountant was no longer reachable and there was no documentation trail to work from.
How we executed the engagement.
TRACES Reconciliation
Pulled the complete TDS traces from the TRACES portal and mapped every challan, return, and deductee record across the four years.
Separating Real Defaults
Used the reconciliation to separate genuine defaults from clerical errors that were inflating the demand.
Revised Returns
Computed correct interest under Section 201 for genuine late filings and filed revised returns to correct the wrong section codes.
Rectification & Representation
Filed a rectification application and appeared before the TDS assessing officer with a reconciled statement showing actual vs. assessed liability.
The capabilities we brought to bear.
TRACES Portal Reconciliation
Challan, return, and deductee-level mapping across four financial years to surface the real liability.
Section 201 Interest Computation
Accurate interest liability calculated only on genuinely late payments.
Section Code Correction
Revised TDS returns correcting wrong contractor-payment section codes that were generating inflated demands.
Rectification & AO Representation
Rectification filing and in-person representation before the TDS assessing officer with a reconciled statement.
The results we delivered.
The demand was reduced from ₹19 lakh to just under ₹4 lakh, with the penalty waived on grounds of reasonable cause.
TDS default demands almost always look worse than they are. A proper reconciliation between TRACES data and actual payments brings the real number into view quickly, and that is usually the number worth fighting for.
