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CMA Intermediate · Direct and Indirect Taxation · Tax Deducted at Source and Tax Collected at Source

Ravi Traders holds a certificate issued under section 395 authorising deduction at a lower rate. The Assessing Officer later feels the certificate was unjustified. Which statement is correct under the Income-tax Act, 2025?

The Assessing Officer can cancel a certificate granted for lower or nil deduction or lower collection, but only after giving the applicant a reasonable opportunity. Immediate cancellation without hearing, cancellation by the payer, or a bar on cancellation are all incorrect.

  1. AThe Assessing Officer may cancel it only after giving the applicant reasonable opportunityCorrect
  2. BThe payer may cancel it on his own whenever he wishes
  3. CThe certificate cannot be cancelled once issued
  4. DThe Assessing Officer may cancel it immediately without hearing the applicant

Explanation

Section 395(5) allows the Assessing Officer to cancel a certificate granted under sub-section (1) or (3) after giving reasonable opportunity to the applicant. Cancellation is not barred, is not at the payer's discretion, and requires an opportunity of being heard.

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