2015 (9) TMI 1436 - AT - Income Tax

Rectification of mistake - not giving credit for TDS - Held that - The income attributable to the TDS under dispute before us has been duly offered to tax by the assessee and hence in the interest of justice , the assessee should be given due credit for TDS thereon more so when the certificate for the same has been filed by the assesee before the Learned AO on 30.5.2008. Thus we direct the Learned AO to grant credit for TDS amounting to ₹ 1,01,090/- to the assessee. - Decided in favour of assessee

Issues Involved:

1. Credit for Tax Deducted at Source (TDS) not granted by the Assessing Officer (AO).
2. Rejection of the rectification petition filed under Section 154 of the Income Tax Act, 1961.
3. Applicability of Section 199(3) and Rule 37BA of the Income Tax Rules to the case.
4. Interpretation of procedural and substantive law in the context of TDS credit.

Issue-wise Detailed Analysis:

1. Credit for Tax Deducted at Source (TDS) not granted by the Assessing Officer (AO):

The assessee, a partnership firm engaged in the profession of Advocates and Solicitors, filed its return of income for the Assessment Year 2004-05, showing a total income of Rs. 42,73,610/- and claimed TDS of Rs. 14,98,887/-. Out of this, TDS certificates amounting to Rs. 12,56,396/- were produced before the AO during assessment proceedings. This included TDS on advance received, with the related income offered to tax in the subsequent year. The AO granted TDS credit of Rs. 9,60,694/- and did not give credit for the remaining Rs. 5,38,193/-.

2. Rejection of the rectification petition filed under Section 154 of the Income Tax Act, 1961:

The assessee filed a rectification petition under Section 154, enclosing a TDS certificate for Rs. 1,01,090/-. The AO rejected the petition, citing Section 155(14), which mandates that TDS certificates not submitted with the return must be submitted within two years from the end of the assessment year. The CIT(A) upheld this action, stating that no mistake apparent from the record was amenable for rectification under Section 154.

3. Applicability of Section 199(3) and Rule 37BA of the Income Tax Rules to the case:

The Tribunal found that Section 199(3) read with Rule 37BA, which were procedural in nature, applied to the case. These provisions allow credit for TDS based on information furnished by the deductor and the return of income. The Tribunal held that these procedural rules should apply to all pending proceedings, thus supporting the assessee's claim for TDS credit.

4. Interpretation of procedural and substantive law in the context of TDS credit:

The Tribunal cited several judicial precedents to support its decision. It referred to the Supreme Court's ruling in CWT vs Sharvan Kumar Swarup and Sons, which distinguished between substantive and procedural law, stating that procedural law is generally applicable to pending cases. The Tribunal also cited the case of Alipurduar Tea Co. Ltd vs Agricultural ITO, which emphasized that no tax should be collected without authority of law and that procedural provisions should ensure justice.

Further, the Tribunal referred to Escorts Ltd vs DCIT, which held that credit for TDS must be given to the assessee from whose income tax was deducted, regardless of whether the income was disclosed in the return. The decision emphasized that the government has no authority to retain TDS amounts without crediting them to the assessee.

Conclusion:

The Tribunal directed the AO to grant credit for the TDS amounting to Rs. 1,01,090/-, as the income attributable to the TDS had been offered to tax by the assessee. The appeal of the assessee was allowed, and the Tribunal pronounced the order on 23.09.2015.

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