2018 (9) TMI 1638 - HC - Income Tax

Grant of credit of the tax deducted at source - refund such excess tax to the petitioner with statutory interest - Held that - In the first of the two reasons leading to mismatch, as noted, the ground was that the fixed deposits offered by the firm by way of security to cover defect liability for specified period, the authorities not permit substitution of the FDs even though the firm had ceased to be in existence. The Banks of which such FDs were therefore offered by way of security, had no choice but to make payment of interest in the name of the firm and also deduct tax in such name. However, according to the petitioner, the income was declared by the company. If so, the company must get the benefit of tax deducted at source. Wherever the payer-deductor had made the payment to the company but by error deposited tax in the account of the firm, the petitioner company must get benefit of such tax deducted at source. The petitioner has no control over the payerdeductor. In the present case those payees are all Government organizations. At the instance of Incometax Department the petitioner did try to persuade such organizations to make corrections, but failed. The respondent No.1 Assessing Officer is requested to verify full details of payments and deduction of tax at source. The petitioner shall provide necessary documents alongwith representation which may be mad latest by 10.10.2018.

Summary

Issues:
1. Direction to grant credit of tax deducted at source and refund excess tax with interest for assessment year 2014-15.

Analysis:
The petitioner, a private limited company engaged in infrastructure development projects, sought a direction to grant credit for tax deducted at source and refund the excess tax for the assessment year 2014-15. The company succeeded a partnership firm, and issues arose due to mismatch of Permanent Account Numbers (PAN) during the transition. The Department rejected a portion of the claimed TDS due to PAN mismatch, leading to a discrepancy of ?21,31,964. This discrepancy primarily stemmed from interest payments on security fixed deposits made in the name of the former firm, as well as errors by payees in crediting TDS to the firm's account instead of the company's. Despite the company's efforts to rectify these errors with payees, the situation remained unresolved.

The Revenue argued that the return was accepted without scrutiny, and the system automatically recognized matched TDS payments. However, in cases of discrepancies like the petitioner's, where TDS was not credited despite being deducted, the Assessing Officer lacked the authority to rectify the issue without physical verification. The Court acknowledged the mismatch issues and emphasized that the company should receive the benefit of TDS rightfully deducted. Notably, most payers/deductors causing mismatches were Government or Semi-Government bodies, complicating the resolution process. The Court directed the Assessing Officer to verify payment details and TDS deductions, instructing the petitioner to submit necessary documents by a specified date. If the petitioner could substantiate the claims, the Assessing Officer was mandated to grant the tax deduction benefits and process any resulting refunds with prescribed interest, aiming for completion by a set deadline.

In conclusion, the petition was disposed of with the directive for the Assessing Officer to conduct a thorough verification process to rectify the TDS credit discrepancies and ensure the petitioner received the entitled benefits, potentially leading to a refund with statutory interest if warranted.