2019 (12) TMI 152 - AT - Income Tax

Denial of credit of tax deducted at source - Rectification u/s 154 - HELD THAT - AO has passed specific directions u/s 154 allowing the assessee s claim towards grant of TDS credit and only when the assessee received the cheque towards the income tax refund, there was apparent inconsistency between the order passed u/s 154 and the processing of the income tax refund wherein the assessee was not granted credit for the TDS which was directed to be allowed by the AO while passing the order u/s 154. Where the Department has accepted the claim of the assessee towards short credit of TDS, it should have suo-moto carried out the rectification and no cause of action lies with the assessee firm. Having said that, where the assessee feeling aggrieved has moved an appeal before the CIT(A), no doubt the order under appeal is order passed by the AO u/s 154 and the appeal should normally be filed within thirty days of receipt of the order. No fault lies with the assessee as it was under the impression that its claim has been accepted as apparent from reading of the rectification order passed u/s 154 and only on receipt of refund cheque, the assessee realized that the credit of TDS has still not been granted to it. The assessee has moved an appeal before the CIT(A) (on 25.07.2018) within a period of few days of receipt of refund cheque (on 3.07.2018). We therefore find that there is a reasonable cause beyond the control of the assessee in preferring the appeal before the ld CIT(A) and the delay so happened is hereby condoned. On merits, we find that it is undisputed fact that the assessee has offered an amount of ₹ 11 lacs received from M/s K. C. India Ltd. during the year. Therefore where the income has been offered to tax and brought to tax by the Assessing officer, the assessee is legal eligible and well within its right to claim corresponding TDS thereon amounting to ₹ 1,23,596/- as reflected in Form No. 26AS. The AO is accordingly directed to give the TDS credit of ₹ 1,23,596/- to the assessee.

Summary

Issues:
Appeal against denial of credit of tax deducted at source.

Analysis:
The appeal was filed by the assessee against the order of the ld. CIT(A)-3, Jaipur for A.Y 2014-15 concerning the denial of credit of tax deducted at source amounting to ?1,23,596. The assessee, a firm of Chartered Accountants, follows the cash basis of accounting. An amount of ?11 lakhs received from M/s K.C. India Ltd was booked under professional fees and offered to tax, but the corresponding TDS credit of ?1,23,596 was inadvertently carried forward to the subsequent year. The assessee filed an application for rectification of mistake u/s 154, and the AO passed an order granting the TDS credit. However, upon receiving the income tax refund cheque, the assessee noticed that the TDS credit was still not given. The ld. CIT(A) dismissed the appeal stating a delay in filing it post the order u/s 154. The assessee contended that the delay was due to the realization of the TDS credit discrepancy only upon receiving the refund cheque.

The Tribunal noted that the AO had directed to grant TDS credit in the rectification order u/s 154. The discrepancy arose when the TDS credit was not reflected in the processing of the income tax refund. The Tribunal observed that the Department should have rectified this inconsistency suo-moto, as the claim had been accepted. The delay in filing the appeal before the ld CIT(A) was due to the assessee's belief that the claim had been accepted based on the order u/s 154. The appeal was filed promptly upon realizing the discrepancy upon receiving the refund cheque. The Tribunal, therefore, condoned the delay in filing the appeal, finding a reasonable cause beyond the assessee's control.

On the merits, it was established that the assessee had offered the income received from M/s K.C. India Ltd for taxation. Consequently, the assessee was entitled to claim the corresponding TDS credit of ?1,23,596 as per Form No. 26AS. The AO was directed to grant the TDS credit to the assessee. As a result, the appeal of the assessee was allowed, and the order was pronounced on 29/11/2019.