2020 (4) TMI 712 - AT - Income Tax

Denying credit for tax deducted at source in the hands of company - credit for the TDS denied on the ground that as per Rule 37BA of the Income-tax Rules, 1962 the director has not filed the declaration with the deductor - income is credited to the bank account held in the name of one of the director, credit for TDS in respect of the additional incentive is reflected in the Form 26AS of the director - HELD THAT - TDS was neither allowed credit in the hands of Shri Pramod Kumar Agrawal nor the assessee whereas the income is assessed in the hands of the assessee. The only technical objection raised by the authorities below are that the scope of 143(1) of the Act is very limited and only those adjustments are made which are prima-facie not allowable to the assessee on the basis of material available before the AO. CIT(A) upheld the order of AO by reasoning that AO is correct in denying the credit of TDS to the assessee as the assessee sought to rely on the new material in the form of affidavit, letter of AO of Shri Pramod Kumar Agrawal to establish that there is a mistake in the order under section 143(1) of the Act, however, under section 154 of the Act the scope is very limited as the material sought to be relied by the assessee was not part of the record at the time of passing the order under section 143(1) of the Act. We are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue as it would be grossly unfair and unjust to deny the assessee the credit of TDS where the corresponding income has been assessed in its hand and this has been done despite the fact that the AO of Shri Pramod Kumar Agrawal has communicated to the AO of the assessee that the credit of TDS has not been allowed to Shri Pramod Kumar Agrawal and may be allowed to the assessee company after verification of facts. Authorities below have gone by the technicalities of the issue instead of correcting the wrongs. It would be gross injustice, if the assessee is denied credit of TDS in view of the fact that the income is already assessed in the hands of the assessee. - Decided in favour of assessee.

Summary

Issues involved:
- Denial of credit for tax deducted at source amounting to ?36,85,776/- by the Assessing Officer.

Detailed Analysis:
1. The only issue raised by the assessee is against the order of Ld. CIT(A) upholding the order of AO denying the credit for tax deducted at source amounting to ?36,85,776/-.

2. The assessee, engaged in the insurance business, received commission and incentives from an insurance company on behalf of the assessee. The TDS was deducted by the insurance company and reflected in Form 26AS of one of the directors. The director did not declare the income or claim TDS in his individual return, as the income belonged to the company. The AO denied TDS credit citing Rule 37BA of the Income-tax Rules, 1962.

3. The Ld. CIT(A) dismissed the appeal, stating that the TDS was not reflected in the company's 26AS statement, hence no credit was given. The CIT(A) rejected the claim for rectification under section 154, as no mistake was apparent in the order under section 143(1) of the Act.

4. The ITAT observed that the income was duly included and assessed in the hands of the assessee, even though TDS credit was denied. The assessment of the director did not consider the income or TDS. The director's AO later informed the assessee's AO to grant TDS credit after verification.

5. The ITAT disagreed with the CIT(A)'s conclusion, finding it unfair to deny TDS credit when the income was assessed in the assessee's hands. Despite technical objections, the ITAT directed the AO to grant the credit of TDS of ?36,85,776/- to the assessee, considering the injustice of denying credit when the income was already assessed.

6. The ITAT allowed the appeal of the assessee, setting aside the CIT(A)'s order, and directed the AO to grant the TDS credit.