2021 (6) TMI 65 - AT - Income Tax

Credit of TDS - whether the credit of the TDS has to be allowed corresponding to the income offered or the income has to be computed according to the amount of TDS which has been deducted and claimed by the assessee? - HELD THAT - AO was required to exclude the credit of the TDS, but instead, he added the advance amount as income of the assessee in the year under consideration. The action of the Assessing Officer without any reasoning is not justified. Simultaneously, the claim of the entire amount of the TDS by the assessee in the year under consideration is also not justified. CIT(A) noted this fact, however, she upheld the addition proposed by the Assessing Officer instead of restricting the credit of the TDS. The duly of the AO is to decide, whether particular receipt is in the nature of taxable income and raise tax liability corresponding to that. He cannot assess particular receipt as income merely on the ground that tax on such receipt has been deducted by the deductor. In the case, the AO was required to examine whether the work was performed by the assessee for entire amount or for the amount of ₹ 48,06,843/- only. Without examining that issue, he is not justified in holding the advance amount as taxable receipt of the year. In the case of Varsha G. Salunke 2005 (9) TMI 226 - ITAT BOMBAY-F also the payment was received in one year, however, bills for part of payment received in subsequent years. The Tribunal directed to give credit of the TDS the year in which income was offered for taxation. We feel it appropriate to restore the issue in dispute to the file of the Assessing Officer, with the direction to the assessee to demonstrate taxability/non-taxability of amount in the year under consideration with the help of documentary evidences including, bills/invoice, proof of work performed etc. Then, the Assessing Officer shall decide the issue in accordance with law. Ground No. 1 of the appeal is accordingly allowed for statistical purposes.

Summary

Issues involved:
1. Addition of income under section 199 of the Income Tax Act, 1961.
2. Sufficiency of opportunity provided before passing the Assessment Order.
3. Legality and arbitrariness of the Assessment.
4. Right to add or delete grounds of appeal.

Analysis:

Issue 1: Addition of income under section 199 of the Income Tax Act, 1961
The appellant, engaged in construction business, claimed TDS credit for an amount not offered for taxation. The Assessing Officer added the unoffered amount as income. The Tribunal analyzed the case of Varsha G Salunke vs. DCIT, where TDS credit was allowed when income was offered for taxation. The Tribunal emphasized that TDS credit must correspond to the income offered for tax. The Assessing Officer's action was deemed unjustified for not examining if the entire amount was for work done. The Tribunal directed the issue back to the Assessing Officer for proper examination.

Issue 2: Sufficiency of opportunity provided before passing the Assessment Order
The appellant argued insufficient opportunity was given before the Assessment Order. The Tribunal did not find it necessary to delve into this issue further as the primary issue was the addition of income under section 199.

Issue 3: Legality and arbitrariness of the Assessment
The appellant contested the legality, arbitrariness, and fallacious nature of the Assessment. The Tribunal found the Assessing Officer's actions unjustified and directed a re-examination of the issue.

Issue 4: Right to add or delete grounds of appeal
The appellant reserved the right to add or delete grounds of appeal. The Tribunal dismissed the remaining grounds as they were deemed general in nature and not requiring adjudication.

In conclusion, the Tribunal partially allowed the appeal, directing a re-examination by the Assessing Officer on the issue of addition of income under section 199. The Tribunal emphasized the importance of correlating TDS credit with the income offered for taxation, as established in relevant case law. The remaining grounds were dismissed as they were considered general and not needing further consideration.