2022 (6) TMI 236 - AT - Income Tax

TDS Credit u/s 199 - grievances of the assessee is that the entire TDS amount was not duly given credit by the CPC Centre - cash basis of system of accounting followed by assessee - As submitted the assessee is following the cash basis system of accounting though the TDS is being made in the earlier years the assessee claimed TDS credit in the current year where the professional fees paid to receive - HELD THAT - As relying on case of Naresh Bhavani Shah (HUF) 2017 (7) TMI 819 - GUJARAT HIGH COURT it is crystal clear that there are provisions of under the IT Act; namely, section 199 of the IT Act, 1961 and Rule 37BA of the IT Rules, 1962 and proper mechanism is also provided under the Act and Rules. Thus, respectfully following the ratio of the Jurisdictional High Court judgement, the assessee is entitled to get credit on TDS. Hence, this ground of appeal raised by the assessee is allowed by setting-aside the orders passed by lower authorities and direct the DCIT, CPC to pass fresh orders giving proper opportunities to the assessee and in accordance with law within a period of 12 weeks from the date of receipt of this order.

Summary

Issues Involved:
1. Credit for Tax Deducted at Source (TDS).
2. Charging of Interest under Sections 234A, 234B, and 234C of the Income Tax Act.

Detailed Analysis:

1. Credit for Tax Deducted at Source (TDS):

The assessee, a Chartered Accountant, filed an Income Tax Return for the Assessment Year 2014-15, declaring a total income of Rs. 14,31,540/- and claiming a TDS credit of Rs. 2,96,734/-. However, the Deputy Commissioner of Income Tax, CPC Centre, Bangalore, granted only Rs. 62,721/- as TDS credit, raising a tax demand of Rs. 2,46,857/-. The assessee filed a rectification application under Section 154, which was rejected.

The core issue was that the assessee followed a cash basis system of accounting, claiming TDS credit in the year the income was received, despite the TDS being deducted in earlier years. The CIT(A) partly allowed the appeal, granting TDS credit for the deductions made in FY 2013-14 but not for FY 2012-13 and 2013-14. The CIT(A) emphasized that the TDS credit should be granted in the year the commensurate income is brought to tax to avoid inconsistencies.

The ITAT referred to the Jurisdictional High Court's judgment in Naresh Bhavani Shah (HUF) vs. CIT, which clarified that under Section 199 and Rule 37BA, credit for TDS should be given in the year the income is assessable. The ITAT concluded that the assessee is entitled to a TDS credit of Rs. 2,96,734/-, setting aside the lower authorities' orders and directing the DCIT, CPC to pass fresh orders within 12 weeks.

2. Charging of Interest under Sections 234A, 234B, and 234C:

The assessee contended that the CPC Centre wrongly charged interest under Sections 234A, 234B, and 234C. The CIT(A) did not specifically address these charges, focusing instead on the TDS credit issue. The ITAT noted that the charging of interest is consequential to the main issue of TDS credit and thus allowed these grounds for statistical purposes, implying that the interest charges would be reconsidered in light of the revised TDS credit.

Conclusion:

The ITAT allowed the appeal for statistical purposes, directing the DCIT, CPC to grant the appropriate TDS credit and reconsider the interest charges under Sections 234A, 234B, and 234C, ensuring compliance with the provisions of Section 199 and Rule 37BA. The decision emphasizes the importance of aligning TDS credit with the year in which the corresponding income is taxed to maintain consistency and transparency in the tax assessment process.