2023 (1) TMI 758 - AT - Income Tax

Credit of TDS - DR mentioned that the amount was not credited in the 26AS, so, the assessee is not eligible for claim of TDS - HELD THAT - As assessee is genuinely eligible for the claim of TDS amount which was deducted from his rental income. The income was also offered for tax. So, assessee is eligible for claim of TDS. It is duty of the party to deduct the tax and to submit before the government treasury u/s 205 of the Act. We set aside the matter to the ld.AO to verify the TDS from respective authority and allow the claim of the assessee after a proper verification. The assessee should also get a reasonable opportunity of hearing for substantiate its claim. Appeal of the assessee allowed for statistical purposes.

Summary

Issues:
Claim of TDS credit denied by revenue authorities.

Analysis:
The case involved an appeal by the assessee against the order of the Commissioner of Income Tax (Appeal) regarding the denial of TDS credit amounting to Rs. 1,71,585 from rental income. The assessee received rental income from a party, M/s Vasan Healthcare Pvt. Ltd., who deducted TDS but did not deposit it in the government treasury. The department, during search proceedings, found that the TDS amount was not credited on behalf of the assessee. The assessment was completed under sections 153A/143(3) of the Income Tax Act, denying the TDS claim. The assessee filed a rectification petition, which was rejected by the Assessing Officer (AO) and subsequently by the Commissioner of Income Tax (Appeal) (CIT(A)). The assessee contended that they had offered the rental income for tax computation and were eligible for TDS credit under section 205 of the Act. The assessee cited relevant judicial pronouncements to support their claim.

During the hearing, the assessee's counsel argued that the assessee had submitted necessary documents, including a rectification petition and ledger of the party showing TDS deduction. The counsel relied on judgments from the Bombay High Court and Karnataka High Court, emphasizing the protection provided under section 205 of the Act against direct demand on the assessee when tax is deducted at the source. The counsel also referred to a decision by the ITAT, Delhi, supporting the assessee's claim for TDS credit.

The Revenue contended that since the TDS amount was not reflected in Form 26AS, the assessee was not eligible for the TDS claim. However, the Tribunal, after considering the submissions and documents, held that the assessee was genuinely eligible for the TDS claim as the income was offered for tax and the TDS was deducted. The Tribunal directed the AO to verify the TDS with the respective authority and allow the claim after proper verification, granting the assessee a reasonable opportunity to substantiate the claim. Consequently, the appeal of the assessee was allowed for statistical purposes.

In conclusion, the Tribunal's decision emphasized the importance of verifying TDS claims and providing the assessee with a fair opportunity to substantiate their claim, in line with the provisions of section 205 of the Income Tax Act.