2023 (12) TMI 765 - AT - Income Tax

Rectification u/s 154 - AO rejected TDS Credit after issuance intimation U/s 143(1) - HELD THAT - The assessee filed the return alongwith the relevant documents for executing the contract with the party which enclosed in APB. The relevant payment is also reflected in the bank account. Only for filing of TDS return and withdrawing the credit, the ld. AO has acted beyond jurisdiction to execute the withdrawal of credit and reduced the refund u/s 154. We find that rectification is only related to intimation U/s 143(1) read with section 139(1) of the Act. We find that there is a lack of verification in the point of the ld. AO section 154 is only restricted to filing of return u/s 139 and processing of intimation u/s 143(1). So, withdrawal of TDS is a separate activity of the deductor. The mere rejection of TDS credit is not serving the purpose. The transaction, execution of works and other evidence should be considered during withdrawn of TDS credit after processing of return U/s 143(1). The execution of section 154 can not be mechanical purpose. AO has acted beyond jurisdiction and rejection of TDS credit after issuance intimation U/s 143(1) is not come under the purview of section 154 of the Act related rectification apparent from the record. We further find that the entire demand U/s 154 is beyond jurisdiction. Therefore, considering the above, we set aside the appeal order and the demand is quashed. Assessee appeal allowed.

Summary

Issues:
The judgment involves the rejection of TDS credit by the Assessing Officer (AO) under section 154 of the Income Tax Act 1961 for the Assessment Year (A.Y.) 2017-18 based on the withdrawal of tax credit by the deductor.

Summary:

Issue 1: Rejection of TDS Credit by AO under Section 154
The assessee filed the return for A.Y. 2017-18, declaring total income and was allowed a refund. Subsequently, the AO proposed to withdraw tax credit amount on account of the deductor withdrawing the credit. The AO withdrew the credit and raised a demand, which was upheld by the CIT(A). The appellant contended that the withdrawal of TDS was arbitrary and submitted evidence to support the claim. The Tribunal observed that the AO's decision was based on the deductor not providing the tax credit to the assessee. However, the Tribunal held that the AO exceeded jurisdiction by withdrawing the credit under section 154, which is limited to rectification related to the processing of returns and intimation. The Tribunal emphasized the need for verification and consideration of evidence before withdrawing TDS credits. Therefore, the Tribunal set aside the appeal order and quashed the demand amount.

Decision:
The appeal of the assessee was allowed, and the demand amount of Rs. 4,68,850/- was quashed.