2024 (8) TMI 1175 - AT - Income Tax

Credit of TDS - HELD THAT - In assessee own case in AY 2007-08 and 2009-10 Tribunal held that the credit of TDS in a financial year can be granted only when income corresponding to such TDS is assessed to tax in the said financial year. Further, the Tribunal directed that the assessee will be at liberty to approach the Assessing Officer for claiming credit of TDS in the concerned year and the AO may allow the claim in accordance with law. We hereby hold that credit of TDS in a financial year may be granted only when income corresponding to such TDS is assessed to tax in the said financial year. Further, the assessee will be at liberty to approach the Assessing Officer for claiming the such credit in the concerned year in which income is offered and the AO may allow the same in accordance with law. Ground no.1 to 4 of the appeal is allowed for statistical purposes. Consideration of current year business loss - AO is directed to verify the claim of the assessee and to consider the current year business loss while computing the assessed income as per law.

Summary

Issues Involved:
1. Addition of Rs. 10,75,12,135/- as undisclosed income.
2. Correctness of accounting standards followed by the appellant.
3. Reconciliation of income reported in Form 26AS and income offered to tax.
4. Direction to avoid double taxation of Rs. 10,75,12,135/- in different assessment years.
5. Non-adjudication of grounds of appeal number 3.1 to 3.6 by CIT(A).
6. Consideration of current year business loss of Rs. 2,23,09,961/-.
7. Adjustment of Rs. 1,92,09,526 as refund and interest under section 244A.
8. Granting credit of TDS amounting to Rs. 21,64,741/-.
9. Deletion of interest levied under section 234B of Rs. 12,92,811/-.
10. Deletion of interest levied under section 234D of Rs. 1,58,393/-.
11. Dropping initiation of penalty proceedings under section 271(1)(c).

Detailed Analysis:

1. Addition of Rs. 10,75,12,135/- as Undisclosed Income:
The primary issue in this appeal is the addition of Rs. 10,75,12,135/- to the total income of the assessee, which was not deleted by the CIT(A). The AO observed a discrepancy between the sales declared in the profit & loss account and the sales as per TDS Certificates, leading to an addition of Rs. 10.75 Crores as undisclosed income. The assessee argued that the discrepancy was due to client errors and timing differences in revenue recognition.

2. Correctness of Accounting Standards Followed by the Appellant:
The CIT(A) noted that the appellant was not following the correct accounting standard, specifically AS-9 on "Revenue Recognition." The appellant's practice of claiming TDS credit in one year while declaring the corresponding income in another year was not acceptable. The CIT(A) directed the AO to verify the claim and allow TDS as per sub-rule 3 and Rule 37BA of the I.T. Rules.

3. Reconciliation of Income Reported in Form 26AS and Income Offered to Tax:
The CIT(A) observed that the appellant needed to reconcile the receipts as per TDS certificates with the income declared in the profit & loss account. The appellant's argument that the discrepancy was due to timing differences and client errors was not accepted. The CIT(A) stated that the credit for TDS should be claimed in the year the corresponding income is declared.

4. Direction to Avoid Double Taxation of Rs. 10,75,12,135/- in Different Assessment Years:
The Tribunal upheld the CIT(A)'s decision, emphasizing that TDS credit should be granted only when the corresponding income is assessed to tax in the same financial year. The Tribunal directed that the assessee could approach the AO for claiming TDS credit in the relevant year, and the AO should allow the claim in accordance with the law.

5. Non-Adjudication of Grounds of Appeal Number 3.1 to 3.6 by CIT(A):
The Tribunal noted that the CIT(A) did not adjudicate grounds of appeal number 3.1 to 3.6. These grounds were raised in the current appeal as ground nos. 5.1 to 5.4.

6. Consideration of Current Year Business Loss of Rs. 2,23,09,961/-:
The Tribunal directed the AO to verify the claim of the assessee and consider the current year business loss of Rs. 2,23,09,961/- while computing the assessed income as per law.

7. Adjustment of Rs. 1,92,09,526 as Refund and Interest under Section 244A:
The AO was directed to verify the claim of the assessee and to allow interest under section 244A as per law.

8. Granting Credit of TDS Amounting to Rs. 21,64,741/-:
The AO was directed to verify the claim of the assessee and to allow the claim of TDS amounting to Rs. 21,64,741/- as per law.

9. Deletion of Interest Levied under Section 234B of Rs. 12,92,811/-:
The AO was directed to verify the claim of the assessee and to levy interest under section 234B as per law.

10. Deletion of Interest Levied under Section 234D of Rs. 1,58,393/-:
The AO was directed to verify the claim of the assessee and to levy interest under section 234D as per law.

11. Dropping Initiation of Penalty Proceedings under Section 271(1)(c):
The Tribunal found this ground premature as the assessee would receive an independent notice for the initiation of penalty proceedings and has a remedy of appeal against any penalty imposed. Hence, this ground was rejected.

Conclusion:
The appeal was partly allowed for statistical purposes, with directions for the AO to verify and consider various claims of the assessee as per law. The Tribunal emphasized the need for consistency in claiming TDS credit and declaring corresponding income in the same financial year.