2024 (9) TMI 971 - HC - Income Tax

Application u/s 264 - petitioner has been denied the credit of tax which had been deducted at source - correctness of the view expressed by the Commissioner when it held that the petitioner was liable to revise its return before being considered eligible to refund of the tax which had been deducted at source - HELD THAT - The statute prescribes that where credit for tax has not been given on the ground of either a certificate having not been furnished or filed, but which is subsequently presented before the AO, the same would be sufficient for the assessment order being amended. Section 155(14) thus places the AO under a statutory obligation to amend the order of assessment once it is established that the contingencies alluded to in that provision are duly established. Sub-section (14) neither contemplates nor mandates the original return being amended or revised. That provision essentially takes care of contingencies where TDS is either subsequently credited or comes to be reflected in Form 26AS after a time lag. An assessee may face such a spectre on account of a variety of unforeseeable reasons. However, that in itself can neither be viewed as fatal nor an irreversible event which would detract from the right of the assessee to claim benefit of tax which has been duly deducted. The statute itself adopts measures to cater to such an eventuality by incorporating remedial measures in Section 155 (14) of the Act. The essence of Section 155 (14) is that once that amount comes to be reflected in Form 26AS and the updated form comes to be submitted before the AO for its consideration, that authority is obliged to acknowledge the same and amend the assessment accordingly. Since the tax which was deducted by BALIC stood duly embedded in the Form 26AS which was produced by the writ petitioner and the income earned from that entity had never been held to be subject to tax under the Act, the refusal on the part of the respondents to refund that amount is rendered wholly illegal and arbitrary. Writ petition is accordingly allowed. The impugned order referable to Section 264 is hereby quashed.

Summary

Issues:
1. Correctness of order framed by the Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961.
2. Denial of credit of tax deducted at source by Bajaj Allianz Life Insurance Company Limited in Assessment Year 2015-16.

Analysis:
1. The petitioner, a non-resident assessee, filed a Return of Income for AY 2015-16 claiming a refund of TDS amounting to INR 1,90,84,170/- based on Form 26AS, including TDS of INR 5,95,549/- by BALIC. The petitioner claimed the TDS amount increased to INR 1,54,11,843/- as per the TDS credited by BALIC on 21 January 2016.

2. The return for AY 2015-16 was accepted by the AO under Section 143 (3) without suggesting any additions. However, the subsequent return for AY 2016-17 was denied TDS credit of INR 1,48,16,294/- despite being reflected in Form 26AS. The petitioner filed rectification applications, but the matter remained unresolved.

3. The High Court found that the Commissioner erred in holding that the petitioner must offer the income received from BALIC to tax before claiming TDS credit. The Court noted that the petitioner consistently asserted that the income was not taxable in India under Section 90 of the Act, and the AO had accepted the return for AY 2015-16 without additions.

4. Section 155(14) of the Act mandates the AO to amend the assessment order if credit for TDS, not initially given due to certificate non-filing, is subsequently produced. The provision does not require the original return to be revised. The Court emphasized that the essence of Section 155(14) is to allow for amendments based on updated information like TDS reflected in Form 26AS after the return filing.

5. As the TDS by BALIC was reflected in Form 26AS and the income was not held taxable under the Act, the Court deemed the refusal to refund the TDS amount as illegal and arbitrary. The Court allowed the writ petition, quashed the impugned order, and directed the respondents to refund INR 1,48,16,294/- with statutory interest.