2022 (1) TMI 181 - AT - Income Tax

Non-grant of TDS credit - salary income received from HDFC Bank as well as Centurion Bank of Punjab to tax - Claim of TDS credit deducted by Centurion Bank of Punjab from the salary of the assessee duly offered to tax - HELD THAT - AO has denied the claim of credit of TDS on technical ground of limitation however when nothing was to be performed on the part of the assessee to claim such credit of TDS and refund except claiming the same in the return of income then the A.O. cannot be absolved from performing his duties as mandated under the provisions of this Act. When the TDS credit available to the assessee is reflected in Form 26AS then the assessee is even not required to assist the tax authorities to justify the claim once it is declared and claimed in the return of income. Further the letter dated 13/03/2013 is well within the period of limitation as prescribed U/s 154(7) of the Act then non-performance of duties by the A.O. to take a decision on the said letter cannot be taken to prejudicial to the assessee when the second letter is filed by the assessee on 03/08/2017 for reminding the A.O. for the said claim. The whole conduct on the part of the authorities below for non-granting of due credit of TDS as well as refund is nothing but amounts to undue enrichment of the department by failure to perform its duties. When it was the duty on the taxing authority to grant undisputed due TDS credit and consequential refund and non non-perfoming of its duties on technical ground certainly results injustice to the assessee. Accordingly in the facts and circumstances of the case the impugned orders of the authorities below are set aside and the claim of TDS credit deducted by Centurion Bank of Punjab from the salary of the assessee duly offered to tax is allowed and the A.O. is directed to grant consequential refund to the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Validity of the order of the ld. CIT(A) upholding the AO's decision regarding the application for allowing credit of TDS and issuing a refund under section 154(7) of the Income Tax Act.
2. Consideration of legal position in the application filed by the assessee for credit of TDS and refund.
3. Direction to allow the credit of tax deducted at source by Centurion Bank of Punjab.
4. Granting necessary costs to the assessee.

Issue 1:
The appeal by the assessee challenged the order of the ld. CIT(A) upholding the AO's decision regarding the application for allowing credit of TDS and issuing a refund under section 154(7) of the Income Tax Act for the assessment year 2009-10. The AO raised a demand of ?17,950 due to non-allowance of TDS credit of ?39,130 by Centurion Bank of Punjab. The assessee's contention was that the application for refund was not under section 154, but for the grant of refund as claimed in the return of income. The Tribunal noted that the department did not dispute the factual matrix of non-granting TDS credit and refund claimed by the assessee. The A.O. denied the credit of TDS on the grounds of limitation, but the Tribunal held that the letter dated 13/03/2013 was within the limitation period as prescribed under section 154(7) of the Act.

Issue 2:
The legal position in the application filed by the assessee for credit of TDS and refund was also considered. The assessee had claimed credit for TDS against the tax liability and subsequently claimed a refund. The Tribunal emphasized that once the income on which TDS was deducted was offered for tax, the credit of such advance tax in the form of TDS should be allowed to the assessee as per the provisions of Sections 198 and 199 of the Act. The Tribunal highlighted that the A.O. cannot be absolved from performing duties mandated under the Act, especially when the TDS credit was reflected in Form 26AS, maintained by the department itself.

Issue 3:
The direction to allow the credit of tax deducted at source by Centurion Bank of Punjab was a crucial aspect of the case. The Tribunal observed that the department did not dispute the TDS amount reflected in Form 26AS, and the assessee had offered the income for tax. Despite the A.O. denying the credit on technical grounds, the Tribunal held that the failure to grant TDS credit and refund amounted to undue enrichment of the department by not performing its duties. The Tribunal referred to the decision of the Hon'ble Supreme Court, emphasizing that justice should not be prejudicial to anyone, and rectification of errors should be allowed to avoid injustice.

Issue 4:
The Tribunal allowed the appeal of the assessee, setting aside the impugned orders of the authorities below and directing the A.O. to grant the consequential refund to the assessee. The Tribunal held that the non-performance of duties by the taxing authority on technical grounds resulted in injustice to the assessee, and the claim of TDS credit by Centurion Bank of Punjab was allowed.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of granting due TDS credit and refunds to avoid unjust enrichment of the department and uphold the principles of justice.