2022 (8) TMI 679 - AT - Income Tax

Disallowance of credit for TDS - jurisdiction of AO to rectify the mistake u/s 154 - tax deductor has withdrawn certain TDS and revised its TDS return - CIT (A) as relying on the statement mentioned in the order u/s. 154 that the taxes deducted earlier in the name of the appellant have been withdrawn by the deductor - assessee received a rectification order u/s 154 wherein TDS credit was disallowed and consequential interest u/s 234B and 234C respectively also charged - HELD THAT - It is nowhere from the record established that on what basis CPC Bangalore and jurisdictional ITO ward-35(1) (5), reduced the claim of the assessee from Rs 4, 53,605/- to Rs 39,605/-. It is further noted that the proceedings u/s 154 can be done only in the cases where there is a mistake apparent from record and no debatable issue is involved in this case the record before us clearly established that there is no mistake apparent from record as far as assessee is concerned. Department nowhere able to establish the fact as observed by the Ld. CIT (A) in his order The credit for TDS is governed by the provisions of section 199 of the Act read with Rule 37BA of the Income Tax Rules, 1962. As per order u/s 154 dated 10.08.2018, the tax deductor of the appellant has withdrawn certain tax credits as per Rule 37BA. In view of the fact that the taxes deducted earlier in the name of the appellant have been withdrawn by the deductor, only the tax credits which have not been withdrawn and those appearing in the claims of the appellant are allowed by the assessing officer in the case of the appellant. In view of the above facts and circumstances, I do not see any reason to interfere in the order of the AO, the appeals of the appellant are not allowed. This observation challenges even the jurisdiction of CPC Bangalore and jurisdictional ITO ward-35(1)(5). Assessee filed her return of income on the basis of record generated by department itself i.e., form no 26AS and form no 16A. The documents which has been processed and issued by the department itself on which assessee relied, how there can be a case of mistake apparent from record. May be there is a mismatch in the data pertaining to assessee and data pertaining to deductor (processed and maintained by department), CPC Bangalore and jurisdictional ITO can t proceed u/s 154 against the assessee. We declare this whole action of CPC Bangalore and in turn jurisdictional ITO is bad in law hence set aside with a consequential direction to give full credit of TDS claim by the assessee and any other money she deposited during this period. Appeal of the assessee is fully allowed with consequential relief in terms of reversal of interest charged u/s 234B and 234C with immediate grant of refund if any with consequential interest.

Summary

Issues:
Disallowance of credit for taxes deducted at source when appearing in Form 26AS and income offered to tax.

Analysis:
The appeal was against the order of the National Faceless Appeal Centre for the Assessment Year 2013-14. The appellant contested the disallowance of credit for taxes deducted at source (TDS) under section 1943 of the Income Tax Act, amounting to Rs. 413,750, despite the TDS reflecting in Form 26AS and the corresponding income being taxed. The appellant argued that the TDS had not been withdrawn, as shown in Form 26AS and Form 16A. The appellant requested verification of the TDS credit and deletion of the disallowance. Additionally, the appellant sought re-computation of consequential interest under sections 234B and 234C after granting full TDS credit.

The facts revealed that the appellant filed her income tax return, declared total income, paid advance tax, and claimed TDS for the Assessment Year 2013-14. Subsequently, a rectification order disallowed TDS credit of Rs. 4,13,570, leading to interest charges under sections 234B and 234C. The appellant's appeal against this order was unsuccessful before the Commissioner of Income Tax (Appeals), prompting the current appeal.

In analyzing the case, the Tribunal reviewed the submissions made by the appellant, examined the total income statement, retainership fees ledger, TDS claims reconciliation, Form 26AS, and Form 16A issued by the deductor. The Form 26AS and Form 16A confirmed the TDS amount claimed by the appellant, supporting her position. The Tribunal noted discrepancies in reducing the appellant's TDS claim without establishing any mistakes apparent from the records.

The Tribunal found no debatable issue warranting action under section 154, as the appellant's declaration relied on official documents like Form 26AS and Form 16A. The Tribunal criticized the assessing authorities and the Commissioner of Income Tax (Appeals) for their insensitive decisions, declaring the actions as bad in law. Consequently, the Tribunal set aside the previous orders, directing full credit for the TDS claim and any refunds due to the appellant.

In conclusion, the Tribunal allowed the appellant's appeal, reversing the interest charges under sections 234B and 234C and granting any consequential relief, emphasizing the importance of fair and just decisions in tax matters.