2022 (10) TMI 74 - AT - Income Tax

TDS Claimed but not reflected in 26AS - AO Asked the assessee to provide reconciliation regarding the difference in the above TDS figures - assessee explained that the difference is because some of the clients have made less payment and the difference was treated by him as TDS deducted - absence of the any TDS being deposited to the Government s account the Assessing Officer could not give credit to the assessee of the same amount - HELD THAT - Short payment made by the client cannot be assumed as TDS, unless, the clients have actually deducted the amount and remitted to the government s account. The aforesaid observation of Commissioner (Appeals) assume importance in the context of the alternative claim made by assessee before the departmental authorities to the effect that, in case, the claim of TDS is not allowed, the amount included in the income should be reduced. In our view, the aforesaid alternative claim of the assessee, though, merits consideration, however, have not been properly addressed by the departmental authorities. Assessee s excess claim of TDS assuming that the less payment made by the clients are towards TDS may not be acceptable, however, if the amounts in dispute were not actually paid by the clients but were offered to tax by including it in the income, the same has to be reduced, as, assessee never received such income. We direct the assessing officer to reduce the amount from the income of the assessee and compute the tax liability accordingly.

Summary

Issues:
Addition/disallowance of an amount in the assessment year 2016-17.

Analysis:
The appeal in this case pertains to the addition/disallowance of Rs.4,67,300 in the assessment year 2016-17. The appellant, an advocate by profession, claimed credit for TDS amounting to Rs.75,02,413 in the return of income filed. However, the assessing officer noted a discrepancy as per Form 26AS, where the actual TDS amount was less by Rs.4,63,300. The appellant explained that the difference was due to some clients making less payment than billed, leading to an assumption that these clients had deducted tax at source aggregating to Rs.4,67,300. The appellant argued that the gross professional income offered for taxation already included this amount. Despite the explanations, the assessing officer disallowed the TDS claim of Rs.4,67,300.

Upon appeal, the learned Commissioner (Appeals) upheld the decision of the assessing officer, emphasizing that the appellant failed to substantiate the TDS claim with any certificates, and the amount was not deposited to the government's account. However, the appellate tribunal, after considering the submissions and material on record, found that the appellant had indeed received short payment of Rs.4,67,300, which was assumed to be TDS. The tribunal agreed that the short payment made by the clients could not be assumed as TDS unless the clients had actually deducted and remitted the amount to the government's account.

The tribunal directed the assessing officer to reduce the amount of Rs.4,67,300 from the appellant's income and compute the tax liability accordingly. While acknowledging that the excess TDS claim based on assumed client payments may not be acceptable, the tribunal emphasized that if the disputed amounts were not actually received by the appellant but included in the income, they should be reduced. Consequently, the appeal was partly allowed, and the tribunal issued the order on 29th August 2022.