2023 (1) TMI 719 - AT - Income Tax

TDS credit - refund of TDS reflected in his Form-26AS - tax liability was created against the firm on transfer of such asset which was owned by firm - CPC denied such refund in its intimation dated 08.10.2018 - HELD THAT - Claim of credit can only be considered in the hand of firm as the income is assessable in the hand of partnership firm. The assessee executed the sale deed on behalf of the firm in the representative capacity as a partner. The assessee has not filed any declaration that as per Rule 37BA the credit be given to the partnership firm. We find that there is no dispute that the TDS was deducted on the sale consideration of the asset which was owned by partnership firm - there is no dispute that the assessee is partner in the said firm and signed the sale deed on behalf of partner in fiduciary relationship. It is also admitted fact that the TDS was credited in the account of (PAN) of assessee. From the fact of the present case it is not clear that any tax liability was created against the firm on transfer of such asset which was owned by firm. Thus we deem it appropriate to restore the case to the file of assessing officer with the direction to adjudicate the issue afresh. The assessee is also directed to move appropriate application under section 199 read with Rule 37BA for claiming the credit of such TDS with required declaration undertaking of other condition prescribed therein. On filing such application with required declaration the assessing officer shall decide the same in accordance with law. Needless to direct that before passing the order afresh the assessing officer shall grant proper and fair opportunity to the assessee. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues:
1. Disallowance of TDS credit in the assessment year 2018-19.
2. Delay in filing the appeal before the Tribunal.
3. Claim of credit of TDS in the case of partnership firm.
4. Rejection of rectification application under section 154.
5. Dismissal of the appeal by NFAC/Ld. CIT(A).

Issue 1: Disallowance of TDS credit in the assessment year 2018-19:
The appeal by the assessee was against the order of NFAC/Ld. CIT(A) for not allowing TDS credit of Rs.2,21,000 despite being reflected in form no 26AS. The assessee argued that the capital gain on the sale of property was offered for taxation in the hands of the partnership firm, and no revenue loss was incurred. The NFAC/Ld. CIT(A) held that the credit can only be claimed in the year when the income is assessable in the hands of the person other than the deductee. The assessee executed the sale deed on behalf of the firm in a representative capacity as a partner, and no declaration was filed for transferring the credit to the partnership firm. The Tribunal directed the assessing officer to re-examine the issue, with the assessee required to submit an application under section 199 with the necessary declaration.

Issue 2: Delay in filing the appeal before the Tribunal:
There was a delay of fifty-two days in filing the appeal before the Tribunal. The assessee cited an order by the Hon'ble Apex Court extending the time period for filing appeals due to the Covid-19 pandemic. The Tribunal condoned the delay, considering the grace period allowed by the Apex Court, and proceeded to review the case.

Issue 3: Claim of credit of TDS in the case of partnership firm:
The assessee, a partner in a partnership firm, claimed credit of TDS on the sale of property by the firm, even though the income was assessable in the hands of the partnership firm. The NFAC/Ld. CIT(A) emphasized that the credit should be claimed in the year in which the income is assessable in the hands of the firm. The Tribunal directed the assessing officer to reevaluate the issue and instructed the assessee to file the necessary application for claiming the credit of TDS.

Issue 4: Rejection of rectification application under section 154:
The assessee's application for rectification under section 154 was rejected by the CPC, leading to the appeal before the NFAC/Ld. CIT(A). The rejection was based on the provisions of section 199 and Rule 37BA, stating that the credit can only be considered in the hands of the firm since the income was assessable in the partnership firm's hands. The Tribunal decided to restore the case to the assessing officer for fresh adjudication, with directions for the assessee to submit the required application for claiming the TDS credit.

Issue 5: Dismissal of the appeal by NFAC/Ld. CIT(A):
The NFAC/Ld. CIT(A) dismissed the appeal, highlighting that the TDS credit can only be claimed in the year when the income is assessable in the hands of the person other than the deductee. The Tribunal, after considering the submissions and records, directed the assessing officer to reexamine the issue and allowed the grounds of appeal raised by the assessee for statistical purposes.

This detailed analysis covers the various issues involved in the legal judgment, providing a comprehensive overview of the arguments, decisions, and directions given by the authorities involved in the case.