2023 (6) TMI 379 - AT - Income Tax

Credit of TDS denied - out of the TDS claimed a portion of tax relates to income under the head house property assessable in the subsequent assessment year - HELD THAT - Notwithstanding any procedural constraints, the revenue authorities are not entitled to appropriate the taxes which have been paid in excess of the due taxes to be paid by the assessee. We hereby order the AO to call for the record of AY 2002 - 03 and pass appropriate rectification order giving full credit for the TDS amounts to the assessee and issue refund of tax which the assessee is entitled consequent to such rectification order. Since, a long period of 20 years have already been elapsed, this action be completed by the revenue authorities within 6 months from the date of this order. Appeal of the assessee is allowed.

Summary

Issues involved:
The judgment involves issues related to non-allowance of full credit for tax deducted at source (TDS) in the assessment years 2001-02 and 2002-03, leading to the denial of refund to the assessee.

Issue 1: Appeal against the order of CIT(A)-2, New Delhi
The assessee filed an appeal against the order of the Commissioner (Appeals) which was deemed non-est as the order was disposing of the grievance petition of the assessee, which is not appealable before the CIT (Appeals) as per Section 246A(1) of the Income Tax Act.

Issue 2: Non-allowance of full TDS credit
The primary issue in the appeal was the denial of full credit for TDS claimed by the assessee in its return of income for the assessment year 2001-02. The Assessing Officer did not allow the full credit for TDS in the subsequent year, resulting in the deprivation of the assessee's entitled tax benefit and refund for both the assessment years 2001-02 and 2002-03.

Facts of the case:
The assessee owned properties leased out to various parties and claimed credit for TDS on rent received. However, due to adjustments for income from advance rent in subsequent years, the full TDS credit was not allowed, leading to a refund being carried forward to the next assessment year.

Legal principles and circulars:
The Circular No. 5/2001 emphasized the importance of giving due credit for TDS under Section 199 of the Income Tax Act, especially in cases where tax is deducted on advance rent spread over multiple financial years. It highlighted the challenges faced by assessees in claiming TDS credit in such scenarios.

Judgment and Order:
The Tribunal ordered the Assessing Officer to rectify the situation by granting full credit for the TDS amounts to the assessee and issuing the entitled tax refund. The revenue authorities were directed to complete this action within six months from the date of the order, considering the long period that had already elapsed.

Conclusion:
The appeal of the assessee was allowed, emphasizing the importance of granting due credit for TDS and ensuring the rightful refund to the assessee as per the provisions of the Income Tax Act.