2024 (7) TMI 785 - AT - Income Tax

Mismatch of TDS between Form 26AS of the relevant A.Y and return of income - appellant is following percentage completion method for recognizing the revenue which des not match exactly with the payment made or credited by the contractors - HELD THAT - We find merit in the submission of the assessee for the simple reason that when the appellant is following percentage completion method for recognition of the Revenue, it may not match with the income from operations or receipts from its business and corresponding TDS credit as per Form 26AS. This is for the simple reason that, the contractor deducted TDS on the amount credited or paid to the account of the contractee, whereas the contractee recognizes revenue in terms of the percentage of completion of works. The credit for TDS should be allowed for the A.Y in which such income is assessed or assessable to tax irrespective of TDS credit available in Form No.26AS. In the present case, the appellant claimed that it has recognized revenue in terms of percentage completion method and also claimed TDS credited in proportion to income recognized for the relevant A.Ys. The appellant also claims that the excess TDS credit, if any, has been carried forward to subsequent A.Ys. Therefore, we are of the considered opinion that when the appellant is claiming credit for TDS in proportion to the income offered for the relevant A.Y, the AO ought to have allowed credit for TDS as claimed by the assessee, provided relevant details has been furnished to prove the claim of the assessee. Since, the appellant claims that it has filed all the relevant details to prove credit for TDS as per ITR filed for the relevant A.Ys, in our considered view, the matter needs further examination from the Assessing Officer. Thus, we set aside the order of the CIT (A) for both the A.Ys and restored the issue back to the file of the AO. Appeals filed by the assessee allowed for statistical purposes.

Summary

Issues:
Appeals against assessment orders, mismatch of TDS in Form 26AS and return of income, recognition of revenue using percentage completion method, allowance of TDS credit, jurisdiction of Assessing Officer.

Analysis:
The appeals were filed against separate but identical orders pertaining to assessment years 2021-22 and 2022-23. The appellant, following the percentage completion method, recognized income from a long-term contract with NCC-Matrix Consortium. The Assessing Officer did not consider TDS credits of Rs. 54,42,398/- and Rs. 35,24,781/- for the respective years as they were not reflected in Form 26AS. The CIT (A) upheld the assessment order, stating the lack of relevant details in Form 26AS to allow TDS credit claimed by the assessee.

The appellant argued that the mismatch in TDS was due to the accounting method, where income recognition did not align with contractor payments. The CIT (A) rejected the explanation and upheld the assessment. The Tribunal noted that the percentage completion method may cause discrepancies between revenue recognition and TDS credits in Form 26AS. As per Section 199(2) of the IT Act, credit for TDS should be allowed for the year in which income is assessable, irrespective of Form 26AS. The Tribunal found merit in the appellant's claim and directed the Assessing Officer to verify the TDS credit claim with supporting evidence.

In conclusion, the Tribunal allowed the appeals for statistical purposes, setting aside the CIT (A) orders and remanding the issue to the Assessing Officer for further examination. The decision emphasized the need to consider the percentage completion method for revenue recognition and the allowance of TDS credit based on the income offered for the relevant assessment years.