2024 (9) TMI 1507 - AT - Income Tax

Intimation u/s 143(1) restricting TDS based on Rule 37BA of the Income Tax Rules - Rectification of mistake u/s 154 denied and credit of difference TDS could not be given - contention raised is that vide this communique the credit difference TDS for the assessment year 2019- 20 was denied to the assessee, without affording any opportunity to the appellant of being heard - HELD THAT - There is nothing in the letter dated 23.01.2023 to suggest that the assessee was given any opportunity of being heard for taking up of its rectification application u/s 154 of the Act once again, and before rejecting the same by way of any decision on merits. In the given situation, issuance of notice to the assessee was one of the essential requirements of section 154(3) of the Act to be complied with by the authority. At the cost of repetition, we mention that as submitted before us by Learned AR, no notice came to be issued by the ITO to the assessee for the purpose of any proceedings or before passing of any order or prior to the communique dated 23.1.2023 came to be issued. For the foregoing reasons and findings, we find that once the department had allowed credit of TDS passed u/s 143(1) r.w.s. 154 of the Act realizing its mistake made in the Intimation, and the appeal filed by the assessee before Learned CIT(A) had become infructuous, neither there was any reason for issuance of letter dated 23.01.2023 by the same Assessing Officer, intimating the assessee that its grievance u/s 154 of the Act could not be accepted, and that the assessee could file the appeal against the order u/s 143(1) of the Act, particularly when the assessee had already filed an appeal on receipt of the Intimation, and same had become infructuous with the passing of the order dated 18.01.2023. Impugned order passed by Learned CIT(A) is hereby set aside. We hereby direct the Assessing Officer to give effect to this judgment, and his own order whereby the mistake made in the Intimation issued initially was rectified and the assessee was given credit of TDS.

Summary

Issues Involved:
1. Denial of TDS credit under Rule 37BA.
2. Rectification application under Section 154 of the Income Tax Act.
3. Violation of principles of natural justice.
4. Actions of the Assessing Officer and the CIT(A).

Detailed Analysis:

1. Denial of TDS Credit under Rule 37BA:

The assessee-company challenged the order dated 22.02.2024, which dismissed its appeal against the intimation under Section 143(1) of the Income Tax Act, 1961, dated 24.12.2020. The intimation restricted the TDS credit based on Rule 37BA of the Income Tax Rules. The computation was as follows:
- Total receipts offered to tax: Rs. 51,04,38,875
- Total receipts as per Form 26AS: Rs. 58,16,24,657
- Credit of TDS claimed: Rs. 1,16,89,928
- TDS credit allowable as per Rule 37BA: Rs. 1,02,59,183

The CIT(A) confirmed the denial of TDS credit, stating that the assessee was required to declare the corresponding income or TDS claim in the corresponding years as per Rule 37BA.

2. Rectification Application under Section 154:

The assessee filed a rectification application under Section 154, resulting in an order dated 18.01.2023, which found merit in the assessee's contention and granted TDS credit of Rs. 14,49,047. However, subsequently, on 23.01.2023, the same Assessing Officer informed the assessee that the rectification application could not be accepted, denying the credit difference of Rs. 14,30,745 for the assessment year 2019-20.

3. Violation of Principles of Natural Justice:

The assessee contended that the denial communicated on 23.01.2023 was issued without affording any opportunity to be heard. The Departmental Representative conceded that there was nothing in the correspondence to suggest that the assessee was heard before the issuance of the letter dated 23.01.2023. Section 154(3) mandates that an amendment enhancing an assessment or reducing a refund requires notice to the assessee and a reasonable opportunity to be heard.

4. Actions of the Assessing Officer and the CIT(A):

The order dated 18.01.2023 was passed after considering the facts and materials, granting the TDS credit. However, the same Assessing Officer, five days later, issued a letter denying the rectification without a fresh order or hearing. The CIT(A) proceeded with the appeal despite the rectification order, which rendered the appeal infructuous. The CIT(A) should have acknowledged the rectification and dismissed the appeal accordingly.

Conclusion:

The appeal is allowed, and the impugned order by the CIT(A) is set aside. The Assessing Officer is directed to give effect to the judgment and the order dated 18.01.2023, granting the TDS credit of Rs. 14,49,047. This judgment underscores the importance of adhering to procedural fairness and the principles of natural justice in tax proceedings.