Banglore ITAT: Taking TDS without Providing Corresponding Income for Taxation is not Permitted

The Bangalore Bench of the Income Tax Appellate Tribunal ruled that the TDS cannot be taken isolatedly in any assessment year without offering the affiliated income for taxation.

The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has followed that the taxpayer will be qualified for the Tax Deducted at Source credit corresponding to the income notified in the AY 2017-18 itself, furnished credit for TDS is shown in Form No. 26AS in the pertinent AY and is not claimed in any other Assessment year, and the taxpayer places an undertaking or affidavit before the department, confirming that aviled credit in the AY 2017-18 would not be claimed doubly in any other AY in the future.

The taxpayer /respondent has the business of civil construction of commercial complexes, and industrial, institutional, and residential projects. According to A.O., there is a mismatch in turnover reported according to financials and turnover as emerging in Form No. 26AS.

The mismatch in turnover was based on sales of FY 2015-16 regarded by the taxpayer in FY 2016-17 and mobilization advance obtained from customs, on which TDS has been regarded but not taken for turnover in financials of FY 2017-18.

As per A.O., the income from these receipts has been obtained and proposed to tax in the previous assessment years. TDS claimed in the present A.Y. 2017-18, which is not permissible under Sec. 199 r.w.r. 37BA. The AO has limited the TDS credit of Rs 49,71,083 in FY 2017-18.

The taxpayer has furnished that the tax is been deducted by the deductor in the year where the income has been paid actually to the taxpayer.

In the income return, the taxpayer has already shown the income, which has resulted in the TDS mismatch as the corresponding income is been furnished to the tax in the former year, and the TDS is been deducted subsequently when merely the payment is been incurred via the deductor to the taxpayer.

The taxpayer is banned from claiming the Tax Deducted at Source credit in the year where the tax was deducted as the affiliated income has been proposed in the former years.

The Finance Act, 2023, has inserted sub-section 20 to Sec. 155 to ease permitting credit if TDS was made in the year of TDS to prevent the re-opening of an earlier assessment or a lapse of time to file the amended return.

The taxpayer before CIT (A), had submitted an extract of the memorandum. The taxpayer has proposed the income to tax in earlier years, and TDS was not availed because of the late payment by the deductor, which would not punish the taxpayer via not permitting the TDS credit in the year when TDS filed was real.

Read Also:- Complete Guide of Filing TDS Returns Via Gen TDS Software

It will result in the taxation of income without permitting the corresponding TDS credit, which will be against the provisions of the Act. As per that the ld. CIT(A) followed that the taxpayer’s opinion is discovered to be accurate and the A.O. is mandated to authorize TDS credit in FY 2017-18 post validating that the related income has been suggested for taxes in earlier years by the taxpayers.

The department contends that the income along with the TDS needs to proceed together in an assessment year where the income has been proposed for taxation. If the income proposed in an earlier assessment year then the TDS ought to be given credit in that assessment year only, and in the assessment year, an amount of Rs. 49,71,083/- is the TDS associating with the earlier assessment year, and the NFAC/CIT(A) is not explained in following that if the income has been proposed for taxation in an earlier assessment year, the TDS credit is to be furnished in this assessment year, which is wrong.

The Income Tax Appellate Tribunal (ITAT) remarked that there is no positive finding of the Revenue Authorities below available to show whether the tax credit for TDS shown in Form No. 26AS in Assessment Year 2017-18 has been availed or otherwise in another assessment year. Verification of the factual position is mandated to ignore the chance of a double claim. The taxpayer will be qualified for a TDS credit corresponding to the income reported in the assessment year 2017–18 itself.

The order of the CIT (A) is been set aside by the tribunal and restored the same to the file of the assessing officer for the credit allotment in AY 2017-18.