M/S KALYANIWALLA & MISTRY LLP,MUMBAI vs. ASSTT.DIRECTOR OF INCOME TAX, CENTRALIZED PROCESSING CENTRE, BANGALORE., MUMBAI

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ITA 2767/MUM/2022Status: DisposedITAT Mumbai20 February 2023AY 2019-20209 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reduction of TDS credit in rectification proceedings under Section 154 was in violation of Section 154(3) as no proper notice was given to the assessee. The assessee had provided sufficient details in its return.

What were the facts?

The assessee claimed TDS credit of Rs. 4,36,30,555 in its return. The CPC initially allowed Rs. 4,19,47,695, but a subsequent rectification order under Section 154 reduced the credit to Rs. 2,10,32,076 without proper notice.

What were the issues?

Whether the reduction of TDS credit in a rectification order under Section 154 was valid without issuing a proper notice to the assessee? Whether the assessee is entitled to the full TDS credit claimed in its return?

Which sections of the Income-tax Act were involved?

Section 154,Section 199,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “H” BENCH, MUMBAI

For Appellant: Shri M.M. Golwala, AR
For Respondent: Shri Tejinder Pal Singh Anand
Hearing: 19.12.2022Pronounced: 20.02.2023
1.

This appeal is filed by theassessee M/s Kalyaniwalla & Mistry LLP (the assessee/ the appellant) against the appellate order passed by the National faceless appeal Centre (Delhi) (the learned CIT – A)dated 8/9/2022 for assessment year 2019 – 20 wherein the appeal filed against the assessment order dated 23/9/2020 passed by The Assistant Director Of Income Tax, Central Processing Centre Bangalore (the learned AO) was partly allowed.

“This appeal is against the order passed us. 250 by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NEAC), Delhi and relates to Assessment Year 2019-20,

1) The Appellant objects to the tax demand of Rs.2,23,46,830/- in an order passed under section 154 of the Act.

2) CPC Bangalore/Assessing Officer erred in passing an order under section 154 of the Act, withdrawing credit for tax deducted at source of Rs.2,09,15,619/-, without issue of a notice under section 154(3) of the Act.

3) CPC Bangalore/Assessing Officer failed to considered that an order passed under section 154 of the Act, without issue of notice under section 154(3) is a nullity, and the said order requires to be cancelled on that ground alone.

4) Having regard to the facts of the case and the provisions of law, the Appellant submits that CPC Bangalore/Assessing Officer be directed to restore credit for tax deducted at source to Rs.4,19.47,695/-, as was allowed in Intimation under section 143(1) dated June 3, 2020.

5) Both the lower authorities failed to consider that the Appellant was following cash basis of accounting,

6) Both the lower authorities erred in not granting credit for tax deducted at source, in spite of assessing the gross income from which tax is deducted and in ignoring the provisions of section 199 r.w Rule 37BA(3).

7) Both the lower authorities erred in not granting credit for tax deducted at source in spite of the same appearing in Form 26AS of the current year or of the earlier years.

8) Both the lower authorities erred in ignoring the Schedule TDS filled up in the ITR form, giving details of TAN of deductor, Gross amount received during the year. TDS deducted therefrom, and the year of deduction of the said TDS.

9) The learned Commissioner of Income Tax (Appeals) erred in confirming levy of interest. The Appellant denies its liability to be levied any interest under section 234B & 234C of the Act.

The Appellant craves leave to add to, amend, alter, modify or withdraw any or all the Grounds of Appeal before or at the time of hearing of the Appeal, as they may be advised from time to time.”

3.

The brief fact of the case shows that assessee is a limited liability partnership , assessed as a firm , filed its return of income for assessment year 2019 – 20 on 30/10/2019 at

4.

Assessee filed an application for rectification of the intimation for a correct grant of tax deduction at source credit. The order under section 154 was passed on 9/9/2020. The TDS credit was restricted in that order at Rs 21,032,076/– as against the tax deduction at source credit of Rs 43,630,555 claimed in the return of income and Rs. 41,947,695/– accepted in the intimation. Therefore, where rectification order was passed, TDS credit granted to the assessee in intimation of amount of Rs 41,947,695/– was also reduced to Rs. 2,10,32,076 only.Therefore, the assessee preferred an appeal before the learned CIT – A.

5.

Assessee claimed that it follows a cash system of accounting hence professional fees are accounted as income on cash or receipt basis. According to the provisions of section 199 of the act credit for tax deducted at source from professional fees is claimed in the year in which professional fees are actually received /accounted as income. It was further stated that most of the clients of

6.

When this ground was agitated before the learned CIT – A, following order was passed as per paragraph number 4: –

“4. In its written submission the appellant submitted that there was a short credit of TDS

7.

Therefore, assessee is aggrieved and preferred this appeal. The grievance of the assessee is manifold. It was submitted that when there is a rectification under section 154 of the act and if it decreases the refund to the assessee, a specific notice is required to be given to the assessee giving reasonable opportunity of being heard. This was not given. Further the assessee submitted a detailed paper book containing 408 pages to contest the above appeal. The learned authorized representative vehemently submitted that assessee must be granted the tax credit of Rs. 43,630,555.

8.

The learned departmental representative vehemently supported the order of the learned CIT – A.

9.

We heard the rival contentions and carefully perused the orders of the National faceless appeal Centre and intimation issued by the central processing Centre Bangalore and a rectification order passed. There is no need to reiterate the facts. Only grievance of the assessee is that a tax credit of Rs. 43,630,555 should be made available to the assessee. We find that in the detail as per schedule TDS – 1 in form number ITR – 5 as per serial number 15 B (1) details of tax deducted at source, income shown by the assessee connected with claim of TDS, assessee has given the details of 896 entries showing the corresponding receipt offered as income and corresponding tax credit claimed by the assessee. We find

10.

In the present case the only dispute was unmatched tax deduction at source entries aggregating to Rs. 1,682,860. Therefore, in the interest of justice we direct the learned assessing officer to grant tax credit to the assessee as per claim of the assessee in the return of income. If the AO wants to verify on sample basis with respect to the tax deduction at source amounting to Rs. 1,682,860/–, he may do so. The assessee may also show to the learned assessing officer on sample basis how the income is shown in the return of income as well as the relevant tax deducted at source claimed as credit during the year. In the nutshell, we direct the learned assessing officer to

11.

In view of this ground number 1 – 8 of the appeal of the assessee are allowed with above direction.

12.

Ground number 9 is with respect to the levy of interest under section 234B and 234C which is consequential in nature, the AO is directed to compute the interest in accordance with the law.

13.

In the result appeal of the assessee is allowed with above directions.

Order pronounced in the open court on 20.02.2023.

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