HOMI FARROK KAKA ,MUMBAI vs. ITO WARD 25(1)(1), MUMBAI

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ITA 9339/MUM/2025Status: DisposedITAT Mumbai23 June 2026AY 2020-217 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to TDS credit even if the deductor failed to deposit the tax or if the TDS is reflected in a dissolved AOP's PAN, provided the corresponding income has been offered to tax by the assessee. The denial of credit based solely on Form 26AS or the deductor's default is contrary to law.

What were the facts?

The assessee claimed credit for Tax Deducted at Source (TDS) which was denied by the CPC/Assessing Officer. The denial was based on the deductor not depositing the tax and the TDS not reflecting in Form 26AS, or the TDS being reflected in the PAN of a dissolved AOP. The assessee argued that the income was offered to tax and the TDS was duly deducted.

What were the issues?

Whether the assessee is entitled to TDS credit when the deductor has defaulted in depositing the tax or when the TDS is reflected in the PAN of a dissolved entity, despite the income being offered to tax by the assessee.

Which sections of the Income-tax Act were involved?

Section 199,Section 205,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLE SHRI AMIT SHUKLA & HON’BLE SHRI GIRISH AGRAWAL

For Respondent: Shri Hemanshu Joshi, Sr. DR
Pronounced: 23.06.2026

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: E BEFORE HON’BLE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND HON’BLE SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA 9339/MUM/2025 िनधा�रण वष�/Assmt. Year: 2020-21) ITO WARD 25(1)(1) HOMI FARROK KAKA KAUTILYA BHAVAN, BKC 3RD FLOOR, AVABAI BANDRA EAST MANSION 15TH HENRY Vs. ROAD, COLABA, MUMBAI- MUMBAI-400051, 400001, MAHARASHTRA MAHARASHTRA (अपीलाथ� Appellant) (��थ� Respondent) Permanent Account Number of AAGPK9646N Assessee: िनधा�रती �ारा/Assessee represented Shri Poras Kaka, Sr. by: Advocate राज� व �ारा/Revenue represented by: Shri Hemanshu Joshi, Sr. DR

सुनवाई की तारीख / Date of conclusion of hearing: 08-Jun-2026 घोषणा की तारीख / Date of pronouncement: 23.06.2026 आदेश / ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal is filed by the assessee is against the order of Addl/JCIT (A)-1, Gurugram vide DIN: ITBA/APL/S/250/2025- 26/1081935573(1) dated 23.10.2025 passed against the assessment order by the Assessing Officer Mum-C-(125)(1) u/s 154 of the Income- tax Act, 1961 (hereinafter referred to as the “Act”), dated 02.12.2022 for the Assessment Year 2020-21.

2.

Assessee has raised the following grounds of appeal:

GROUND NO. 1: DISALLOWANCE OF CREDIT OF TAX DEDUCTED AT SOURCE: The learned CIT(A) erred in upholding the denial of TDS credit of ₹87,645 by CPC, despite the tax having been duly deducted from the appellant's duly returned income. The denial based solely on non-deposit by the deductor and Form 26AS is contrary to Sections 199 and 205 of the Act. The Appellant prays that the Deputy Commissioner of Income Tax, CPC, (DCIT) be directed to grant a credit of the Tax Deducted at Source and cancel the demand accordingly. GROUND 2: FAILURE TO ALLOW TDS OF ₹45,645 APPEARING IN AOP'S PAN (AAAFH49500) The learned CIT(A) erred in denying TDS credit of ₹45,645 appearing in the PAN of the dissolved AOP, though the corresponding income was assessed in the hands of the appellant and the tax deducted at source (TDS) not claimed by the AOP. Your appellant pray, the TDS credit be granted to the appellant. GROUND NO. 3: LEVY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT: On the facts and circumstances of the case and in law, the learned DCIT, CPC erred in levying interest under section 234B and 234C of the Act. The Appellant prays that, the DCIT, CPC be directed to delete the levy of interest under section 234B and 234C of the Act.

2.1. The issue involved in the present appeal is in respect of claim of credit for TDS not granted to the assessee.

3.

Ground no.1 is in respect of denial of TDS credit of Rs.87,645/-, even though it has been deducted from the income received by the assessee and reported in the return filed by him. The said denial is solely is on the basis of deductor not depositing the amount so deducted and entry not being reflected in Form 26AS, which according to the assessee is contrary to section 199 and section 205.

3.1. In the course of hearing before us, ld. Counsel referred to computation of total income placed in the paper book at page-12 to point out interest income of Rs. 94,82,348/- which has been reported by the assessee. Details of this total interest income is placed at page- 13 wherein it includes interest received from Popular Dealers amounting to Rs.6,60,000/- on which TDS done is Rs.66,000/- and from Popular Dealers of Rs.1,20,000/- on which TDS done is Rs.12,000/-. In this regard he referred to Form 26AS of the assessee placed in the paper book wherein the entry for interest reflected against the deductor Popular Dealers is of Rs. 2,40,000/- only, even though assessee has reported interest income of Rs. 6,60,000/- in the return. Corresponding TDS entry is of Rs. 24,000/- as against TDS done by the deductor of Rs.66,000/-.

3.2. Contention of ld. Counsel is that Department has assessed the assessee on the interest income of Rs.6,60,000/- by processing the return which included this income, however, the corresponding TDS credit has not been given as it is not reflected in the Form 26AS on account of non-deposit of tax deducted by the deductor. It is thus, submitted that once the deductor has deducted the tax at source, but does not deposit the same with the exchequer, assessee should not be made to suffer for the same and due credit of TDS ought to be given to assessee.

4.

Similar issue had come up before the Coordinate Bench in the case of Naik Naik and Company vs. CIT in ITA No. 2915/Mum/2025, dated 30.09.2025. Coordinate Bench after taking into consideration similar factual matrix as in the present case, section 205 and judicial precedents in the case of Yashpal Sahni vs. Rakha Hajarnavis [2007] 293 ITR 539 (Bom) and of Hon'ble Delhi High Court in the case of Incredible Unique Buildcon (P.) Ltd. vs. ITO [2023] 153 taxmann.com 179 as well as CBDT Instruction No. 275/29/2014 IT(B), dated 01.06.2015 held that assessee is entitled to credit of TDS to the extent deduction made from its receipts.

4.1. Relevant paragraphs from the aforesaid decision from para-22 to 27 are extracted below for ready reference: “22. Tested on this legal touchstone the approach of the first appellate authority does not commend acceptance. The learned CIT(A) made Form 26AS the decisive touchstone and cast upon the assessee the burden of securing rectification by the deductors. Form 26AS is a departmental statement that reflects the deductor’s compliance. It does not form part of the assessee’s books. When primary materials on record show that payments were received net of tax after deduction at source, to thereafter insist on reflection in 26AS as a condition precedent for credit is to elevate form over substance. The statute does not so provide. The Board’s directions counsel against it. The High Courts have interdicted it. 23. On facts, the assessee has demonstrated deduction of tax at source through its invoices and bank statements. The reconciliation placed on record shows, among others, deduction by Future Retail Limited of a substantial sum which was not deposited owing to the company’s financial condition. In the case of MEP Infraprojects the deposited tax is now reflected on update of 26AS, which only underscores that the mismatch was the consequence of deductor side compliance and not any infirmity in the assessee’s claim. For the remaining parties too the Department has not disputed the services rendered or the gross receipts; its sole objection is non appearance in 26AS. That objection, in the face of section 205, the CBDT directions and the binding precedents, cannot prevail. 24. It is important to remember that the assessee has already brought the corresponding income to tax. Denial of credit in the assessee’s hands, because the deductor failed to deposit or mis reported the deduction, results in taxing the same income twice. Section 205 is the Parliamentary safeguard against precisely such injustice. The Board’s Instruction and Memorandum translate that safeguard into administrative practice. The High Courts have given it judicial benediction. The revenue’s proper remedy lies against the defaulting deductor under sections 200 and 201 and other enabling provisions, and not against the deductee who has already suffered deduction. 25. The learned Departmental Representative suggested that section 199 contemplates credit only on payment to the Government and hence the absence of 26AS entries should defeat the claim. Section 199 cannot be read in isolation. It must be read harmoniously with section 205. Section 199 allocates the time and manner of giving credit in the ordinary course when the deductor has discharged his obligation. Section 205 steps in to prevent a second exaction from the deductee when that ordinary course is derailed by the deductor’s default. The harmonious reading preserves both provisions and avoids the manifest unfairness that would otherwise ensue. 26. We also cannot subscribe to the view that the assessee must first secure rectification of the deductors’ e TDS statements and only thereafter obtain credit. The statute does not impose such a precondition. The deductee has neither control over nor access to the deductor’s filings. The insistence effectively makes the assessee hostage to another’s compliance and empties section 205 of content. The more correct and lawful approach is to verify the assessee’s primary evidence of deduction and allow credit accordingly, leaving the Department free to pursue the defaulting deductors in accordance with law. 27. In the result we hold that the assessee is entitled to credit of TDS to the extent deduction from its receipts is established on the basis of the contemporaneous material placed on record. The denial of credit by CPC and its affirmation by the first appellate authority are set aside. The Assessing Officer is directed to verify the assessee’s reconciliation with reference to the invoices, payment advices and bank statements already on record and to allow the corresponding credit of TDS. This direction is squarely in line with section 205 of the Act, CBDT Instruction dated 1 June 2015 and Office Memorandum dated 11 March 2016, and the principles laid down by the Bombay and Delhi High Courts noticed above.

5.

We take note of section 199 which provides for credit for tax deducted. Section 205 provides for bar against direct demand on assessee where the tax is deductible at source to the extent to which tax has been deducted from that income. Keeping in juxtaposition the said sections of the Act and the factual matrix deliberated upon in the above paragraphs, corroborated by documentary evidence placed on record, we direct the ld. Assessing Officer to give credit for the TDS done as claimed by the assessee in his return of income for which corresponding income has already been offered to tax and assessed while processing the return. ground no.1 raised by the assessee is allowed.

6.

In ground no. 2, the issue relates to denial of TDS credit of Rs.45,645/- which is appearing in the PAN of dissolved AOP though the corresponding income was assessed in the hands of the assessee and the TDS was not claimed by the AOP. Thus, the TDS credit is to be granted to the assessee.

7.

At the outset, ld. Counsel submitted that this issue had come up before the Coordinate Bench of ITAT Mumbai in assessee’s own case for Assessment Year 2019-20 in ITA No. 1840/Mum/2023, dated 27.09.2023. The factual matrix of the present case before us remains identical with this decision as contended in para-3 and 3.1 of the said order, reproduced below for ready reference: 3. Shri Porus Kaka appearing on behalf of the assessee submitted that while filing return of income assessee had claimed TDS credited to the PAN of M/s. Homi S. Kaka & Others (AOP). The ld. Counsel for the assessee submitted that the AOP M/s. Homi S. Kaka was dissolved in March, 2019. The income of AOP relevant to Assessment Year 2019-20 was reflected by the assessee in his return of income. The assessee wanted to claim TDS deducted in the name of AOP in his individual account. After the dissolution of AOP the assessee tried his level best to inform about dissolution of AOP to the jurisdictional Assessing Officer. The Department refused to accept the letter on the ground that since, proceedings have become online/faceless, no physical letter/request can be accepted. The assessee tried to upload the letter on official portal of the Department but there was no way the assessee could uploaded this information to reach the Assessing Officer. 3.1 The ld. Counsel for the assessee submitted that since, the assessee had offered income of AOP in his return of income filed in individual capacity, the assessee was eligible to claim benefit of TDS deducted in the name of AOP. In support of his submissions he placed reliance on the decision in the case of Anil Ratanlal Bohora vs. ACIT, 148 taxmann.com 15 (Pune-Trib).

7.1. The Coordinate Bench after considering section 199 r.w.r. 37BA of the Income-tax Rules, 1962 gave its findings to allow credit of TDS to the assessee who has offered the corresponding income in his return of income. The Coordinate Bench restored the issue back to the file of ld. Assessing Officer with a direction to examine facts in this regard and consider the claim of TDS made by the assessee. Relevant paragraphs in this regard are extracted below for ready reference: “In the light of the provisions of section 199 r.w.r 378A(2), in the instant case we have no hesitation in holding that where the deductee has not filed return of income offering the income to tax and consequently has not claimed the benefit of TDS, the other person who has offered the said income (i.e. the income of the deductee) in his return of income, he would be eligible for claiming the credit of TDS deducted in the name of deductee. 9. Thus, in the facts of the case, we deem it appropriate to restore the issue back to the file of Assessing Officer with a direction to examine whether the assessee has declared income of erstwhile AOP in his return of income. If the answer to above question is in affirmative, the benefit of TDS deducted in the name of AOP be allowed to the assessee. The Assessing Officer before deciding this issue shall afford reasonable opportunity of hearing/making submissions to the assessee, in accordance with law.”

8.

Following the principle of consistency, facts remaining same, we also give similar direction in respect of claim of credit for TDS of Rs.45,645/- to apply mutatis mutandis. Accordingly, ground no. 2 raised by the assessee is allowed for statistical purposes.

9.

In the result, appeal of the assessee is allowed.

Order is pronounced in the open court on 23 June, 2026

Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 23 June, 2026 MP, Sr.P.S. Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER,

(Dy./Asstt.Registrar) ITAT, Mumbai

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