KARAN VAHI,CHANDIGARH vs. INCOME TAX OFFICER, WARD 2(1),CHANDIGARH, CHANDIGARH

The assessee raised various grounds challenging the reduction of TDS credit, the exercise of jurisdiction under section 154, failure to consider the objections raised by the assessee, and the consequential levy of interest under sections 234B and 234C. The principal grievance of the assessee was against reduction of TDS credit from Rs.7,05,307/- to Rs.2,46,858/-, resulting in denial of credit of Rs.4,58,449/-.

The learned CIT(A) clubbed Grounds Nos. 1 to 5 and held that the TDS credit could be granted only to the extent of the tax actually reflected in the departmental system/Form No. 26AS. According to the learned CIT(A), the updated Form No. 26AS reflected TDS of only Rs.2,46,858/- and the mismatch between the TDS claimed and the TDS reflected in the departmental records constituted a mistake apparent from the record, which could be rectified under section 154.

The learned CIT(A) further observed that the assessee had not produced conclusive documentary evidence establishing that the balance TDS of Rs.4,58,449/- continued to be credited to the Government account. It was accordingly held that the assessee could not be granted TDS credit exceeding the amount reflected in the departmental records. Grounds Nos. 1 to 5 were consequently rejected. With regard to the assessee's contention that, if TDS credit was restricted to Rs.2,46,858/-, the corresponding interest income should also be reduced, the learned CIT(A) held that TDS

Before me, the learned AR submitted that the controversy is essentially with regard to the year in which credit for TDS is to be allowed. It was submitted that the assessee had received interest on enhanced compensation and had offered the entire interest income of Rs.70,53,072/- to tax in the year under consideration. The deductor had, at the relevant point of time, deducted TDS of Rs.7,05,307/-, which was reflected in Form No. 26AS. Accordingly, the assessee claimed credit of the said amount in the return of income. It was submitted that subsequently the deductor, in its own wisdom, modified the TDS statement and bifurcated/reported the TDS differently between the relevant years, as a consequence of which the TDS reflected in Form No. 26AS for the year under consideration stood reduced to Rs.2,46,858/-. The learned AR submitted that the assessee had no control whatsoever over the action of the deductor. The assessee had correctly disclosed the interest income in the year in which it was received and had also claimed the TDS corresponding to that income. Several representations were thereafter made to the TDS authorities seeking correction of the mismatch.

It was further submitted that by the time the subsequent modification was made by the deductor, the period for

The learned DR supported the orders of the lower authorities. It was submitted that the grant of TDS credit is governed by the statutory mechanism and that credit could be allowed only to the extent the TDS was reflected in the departmental system/Form No. 26AS. It was submitted that the revised Form No. 26AS reflected TDS of only Rs.2,46,858/- and that the assessee had failed to establish, through conclusive documentary evidence, that the balance amount of Rs.4,58,449/- continued to stand credited to the account of the Central Government. The learned DR, accordingly, supported the action of the CPC as well as the findings of the learned CIT(A).

I have considered the rival submissions and perused the material available on record. At the outset, I find that the controversy in the present appeal is narrow. The issue before me

In the present case, the assessee had discharged his obligation by offering the entire interest income to tax in the year under consideration. The assessee had also claimed the TDS on the basis of the Form No. 26AS then available. Thereafter, the deductor modified its TDS statement and the TDS reflected against the assessee was reduced to Rs.2,46,858/-. The assessee had no role in, or control over, such subsequent modification. In my considered view, the assessee cannot be made to suffer on account of an act of the deductor over which the assessee had no control. The assessee had disclosed the income in the correct assessment

The situation can also be viewed from another perspective. If the entire interest income of Rs.70,53,072/- is accepted as taxable in the year under consideration, the TDS deducted with reference to such interest cannot, merely because of a subsequent reporting modification by the deductor, be detached from the corresponding income and denied to the assessee in that year. I also note that the assessee did not remain passive. The record shows that representations were made before the TDS authorities seeking correction of the mismatch. Thus, the assessee had taken steps to have the subsequent discrepancy corrected.

The learned CIT(A) proceeded primarily on the basis that the revised Form No. 26AS reflected TDS of only Rs.2,46,858/- and that TDS credit could not be allowed beyond the amount reflected therein. While Form No. 26AS is undoubtedly relevant for determining TDS credit, the peculiar factual situation before me cannot be decided merely by looking at the subsequently modified figure in isolation. The corresponding income has admittedly been offered to tax in the year under consideration, and the original TDS of Rs.7,05,307/- was reported by the deductor and reflected in

I, therefore, hold that once the assessee has disclosed the interest income in the year under consideration and the corresponding TDS had been deducted by the deductor, the assessee is entitled to the benefit of such TDS in the same assessment year. The subsequent modification made by the deductor cannot be a valid ground either for the CPC or for the learned CIT(A) to deny the corresponding TDS credit to the assessee. Accordingly, the assessee is entitled to credit of TDS of Rs.7,05,307/- in the assessment year under consideration, subject to verification by the Assessing Officer that the said TDS pertains to the interest income of Rs.70,53,072/- offered to tax by the assessee in this year.

Since the principal grievance of the assessee is allowed, the consequential interest charged under sections 234B and 234C shall also be recomputed accordingly.

In view of the foregoing discussion, the order passed by the learned CIT(A) is set aside to the extent it restricts the TDS credit to Rs.2,46,858/-. The Assessing Officer/CPC is directed to allow TDS credit of Rs.7,05,307/- in the assessment year under

In the result, the appeal of the assessee is allowed.