SUPERLINE CONSULTANTS PVT LTD,MUMBAI vs. INCOME TAX OFFICER, WD-13(2)(1), MUMBAI

The brief facts of the case are that the assessee, M/s Superline Consultants Pvt. Ltd., is engaged in the business of trading in shares and securities. For A.Y. 2016-17, the assessee filed its return of income on 17.10.2016, which was processed under section 143(1) of the Act on 23.11.2016. The case was subsequently selected for limited scrutiny to examine the depreciation claimed and certain issues relating to TDS compliance. The Assessing Officer completed the assessment under section 143(3) of the Act on 18.12.2018 after making various additions which included disallowance of ₹7,65,555/- under section 14A, disallowance of depreciation of ₹6,66,574/-, addition of ₹4,35,750/- towards speculation income and addition of ₹5,50,000/- towards interest income. The Assessing Officer made the addition of ₹5,50,000/- on the ground that Form 26AS reflected interest income of this amount from M/s Piramal Sunteck Realty Pvt. Ltd., whereas the assessee had not offered the same to tax in its return of income.

The assessee challenged the assessment order before the learned CIT(Appeals)-21, Mumbai, who, vide order dated 28.06.2019, directed the Assessing Officer to reconsider certain issues. With regard to the addition of ₹5,50,000/-, the assessee submitted that it had neither advanced any loan to M/s Piramal Sunteck Realty Pvt. Ltd. nor received any interest from the said company.

Pursuant to these directions, the Assessing Officer issued notices dated 03.03.2020 and 06.09.2021 asking the assessee to produce the relevant details. Since the assessee did not furnish the required information, the Assessing Officer passed the order giving effect to the appellate order on 04.10.2021 and reconfirmed the additions of ₹7,65,555/- under section 14A and ₹5,50,000/- towards interest income. The Assessing Officer accordingly assessed the total income at ₹6,58,135/-.

The assessee again preferred an appeal before the learned CIT(Appeals). During the appellate proceedings, the assessee furnished the corrected Form 26AS, confirmation from M/s Piramal Sunteck Realty Pvt. Ltd. and its audited balance sheet to establish that no loan had been advanced to the said company and the assessee had not received interest income. However, the learned CIT(Appeals), vide order dated 15.07.2026, observed that although the assessee had denied having received interest income of ₹5,50,000/-, it had claimed credit of TDS of ₹55,000/- deducted on the same amount in its return of income. The learned CIT(Appeals) held that the assessee could not claim the benefit of TDS while denying receipt of the corresponding income. The CIT(Appeals) further observed that although the assessee had offered to surrender the TDS credit, the assessee did not file revised return or any application withdrawing the claim. The learned CIT(Appeals), therefore, upheld the addition of ₹5,50,000/-.

The assessee is in appeal before us against the order passed by the learned CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival contentions and perused the material on record. We find that the limited issue requiring our consideration is the addition of ₹5,50,000/- towards interest income from M/s Piramal Sunteck Realty Pvt. Ltd. The Assessing Officer made this addition on the basis of the interest income appearing in Form 26AS. The assessee submitted that it had neither advanced any loan to the said company nor earned or received any interest from it. The assessee has also placed on record the confirmation issued by M/s Piramal Sunteck Realty Pvt. Ltd., stating that the interest income was wrongly reported against the PAN of the assessee and that the mistake had subsequently been corrected in its TDS statement. The assessee has further relied upon the corrected Form 26AS, which, according to it, reflects the reversal of the interest income of ₹5,50,000/- and the corresponding TDS.

We further find that the assessee had not offered the interest income of ₹5,50,000/- in its return of income but had claimed credit of TDS of ₹55,000/- relating to the same amount. The learned CIT(Appeals) has sustained the addition mainly on this ground. In our view, merely because the assessee had claimed credit of TDS, it cannot automatically be held that the corresponding interest income had actually accrued or been received, particularly when the deductor itself has stated that the entry was wrongly reported and has subsequently corrected its TDS statement. The entries appearing in Form 26AS are relevant for verification, but they cannot, by themselves, establish that an income has accrued to the assessee. At the same time, we agree that the assessee cannot claim credit of TDS in respect of income which it denies that it has earned or received.

Considering these facts, we are of the view that the matter requires verification by the Assessing Officer because the assessee has produced the corrected Form 26AS and confirmation from the deductor. We, therefore, restore the matter to the file of the Assessing Officer. The Assessing Officer shall verify the confirmation issued by M/s Piramal Sunteck Realty Pvt. Ltd., the correction made by the deductor in its TDS statement, the revised Form 26AS and the relevant books of account of the assessee. If the verification shows that no interest income of ₹5,50,000/- had accrued or been received by the assessee and that the original TDS entry was wrongly reported and subsequently corrected by the deductor, the Assessing Officer shall not bring the said amount to tax in the hands of the assessee. Also, the Assessing Officer shall not allow the assessee any credit of TDS of ₹55,000/- relating to such income. If such credit has already been allowed while processing the return or in any subsequent order, the Assessing Officer shall make the necessary adjustment in accordance with law so that the assessee does not receive the benefit of TDS credit in respect of income which was never earned or offered to tax.

In the result, the appeal of the assessee is allowed for statistical purposes.