CHAMPION SEALS AND PACKINGS PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI GIRISH AGARWAL, ACCOUNTANT MEMBER

ITA 2862/MUM/2026 (िनधा�रणवष�/Assessment Year: 2012-13 )

Deputy Commissioner of Champion Seals and Income Tax, Circle Packings Private Limited 2(1)(1) 712, Panchshil Plaza, Nyaymurti Sitaram Patkar Room No. 575, Aayakar Marg, Gamdevi Grant Road, Bhawan, Maharshi Karwe Vs. Mumbai 400007. Road, New Marine Lines, Churchgate Mumbai PAN: AAACC1522A 400020.

(अपीलाथ�/ Appellant) (��थ� /Respondent)

िनधा�रती�ारा/Assessee represented by: Shri Mehil Golvala, CA राज� व�ारा/Revenue represented by: Shri Rajdeep Singh, CIT DR

सुनवाईकीतारीख/Date of conclusion of hearing: 28.07.2026 घोषणाकीतारीख/Date of pronouncement: 21.10.2026 आदेश / ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal is preferred by the assessee against the order dated 28.01.2026 passed by the Addl./JCIT(A)-1 Jaipur (hereinafter referred to as “Ld. CIT(A)”) vide DIN ITBA/APL/S/250/2025-26/1085224318(1) u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). The appeal arises from the rectification order dated 25.07.2016 passed 1

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 u/s 154 by the Deputy Commissioner of Income Tax, CPC Bengaluru (hereinafter referred to as “CPC”).

2.1. By a letter dated 23.06.2026, assessee has also filed an application seeking admission for an additional ground of appeal, which goes to the root of the matter. The said additional ground of appeal is as under: Having regard to the facts and circumstances of the case, and the provisions of law, the appellant submits that jurisdiction u/s.154 was wrongly assumed by the Assessing Officer, having regard to the fact that the issue is highly debatable and capable of two views.

2.2. Ground Nos. 1 to 4 and the additional ground raise a common question whether the credit of tax deducted at source could be withdrawn by way of rectification u/s 154. Ground No. 5 on interest is consequential. All the grounds are therefore taken up together.

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 3. The assessee let out its premises to Tornado Motors Private Limited (hereinafter referred to as “TMPL”) under a Leave and License Agreement dated 08.07.2010. The relevant terms of the agreement are extracted below for ready reference. “TERM: The license hereby given shall be initially for a period of 36 months commencing on 1st August, 2010 and expiring on 31st July, 2013, (the Initial term). Subject to section VII (Termination), clause 1, this tenure of 3 years will be a lock in period for both the parties.

The tenure of license can be extended at the sole discretion of the Licensor for a further period of 24 months commencing from 1st August, 2013 to 31st July, 2015, on the same terms and conditions including escalation in license fees at the rate of 5% after every twelve month on the licence fee existing at the end of 36 months. The Licensee shall communicate to the Licensor in writing at least three months in advance of their intention to renew the license after the Initial Term.

III - LICENSE FEE: 1. In consideration of the Licensor granting such leave, license and permission, the Licensee shall pay to the Licensor a total license fee of Rs. 16,50,000/- (Rupees Sixteen Lacs Fifty Thousand only) per month + service tax as applicable with an escalation @ 5% after every 12 months from the date of possession as License fee/compensation for the use of the licensed premises. Such amount shall be paid on or before the 10th day of each month in advance.

3.1. As per clause III.4, the monthly compensation commenced from 01.11.2010. During the previous year relevant to AY 2012-13, TMPL paid license fee aggregating to Rs. 2,04,60,000/- after deducting tax at

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 source at 10% amounting to Rs. 20,46,000/- u/s 194-I. TMPL issued Form 16A for the deduction. The deduction was also reflected in Form 26AS downloaded by the assessee on 03.09.2012.

3.2. Assessee e-filed its return of income on 21.09.2012, reporting total income at Rs. 1,72,80,096/- and claimed credit of TDS of Rs. 26,06,796/-. This included the TDS of Rs. 20,46,000/- deducted by TMPL. The computation of tax by CPC reflects income from house property of Rs. 1,74,46,447/-. CPC processed the return and issued intimation u/s 143(1) dated 17.04.2013 bearing reference no. CPC/1213/P6/1222803864. The returned income was accepted and credit of TDS was granted as claimed.

3.3. On 25.07.2016, CPC passed the impugned rectification order u/s 154 bearing reference no. CPC/1213/T6/1547180244. The credit of TDS was reduced from Rs. 26,06,796/- to Rs. 5,60,796/-. The credit of Rs. 20,46,000/- was thus withdrawn and a demand of Rs. 24,31,130/- was raised. The effect on the computation of tax is as under. Particulars As provided by taxpayer As computed under and/or information available section 154 (Rs.) on record (Rs.) Interest u/s 234B 23,988 3,05,789 Interest u/s 234C 36,979 1,40,308 Total interest liability 60,967 4,46,097 Aggregate income tax 56,67,496 60,52,626 liability TDS credit 26,06,796 5,60,796 Advance tax 26,00,000 26,00,000 Self assessment tax 4,60,700 4,60,700 Total pre-paid taxes 56,67,496 36,21,496 Net amount payable Nil 24,31,130

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 3.4. The reasons recorded by CPC for the rectification are extracted below for ready reference. “In your case, tax credit is withdrawn because of the following reasons:

1) TDS/TCS credit which had been given earlier is now withdrawn by your deductor, you are requested to contact your tax deductor for any corrections in this regard.

2) The assessee has not entered the tax credit details correctly & completely in the schedule- BTTI/Tax computation or entered TDS Deducted year wrongly, in this regard, you are requested to enter the correct details of tax credits or TDS deducted year as appearing in the Form 26AS in the appropriate schedule & file Online rectification. If credit is not available in Form 26AS, Please get the same uploaded by the deductor & then file an Online rectification request.”

3.5. The details of unmatched TDS furnished by CPC along with the order are as under. Name of deductor TAN of deductor TDS claimed Amount of (Rs.) mismatch (Rs.) Tornado Motors Private MUMT16248B 20,46,000 20,46,000 Limited

3.6. Assessee objected to the rectification by letters dated 22.08.2016 and 01.03.2017 filed with the Assessing Officer and the TDS officer. By its letter dated 10.04.2017, it furnished details of cases of fraud filed by other assessees against TMPL. It approached the ld. PCIT by letter dated 27.06.2018 with a compilation and met the ld. PCIT along with ld. Income-tax Officer HQ (Tech)-2 on 15.11.2018. By communication dated 11.01.2019 received on 16.01.2019, the letter was forwarded to the ld. Commissioner of Income-tax TDS-2 for verification and action. No action was taken and the demand continued to be outstanding. Assessee therefore, filed appeal before ld. CIT(A) which was instituted on 14.06.2019.

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 3.7. Ld. CIT(A) noted that TDS of Rs. 26,06,796/- belongs to the assessee while CPC had allowed only Rs. 5,60,796/-. Citing section 199 and the decision of the Hon’ble Delhi High Court in Court on its Own Motion v. UOI (2013) 352 ITR 273 (Del) along with the instructions of CBDT, Ld. CIT(A) directed the Assessing Officer to grant an opportunity of being heard and verify the TDS relatable to the income offered for AY 2012-13 against Form 26AS and other material. Credit was to be granted if the claim was found correct. Interest u/s 234B and 234C was to be recomputed. The appeal was partly allowed for statistical purposes. Aggrieved, assessee is in appeal before the Tribunal.

4.1. On merits, ld. Counsel for the assessee submitted that TMPL deducted tax at source and issued Form 16A. The credit appeared in Form 26AS when the return was filed and CPC itself granted it in the intimation u/s 143(1). The withdrawal followed a later revision of TDS returns by the deductor. Section 205 bars a direct demand on the assessee to the extent tax has been deducted from the income. The revision by the deductor cannot create a liability on the assessee who has suffered the deduction. Reliance was placed on the decision of the Hon’ble Delhi High Court in BDR Finvest (P.) Ltd. v. DCIT [2024] 161

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 taxmann.com 583 (Del). The interest u/s 234B and 234C levied in the rectification order is excessive and consequential.

6.1. We first take up the additional ground. It is a legal ground that goes to the root of the jurisdiction u/s 154. It arises on facts already on record and requires no fresh enquiry. The Hon’ble Supreme Court in National Thermal Power Corporation Ltd. v. CIT [1998] 229 ITR 383 (SC) has held that a legal question arising on facts on record can be raised before the Tribunal. We therefore admit the additional ground.

6.2. Section 154 permits rectification of a mistake apparent from the record. The mistake must be obvious and patent. It cannot be something that requires a process of reasoning on a point on which two opinions are possible. Hon’ble Supreme Court in T.S. Balaram v. Volkart Brothers [1971] 82 ITR 50 (SC) has laid down this test. Section 154(3) further provides that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee shall not be made unless the authority has given notice of its intention and allowed the assessee a reasonable opportunity of being heard.

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 6.3. We examine the two reasons recorded by CPC. The first reason only states that the credit given earlier is withdrawn by the deductor. It does not record that tax was not deducted from the rent or that the assessee had no claim to it. The unmatched TDS details annexed to the order itself show that the mismatch of Rs. 20,46,000/- arises against TMPL alone. The credit was claimed on the strength of Form 16A and the entries in Form 26AS as they stood when the return was filed. It was granted by CPC in the intimation. The second reason is that the assessee did not enter the tax credit details correctly. CPC has not pointed out any error in the schedule of the return. The credit was denied not for a mistake of the assessee but for the revision made by a third party after the intimation. Such a position can hardly be called a mistake apparent from the record.

6.4. The effect of the revision by the deductor has to be judged under sections 199 and 205. Sub-section (1) of section 199 reads as under. “199. (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be.”

6.5. Section 205 reads as under. “205. Where tax is deductible at the source under the foregoing provisions of this Chapter, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.”

6.6. Section 199 treats tax deducted from the income of a person as a payment made on behalf of that person. Section 205 bars a direct demand on the assessee to the extent the tax has been deducted from that income. The assessee as deductee follows the machinery of the Act by suffering deduction from the rent received. It has no control over the filing of the TDS returns by the deductor or over their revision. The

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 rectification order withdraws the credit and raises a demand on the assessee for the very tax that was deducted from its income. This is a direct demand of the nature that section 205 prohibits.

6.7. Hon’ble Delhi High Court in BDR Finvest (P.) Ltd. (supra) considered the denial of credit of tax deducted by a deductor that had failed to deposit it with the Government. It held that credit could not be denied to the deductee. The Court observed that deduction of tax at source is a method of collecting tax. The tax deducted forms part of the income of the assessee because the gross amount is offered to tax. It is on this premise that the tax deducted is treated as tax paid on behalf of the assessee. If credit is denied, Revenue would indirectly recover from the deductee what it cannot recover directly. The deductee having followed the regime put in place by the Act, the recovery can only be initiated against the deductor who is the agent of the Government. The Court held that section 199 does not come in the way of granting credit. It followed its earlier decision in Sanjay Sudan v. Asstt. CIT [2023] 148 taxmann.com 329 (Del). Ld. CIT(A) too relied on Court on its Own Motion (supra) and the instructions of CBDT for verification and grant of credit of TDS.

6.8. The principle applies with greater force here. In BDR Finvest (P.) Ltd. (supra), the deductor had failed to deposit the tax. In the present case, CPC has not even found non-deduction or non-deposit. The only ground is that the deductor withdrew the credit by revising its statement. The Revenue has its remedy against TMPL for any default. The assessee cannot be asked to pay again the tax already deducted from its rent. More importantly, when the assessee has placed on record its bank statements demonstrating corroboratively that the amount received towards rent, in its bank account is net of TDS. With TDS credit

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 being denied, assessee is left in an adverse situation, losing the receipt of a lesser credit in the bank statement towards rental income and, at the same time, not getting credit for the tax deducted at source by the deductor.

6.9. Whether the credit can be taken away on a later revision by the deductor involves the interpretation of sections 199 and 205 and the judicial decisions on them. The question is at least debatable and capable of two views. It cannot be treated as a mistake apparent from the record u/s 154. The additional ground that jurisdiction u/s 154 was wrongly assumed is therefore well founded.

6.10. There is a further infirmity. The rectification withdrew the credit and raised a demand of Rs. 24,31,130/-. It thus, increased the liability of the assessee. Section 154(3) required a prior notice of the intention to do so and a reasonable opportunity of being heard. The assessee has stated in Ground No. 1 and in its statement of facts that no such notice was issued before the order. Nothing on record shows otherwise. Ld. CIT(A) too directed the Assessing Officer to grant the assessee an opportunity of being heard which indicates that none was given. The rectification order is invalid on this count also.

6.11. Ld. CIT(A) remitted the matter to the Assessing Officer for verification. When the rectification order itself is not sustainable in law for the reasons given above, there is no purpose in a remit. We therefore set aside the order of ld. CIT(A) and cancel the rectification order dated 25.07.2016. The demand of Rs. 24,31,130/- stands deleted and the credit of TDS of Rs. 20,46,000/- deducted by TMPL from the rent included in the income of the assessee is restored. The interest u/s 234B and 234C levied in the rectification order in excess of that charged on

ITA 2862/Mum/2026 Champion Seals and Packings Pvt Ltd Assessment Year 2012-13 the original intimation also does not survive. Ld. AO shall give effect to this order accordingly. Ground Nos. 1 to 4 and the additional ground are allowed. Ground No. 5 is consequential and is also allowed. Revenue is at liberty to proceed against the deductor in accordance with law.

Order pronounced in the open court on 21 October, 2026.

Sd/- Sd/- Saktijit Dey Girish Agrawal Vice President Accountant Member Mumbai, Dated: 21.10.2026 MP, Sr.P.S. Copy to: The Appellant The Respondent The PCIT / CIT (Judicial); The DR, ITAT; and Guard file. //True Copy// By Order ABHINAV ANANT Digitally signed by ABHINAV ANANT GAVANDE GAVANDE Date: 2026.10.28 13:37:25 +05'30' Dy/Asstt. Registrar ITAT, Mumbai