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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI MAHAVIR SINGH & DR. DIPAK P. RIPOTE
आदेश / O R D E R
PER DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER:
1. This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-3, Chennai, dated 24.03.2016 emanating from the order passed by the AO u/s.154 of the Act, dated 19.02.2015.
The Revenue has raised the following grounds of appeal:
The order of the Ld. Commissioner of Income-tax (Appeals) is contrary to law and facts of the case.
2. The Ld.CIT (A) has erred in holding that the addition of difference in receipts will not come u/s.154, when, it is apparent from record in as much as the same is AY 2010-11 M/s.Proactive Solutech (India) Pvt. Ltd. :: 2 ::
evident from Form No.26AS and accounts and also that the assessee has claimed credit for TDS on such differential amount.
3. The Ld.CIT (A) erred in deleting the addition of Rs.8,99,593/- overlooking the fact that though credit for TDS on the amount of Rs.8,99,593/- was allowed, the assessee failed to prove that the receipt of Rs.8,99,593/- was offered for taxation in the assessment year under consideration.
4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. Commissioner of Income-tax (Appeals) may please be set aside and that of the Assessing Officer be restored.
Earlier this appeal No.1999/Chny/2016 was dismissed on account of low tax effect vide CBDT Circular No.3 of 2018. However, the Department filed MP stating that the said appeal falls under exception clause of the said Circular. The Hon’ble ITAT allowed the MA of the Revenue vide order dated 13.05.2022 and recalled its earlier order.
Therefore, this appeal came up for hearing today.
The Ld.AR submitted that the order u/s.154 of the Act, is not maintainable as the issue involved is outside the purview of Sec.154 of the Act. The Ld.AR explained that the assessee followed mercantile system of accounting. The assessee had credited the receipts for the AY 2009-10 on accrual basis, whereas, actual receipts were in AY 2010-11.
Accordingly, TDS was deducted during the AY 2010-11. The AO in the assessment order passed u/s.143(3) of the Act, has allowed assessee’s claim for TDS. However, subsequently the AO passed order u/s.154 of the Act, and added Rs.8,99,593/- to the total income of the assessee as credit for the TDS of the said amount is taken in AY 2010-11. The Ld.AR further submitted that the Ld.CIT(A) has rightly allowed the appeal of the assessee. On the other hand, the Ld.DR submitted that it is an AY 2010-11 M/s.Proactive Solutech (India) Pvt. Ltd. :: 3 :: admitted fact that the amount was credited as income in AY 2009-10, whereas, the TDS for the said amount was considered in AY 2010-11.
Therefore, the Ld.DR invited our attention to Rule 37BA and explained as
per Rule 37BA(3)(i), the credit for tax deduced at source shall be allowed in the year in which the income is assessable to tax. The Ld.DR submitted that these are not debatable issues. Therefore, the Ld.CIT(A)’s finding that it is debatable issue is erroneous. These are factual issues emanating from the records. Therefore, any mistake which is apparent from the record, can be corrected u/s.154 of the Act.
We have heard both the parties, perused the materials available on records. Vide order u/s.154 of the Act dated 19.02.2015, the AO has added Rs.8,99,593/- as credit for TDS relating to the said income was allowed in AY 2010-11. The Rule 37BA(3)(i) is reproduced here as under:
“Sub Rule (3) of Rule 37BA is reproduced as under: (3) (i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable”. The Rule 37BA(3)(i) categorically states that credit for tax deducted at source shall be given for the AY, for which, such income is assessable.
It also states that whenever there are multiple years involved credit for tax shall be allowed across those years in proportion, in which, the income is assessable to tax. In this case, it is an admitted fact that the income was offered on accrual basis in AY 2009-10. Therefore, credit for the TDS pertaining to said amount shall be considered in AY 2009-10 only. However, the AO has erred in adding amount in AY 2010-11 on AY 2010-11 M/s.Proactive Solutech (India) Pvt. Ltd. :: 4 :: account of the fact that TDS pertaining to said amount was considered in AY 2010-11. The provisions of the Income Tax Rules speaks about giving credit in the year in which the amount was considered as taxable.
Therefore, the AO has erred in adding Rs.8,99,593/- as income of the AY 2010-11, because, the said income has already been considered by the assessee for AY 2009-10 as claimed by the Ld.AR. Therefore, we direct the AO to delete the addition of Rs.8,99,593/- after verifying the facts from the records if amount of Rs.8,99,593/- has been offered for taxation in AY 2009-10. The AO is also directed to allow TDS credit as per Rule 37BA(3)(i) in the year in which amount has been credited as income of the assessee. In this case, since the amount was offered for taxation in AY 2009-10, the corresponding TDS credit will not be available for AY 2010-11. The Hon’ble Jurisdictional High Court of Madras in the case of CIT vs Lakshmi Vilas Bank, [2010] 230 CTR 185 (Madras) has observed as under:
Quote “The submissions of the learned counsel appearing for the Revenue that the definition of 'mistake apparent from the record' should not be construed to mean any record also cannot be countenanced. The word 'record' has not been defined under section 154 or in the definition section. Therefore the said word will have to be given a wider import by including the record that is available with the AO. In this case, the records pertaining to the order allowing the bad debts to the net amount for a sum of Rs. 50,97,358 are available with the AO in the form of earlier proceedings and therefore the contention of the learned counsel appearing for the Revenue cannot be accepted. ……………………….It is neither necessary nor possible to set out exhaustively all the material that can possibly be regarded as forming part of the 'record' for the purpose of examination under section 154(1) of the Act. On the facts of this case, the order of assessment for the immediately preceding year which was rectified was undoubtedly a part of the record which was available for examination by the ITO for the purpose of deciding as to whether there was a mistake apparent on the face of the record in the order of assessment for the immediately succeeding year, namely, the asst. yr. 1974-75. More so, as the figures of unabsorbed depreciation considered in the assessment for the asst. yr. 1974-75 were the figures which the officers were required to obtain from the assessment order of the previous year and the two assessment
AY 2010-11 M/s.Proactive Solutech (India) Pvt. Ltd. :: 5 :: orders to that extent were inter-linked. After the rectification of the assessment order for the asst. yr. 1973-74 no amount towards unabsorbed depreciation was available for being adjusted in the asst. yr. 1974-75. The set off allowed on the original assessment order for that year was an apparent mistake which was rectifiable under section 154.” Unquote. Thus, as held by Hon’ble jurisdictional high Court, the AO has jurisdiction to verify the records of the preceding year u/s.154. Hence, in the present case on the facts and circumstances of the case, the AO has jurisdiction to verify the records of the preceding year u/s.154 of the Act.
In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced on the 23rd day of August, 2022, in Chennai.