Loading judgment…
Facts
The assessee received payments from parties who had deducted TDS, which was reflected in Form 26AS. The CPC disallowed a portion of the claimed TDS credit, citing a discrepancy between total receipts offered and amounts in Form 26AS. The CIT(A) restored the matter to the AO.
Held
The Tribunal held that the CPC, while processing the return under Section 143(1), has no jurisdiction to make such a disallowance of TDS credit as it is not an arithmetical error or apparent incorrect claim, especially when the TDS is reflected in Form 26AS. The disallowance was deemed unsustainable.
Key Issues
Whether the CPC has the jurisdiction to disallow TDS credit under Section 143(1) when the TDS is reflected in Form 26AS and the matter involves reimbursement of expenses which requires examination beyond summary assessment.
Sections Cited
143(1), 250, 37BA, 139, 143(3), 10AA, VI-A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Annapurna Gupta
Year : 2023-24 Vinubhai Vecharbhai Patel Deputy Director of Income Tax बनाम/ 20, Signature Residency, Opp. CPC-Through v/s. Suvarna Bungalows, 100 FT Jurisdictional Assessing Road, Thaltej, Officer, Ahmedabad – 380059 Deputy Commissioner of Income Tax, Ward-3(1)(1), Ahmedabad – 380 015 "थायी लेखा सं./PAN: AATPP 8055 H (अपीलाथ(/ Appellant) ()* यथ(/ Respondent) Assessee by : Shri Jimi Patel, AR Revenue by : Shri Rajeev Garg, SR-DR सुनवाई की तारीख/Date of Hearing : 18/09/2025 घोषणा की तारीख /Date of Pronouncement: 15/12/2025 आदेश/O R D E R Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order of the Office of the Commissioner of Income Tax, Appeal, Addl/JCIT(A) Faridabad [hereinafter referred to as ‘CIT(A)’] dated 10/12/2024 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2023-2024. 2. The assessee, in this appeal, has taken the following grounds of appeal: Vinubhai Becharbhai Patel Vs.DCIT Asst. Year: 2023-24 2
1. “Ld. JCIT(A) erred in law and on facts in principle confirming scope of adjustment to be made u/s 143(1) in respect of disallowance of TDS at time of processing return of income u/s 143(1) without appreciating facts and law of the case properly.
2. Ld. JCIT(A) erred in law and on facts in remanding matter back of Jurisdictional Assessing Officer with direction to allow TDS credit as per Rule 37BA of the without appreciating facts and law of the case properly.
3. The appellant craves leave to add, amend or alter the grounds of appeal at the time of hearing, if need arise”.
2. The brief facts of the case are that the C.P.C., while processing the return of the assessee u/s.143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) disallowed the TDS credit of Rs.17,93,370/- out of total TDS claimed of Rs.28,57,563/- by the assessee. The reasoning given by the CPC is that the assessee had offered total receipts to tax under various heads in the return of Rs.1,24,28,116/-, whereas, total receipts as per Form 26AS from various parties, who had deducted TDS were of Rs.3,33,71,880/-. Therefore, the CPC restricted the TDS claim to the extent of as admissible on the receipts shown by the assessee and disallowed the credit of the remaining amount of Rs.17,93,370/-.
Being aggrieved by the said order of the CPC, the assessee preferred appeal before the Ld. CIT(A). However, the Ld.CIT(A) restored the matter to the Assessing Officer (AO), by observing as under:
4.1.2. As per Rule 37BA, credit for TDS, shall be given to the person to whom payment has bee made or credit has been given, i.e. the deductee. But, where the whole or ay part of the income on which tax has been deducted at source is assessable in the hand of the person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be give to the other person and not to the deductee. This is possible only if the deductee files a declaration with the deductor reports the tax deduction in the name of the other person whose name is mentioned in the declaration. Vinubhai Becharbhai Patel Vs.DCIT Asst. Year: 2023-24 3 Accordingly, the JAO is hereby directed to compute the TDS admissible to the appellant as per provisions of Rule 37BA, and give credit after verifying the TDS claimed in the ITR vis-à-vis TDS credit as per Form-26AS; as per law.
Before us, the Ld. Counsel for the assessee has submitted that the Ld. CIT(A) has restored the matter to the file of AO making directions which, in fact, are contrary to the pleadings of the assessee. The Ld. Counsel for the assessee submitted that in this case, the assessee neither had filed any declaration with the deductor nor with the Income-tax authorities that the credits of the tax deducted should be given to any other party. The Ld. Counsel for the assessee has further submitted that the assessee was Clearing & Forwarding (C&F) Agent and working for various entities. That in the year under consideration, the assessee had received various payments from various parties who had deducted TDS, thereupon which was duly reflected in Form 26AS also. He has submitted that the said deductors have deducted the TDS on the gross amount paid to the assessee which included reimbursement of expenses, etc. which were incurred by the assessee on their behalf and, therefore, the said amount was not shown in receipts. He has further submitted that the CPC has made the impugned disallowance without any notice to the assessee. He has further submitted that as per the provisions of section 143(1) of the Act, the CPC has no jurisdiction to make such a disallowance of TDS credit. He, therefore, has submitted that the impugned disallowance may be ordered to be deleted.
The Ld. DR, on the other hand, relied upon the findings of the lower authorities. Vinubhai Becharbhai Patel Vs.DCIT Asst. Year: 2023-24 4
We have considered the rival contentions and gone through the record. The relevant part of the provisions of section 143(1) of the Act is reproduced as under:
Section 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; 98[(iia) any such inconsistency in the return, with respect to the information in the return of any preceding previous year, as may be prescribed;] (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub- section (1) of section 139; (iv) disallowance of expenditure [or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under [section 10AA or under any of the provisions of Chapter VI-A under the heading C.—Deductions in respect of certain incomes", if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:
Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic made: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018:] ……. ……. .”
6.1. A perusal of the aforesaid relevant provisions of section 143(1) of the Act would reveal that the CPC is not authorized to make the impugned adjustment Vinubhai Becharbhai Patel Vs.DCIT Asst. Year: 2023-24 5 and make any disallowance on TDS credit, if the same is reflected in Form 26AS. So far as clause (vi) is concerned, that was relating to the addition of income appearing in Form 16A or Form 16 which has not been included in computing the total income. However, the said provision was not relating to the disallowance of claim of TDS deducted by third parties. Furthermore, even the said clause (vi) has been dropped and no adjustment can be made in this respect for assessment year commencing on or after the 1st day of April-2018. Therefore, even the said clause (vi) was not in operation for the assessment year under consideration, i.e. AY 2023-24. Moreover, the issue is otherwise debatable. The assessee has an explanation that the total receipts included reimbursement of expenditure, which could have been examined if the case of the assessee would have been selected for scrutiny u/s.143(3) of the Act. In the case in hand, the CPC apparently did not have any jurisdiction to make the impugned adjustment/disallowance while processing the return of income u/s.143(1) of the Act.
In view of this, the impugned disallowance made by the CPC is not sustainable in the eyes of law and the same is accordingly ordered to be deleted.