DEEPAK MUNILALJI HIRANI,MUMBAI vs. CENTRAL CIRCLE 2, THANE

This appeal filed by the assessee pertaining to the Assessment Year (in short "AY") 2023-24 is directed against the order passed u/s.250 of the Income Tax Act, 1961 [in short “the Act"] by the ld.CIT(A), Pune-11, dated 29.07.2024 arising out of the Rectification order passed u/s.154 of the Act, dated 30.01.2024.

Assessee has raised following grounds of appeal :

We have heard the ld. Departmental Representative and perused the record placed before us. From perusal of the solitary ground, the grievance of the assessee is that the Assessing Officer (AO) has not given credit of the total TDS claimed in the return merely for the reason that assessee had shown the net interest income rather than giving bifurcation of gross interest received and interest paid during the year. We notice that the assessee in the return of income for A.Y. 2023-24 furnished on 27.07.2023 has declared net taxable income of Rs.1,09,45,600/-. This taxable income includes ‘Income from other sources’ at Rs.28,33,250/- which is the net interest income (difference of gross interest received at Rs.1,22,54,810/- and gross interest expenditure at Rs.94,99,495/-). The tax has been deducted at source on the gross interest received and the same has been claimed by the assessee in the tax return and is duly matching with the TDS credit appearing in Form No.26AS. However, in the return processed u/s.143(1)(a) and thereafter, the order framed u/s.154 of the Act, the AO/CPC only took the net interest income of Rs.28,33,250/- and gave TDS credit for amount deducted on Rs.28,33,250/- and declined the claim of TDS deducted on the remaining amount of interest income. Even the ld. CIT(A) also upheld the action of the CPC observing as under :

A perusal of Schedule OS of ITR filed by the appellant suggests that it has declared 'Gross Interest of Rs.28,33,250/- under the column 1(b) of Schedule OS and thereafter under the column 3(c) to Schedule OS, it has claimed 'Nil' amount interest expenditure as deduction. Thus, the claim of the appellant that it has incurred an interest expenditure of Rs.94,99,495/- for earning interest income of Rs. 1,22,54,810/- cannot be accepted at this stage. It is a well-settled legal position that the processing of return u/s.143(1) of the Act is required to be completed on the basis of information provided in the ITR. Since no deduction u/s.57(1) on account of interest expenditure is claimed in the ITR, same cannot be allowed by the CPC while processing the return or while processing the rectification application. The facts of the present case clearly suggest that the gross amount of interest declared in the Schedule OS of ITR does not match with the gross receipts reflected in the form 26AS. Also, as discussed above, no deduction towards the interest expenses has been claimed u/s.57(1) of the Act in the ITR. In such situation, the submission now filed by the appellant cannot be accepted while dealing with the appeal against the rectification order u/s.154 of the Act. Accordingly, the action of the CPC in restricting the credit for TDS by applying the rule 37BA of the I.T.Rules is upheld. The ground no.1 raised by the appellant is DISMISSED.”

On going through the finding of the ld.CIT(A), we find that the same do not have any merit because even when the ld. CIT(A) was aware about the gross interest received and gross interest expenditure incurred by the assessee and also aware that the TDS has been deducted on the gross interest received, even then just for the technical mistake at the end of assessee having shown net interest income in the income- tax return rather than giving the total bifurcation, did not allow the claim of TDS appearing in Form No.26AS. We therefore fail to find any logic in the finding of the ld. CIT(A). The finding given by the ld. CIT(A) is unsustainable under the given facts and circumstances of the case. Therefore, the finding of the CIT(A) is set-aside and the jurisdictional Assessing Officer is directed to allow the TDS claim of Rs.19,34,231/- as against the lower amount of TDS allowed at Rs.8,19,870/-. Ground of appeal No.1 raised by the assessee is allowed. Ground No.2 being general in nature needs no adjudication.

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