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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 23.03.2023 passed by learned Commissioner (Appeals), NFAC, Delhi [“CIT(A), NFAC”], arising out of rectification-order dated 26.02.2018 passed by ACIT, Ratlam u/s 154 [“AO”], the assessee has filed this appeal on the following effective grounds:-
“(1) The Ld. CIT(A) NFAC has passed the order arbitrary without considering the submission made and evidences filed and not considering the earlier decision of the CIT(A). (2) The Ld. CIT(A) NFAC has erred in not directing to allow the TDS as claimed by the assessee. Page 1 of 11 Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM (3) The Ld. CIT(A) has erred in not allowing the audit fee of Rs. 3,20,000/- when the TDS was deducted and paid before the due date of filing of the return. (4) The Ld. CIT(A) has erred in not directing to allow the carry forward of loss which is allowable to the assessee.”
2. Ld. AR for assessee carried us to the grounds of appeal reproduced above and submitted that there are three (3) issues being contested by assessee in present appeal, namely (i) Issue of TDS credit, (ii) Issue of disallowance of audit fee of Rs. 3,20,000/- u/s 40(a) for TDS default, and (iii) Issue of carry-forwarded loss from earlier years.
The facts leading to present appeal before us are such that the assessee is a regional rural bank. The case of assessee was originally assessed u/s 143(3) by AO vide order dated 15.11.2010 after making certain disallowances/additions against which the assessee filed appeal No. U- 311/2010-11 to CIT(A), Ujjain and the said appeal came to be decided vide order dated 03.11.2016, copy of order is placed at Page No. 51-71 of Paper- Book. Subsequently, the case of the assessee was re-opened and the order of re-assessment was passed u/s 147 read with section 143(3) on 20.08.2015 by AO after making some newer disallowances/additions against which the assessee filed a separate appeal No. U-216/2015-16 to the same CIT(A), Ujjain and the said appeal came to be decided vide a separate order of even date 03.11.2016, copy of order is placed at Page No. 72-79 of Paper-Book. In those two separate appeal-orders, both dated 03.11.2016 as aforesaid, CIT(A) remanded the impugned (3) issues, being contested in present- appeal, with certain directions to AO. In pursuance thereof, the AO passed two separate consequential orders, both dated 27.01.2017, copies filed at Page No. 59 and 110 of Paper-Book.
3.1 However, from consequential orders, the assessee found that the AO has not given proper effect to the directions given by CIT(A), Ujjain.
Therefore, the assessee filed a rectification-application dated 08.02.2018 to Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM AO u/s 154. The AO, however, rejected assessee’s application vide rectification-order dated 26.02.2018, a copy of order is filed at Page No. 113 of Paper-Book.
3.2 Against order dated 26.02.2018 passed by AO, the assessee again carried matter in first-appeal. The assessee’s appeal was registered as CIT(A), Ujjain/10216/2018-19 and decided under faceless scheme by CIT(A), NFAC, Delhi vide order dated 23.03.2023 wherein no relief was granted to assessee. Still aggrieved, the assessee is in appeal before us assailing the orders of lower authorities i.e. the rectification-order dated 26.02.2018 passed by AO and appeal-order dated 23.03.2023 passed by CIT(A), NFAC.
We have heard the learned Representatives of both sides and also perused all orders of lower-authorities narrated in preceding paragraph as well as the documents filed in Paper-Book submitted by assessee. After a careful consideration, we give our analysis issue-wise in subsequent paragraphs.
Issue of TDS Credit:
5. The assessee claimed TDS credit of Rs. 5,53,940/- in the return of income on account of tax deducted by different deductors and filed original TDS certificates but the AO allowed TDS credit of Rs. 2,55,241/- only on the basis of Form No. 26AS. In first-appeal No. U-311/2010-11 order dated 03.11.2016, the CIT(A), Ujjain issued following direction to AO:
Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM “4.4 Ground No. 5: Through this ground of appeal the appellant has challenged for not giving the credit of full amount of TDS. The appellant stated that he has claimed the TDS of Rs. 5,53,940/- whereas the AO has allowed the credit of Rs. 2,55,241/-. The AO is directed to verify from the record and give the credit for the full amount of taxes paid by the appellant. Therefore, the appeal on this ground is allowed for statistical purposes.”
However, the AO passed following rectification-order rejecting the claim of assessee:
“The credit of TDS at Rs. 2,55,241/- is allowed out of Rs. 5,53,940/- claimed by the assessee bank, in this regard according to the record of this office only amount of Rs. 2,55,241/- is available for credit in the form of TDS for the A.Y.2008-09 and therefore there is no further rectification possible for this office to be carried out in this matter.”
Ld. AR submitted that the AO has by-passed the direction given by CIT(A) and has again allowed credit of Rs. 2,55,241/- only on the basis of records of his office, which is basically Form 26AS, ignoring the TDS certificates filed by assessee. He submitted that the present case relates to AY 2008-09 and that was the initial period of Form 26AS and in many cases, the TDS deducted and paid by deductors was not getting reflected in Form No. 26AS but still the credit of TDS had to be allowed on the basis of TDS certificates issued by deductors and filed by assessee to AO. Ld. AR also submitted copy of CBDT Instruction dated 08.07.2023, re-produced below, in which the CBDT has, following the mandamus given by Hon’ble Delhi High Court, instructed all officers to allow credit:
Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM
“INSTRUCTION NO. 05/2013 F. No. 275/03/2013-IT(B) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, the 8th of July, 2013 To All Chief Commissioners of Income-Tax/ All Directors General of Income-Tax Sir/Madam, Subject:-Credit of TDS u/s 199 of the Income Tax Act 1961 to an assessee when the tax deducted has been deposited with the revenue by the deductor- direction of the Hon'ble Delhi HC in the case 'Court on Its Own Motion vs. UOI & Ors in WP( C) 659/2012 & WP(C)5443/2012'- regarding
The CBDT issues instructions with respect to processing of Income tax returns and giving credit for TDS thereon in the case of TDS mismatch. A few of the instructions on this subject issued in previous years are Instruction no. 1/2010 (25.02.2010) for returns pertaining to A.Y. 2008-09; Instruction no. 05/2010 (21.07.2010), Instruction no. 07/2010 (16.08.2010) and Instruction no. 09/2010 (09.12.2010) for returns pertaining to A.Y. 2009-10; Instruction no. 02/2011 (09.02.2011) for returns pertaining to A.Y. 2010-11; and Instruction no. 1/2012 (02.02.2012) and Instruction no. 04/2012 (25.05.2012) for returns pertaining to A.Y. 2011-12. The instructions gave decisions and the manner in which the TDS claims were to be given credit while clearing the backlog of returns pending processing. In the cases that did not fall under the specific TDS amount limit or refund amount computed, the residuary clause in these instructions gave the manner of processing those returns and it stated that "TDS credit shall be given after due verification".
The Hon'ble Delhi High Court vide its judgement in the case 'Court On its Own Motion vs. U0I and Ors' (W.P. (C) 2659/2012 & W.F. (C) 5443/2012 dated 14.03.2013) has issued seven mandamuses for necessary action by Income-tax Department, one of which is regarding the issue of non-credit of TDS to the taxpayer due to TDS mismatch despite the assesse furnishing before the assessing officer, TDS certificate issued by the deductor. 3. In view of the order of the Hon'ble Delhi High Court (reference: Para 50 of the Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM Board that when an assessee approaches the Assessing Officer with requisite details and particulars in the form of TDS certificate as an evidence against any mismatched amount, the said Assessing Officer will verify whether or not the deductor has made payment of the TDS in the Government Account and if the payment has been made, credit of the same should be given to the assessee. However, the Assessing Officer is at liberty to ascertain and verify the true and correct position about the TDS certificate. Such verification may be made with the relevant AO(TDS). The AO(TDS) may also, if deemed necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down. In this regard, the AO(TDS) may invoke all the powers and authority as available to him/her as per the Income tax Act. If required and necessary, he/she can obtain prior approval of the Director or Commissioner of Income tax . The authorities can also examine whether general approval can be given.
4. Thus, the manner laid down by the Hon'ble HC in the above mandamus is a method of due verification. This may be brought to notice of all Officers working under your jurisdiction for compliance.
Hindi version shall follow. sd/- 8.07.13 (Anshu Prakash) Director IT (Budget), CBDT Copy to:
1. 1. Chairperson, CBDT 2. All Members, CBDT with the request to kindly instruct the respective CCsIT/DsGIT; Ds1T/CsIT/ Cs1T (TDS) under their zonal jurisdiction for compliance.
3. All other officers of CBDT of the rank of Under Secretary and above 4. DIT (PR,PP&OL), Mayor Bhawan, N. Delhi 5. The Comptroller and Auditor-General of India 6. The DGIT (Vigilance), New Delhi.
7. The Joint Secretary and Legal Advisor, Ministry of Law and Justice, New Delhi.
8. AU Directors of Income Tax, N. Delhi.
9. The DGIT (NADT), Nagpur 10.ITCC Division of CBDT (3 copies) 11.The DGIT (Systems), N. Delhi. sd/- 8.07.13 (Anshu Prakash) Director IT (Budget), CBDT”
Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM
Ld. AR also carried us to the details of TDS of Rs. 5,53,941/- claimed by assessee filed at Page No. 8 of Paper-Book and co-relating/contrasting the same with the TDS entries reflected in Form No. 26AS, submitted that the AO has mainly not given credit of TDS of Rs. 2,98,700/- deducted by ICICI Bank. Ld. AR submitted that ICICI Bank is a big and known corporate and the AO should not have any doubt on the TDS deducted and paid by ICICI Bank.
We agree with the submissions of Ld. AR. Firstly, we find that the CIT(A) has given a clear direction to AO to verify from record and allow credit of TDS. It is also not a case of revenue that the assessee has not filed original TDS certificates. Needless to mention that the TDS certificates are statutory documents issued by deductor under the provisions of Income-tax Act and form part of record. Secondly, we take note of the CBDT Instruction dated 08.07.2023 (supra) which is binding upon AO and clearly helps to resolve the case of assessee. We also find merit in the claim of assessee that ICICI Bank is a renowned corporate and the AO should not disbelieve the TDS certificate issued by ICICI Bank. The AO should take into account all these aspects and make a sincere attempt to carry out the direction given by CIT(A) and allow proper TDS credit to assessee. We, therefore, remand this issue to back to AO again. We expect the AO to resolve the issue of TDS credit with utmost sincerity and positive approach uninfluenced by his earlier order.
Issue of disallowance u/s 40(a):
Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM
The AO disallowed a deduction of Rs. 3,20,000/- of audit fee expenditure claimed by assessee u/s 40(a). In first-appeal No. U-311/2010- 11 order dated 03.11.2016, the CIT(A), Ujjain issued following direction to AO:
“4.3 Ground no. 4: Through this ground of appeal the appellant has challenged the addition of Rs. 3,20,000/- on account of disallowance out of audit fee provision. The AO made the disallowance on the ground that the TDS has not been paid. The appellant during the course of appellate proceedings submitted that he has paid the TDS before filing of the return of income. The appellant produced the Challan in this respect. The AO is directed to verify and delete the addition if the TDS payment has been made before filing of the return of income. Therefore, the appeal on this ground is allowed for statistical purpose.
11. However, the AO passed following rectification-order rejecting the claim of assessee:
1. That the addition on account of disallowance of audit fee provision was made by the AO according to the Column No. 17(f) of FORM 3CD, wherein the auditor has mentioned that the above provision is disallowable u/s 40(a) and according to, the computation filed during the assessment proceedings the said amount was not disallowed from the loss claimed by the Bank. Therefore, when there was no TDS done by the bank during the said FY 2007-08 (as per Audit Report Form 3CD), the said amount is to be disallowed according to the provision of Income- tax Act, 1961,. Therefore, this point is not tenable for taking any action u/s 154 of the Income-tax Act, 1961.
12. Ld. AR submitted that the CIT(A) has given a clear-cut direction to AO to verify and delete the addition if the TDS payment has been made before due date for filing of the return but the AO has neglected CIT(A)’s direction which is very much apparent from AO’s order.
13. On a careful consideration, we agree with submission of Ld. AR. We find that the CIT(A) has given a pointed direction to AO in these words “The AO is directed to verify and delete the addition if the TDS payment has been made
Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM before filing of the return of income.” Hence, the AO must carry out the specific direction given by CIT(A) which is first appellate authority. Since the AO has failed to do so, we remand this issue back to AO to execute the CIT(A)’s direction.
Issue of set off of brought forward loss:
This issue has cropped in/from re-assessment proceeding u/s 147 and not from original assessment. The AO, during re-assessment proceeding, made certain newer additions which turned originally assessed loss to positive income. Therefore, the assessee raised a claim to grant proper set off of loss carried-forward from earlier years. In first-appeal No. U- 216/2015-16, order dated 03.11.2016, the CIT(A), Ujjain issued following direction to AO:
“4.3 Ground No. 5: Through this ground of appeal the appellant has challenged that the AO has not correctly carry forwarded the losses. The AO is directed to verify the records and correctly allows the carry forward losses as per law.”
15. However, the AO passed following rectification-order rejecting the claim of assessee:
“3. As regards to the matter of Carry Forward of losses, this office has already carried out rectification u/s 154 vide order u/s 154 dt.14.10.2015 for AY 2009-10; the effect of the said order is also provided for AY 2008-09 and the basis of the said rectification order dt. 14.10.2015 was the audit report filed by the Bank and submission made during the assessment proceedings by the Bank itself. “ 16. Ld. AR pointed out some more developments in the case of assessee.
He submitted that after disposal of first-appeal No. U-216/2015-16, order dated 03.11.2016, the assessee carried matter to ITAT, Indore in ITA No.
Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM 106/Ind/2017, to contest the newer additions made by AO in re- assessment proceeding for which no relief was granted by CIT(A). In that process before ITAT, the assessee challenged the legality of re-assessment proceeding done by AO u/s 147 itself. The ITAT, vide para No. 13 of order dated 06.09.2018, accepted the plea of assessee and quashed the re- assessment proceeding. Therefore, the newer additions made by AO in re- assessment order are not subsisting at present and as such there is no present necessity of any set-off of carried forward loss from earlier years.
But, however, the department has filed next appeal to Hon’ble High Court against the order of ITAT and now the case is again pending before Hon’ble High Court. Therefore, the assessee wants to keep the issue of set off of carried forward losses alive to meet any contingency if unfortunately the decision of Hon’ble High Court goes against assessee. Hence, the assessee’s prayer is very limited i.e. to give a direction to AO to determine the quantum of carried forward losses from earlier years alive in terms of direction given by CIT(A).
We agree to the submission of Ld. AR. We also find that the assessee has given a calculation of carried forward loss from earlier years at Page No. 125 / 125A of the Paper-Book. Accordingly, we direct the AO to verify assessee’s working and determine the correct quantum of carried forward loss live by a speaking order so that the same would be available to assessee in case of necessity after outcome of decision at High Court level.
Jhabua Dhar Kshetriya Gramin Bank,Indore V.DCIT RATLAM
With above discussions, we are inclined to remand all three issues to the file of AO. Ld. DR for revenue did not raise any objection if these issues are remanded to AO for taking a fresh call. Ordered accordingly.
Resultantly, this appeal of assessee is allowed for statistical purpose.
Order pronounced in the open court on 21.09.2023.