SH. RAKESH KUMAR SINGLA,LUDHIANA vs. ITO, WARD-6(1), LUDHIANA

आदेश/ORDER

This is assessee's appeal for assessment year 2020-21 against the order dated 16.12.2022 passed by the ld. CIT(A)

NFAC, Delhi.

2. The assessee has raised the following grounds of appeal :

“1. That order passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Learned Assessing Officer in not allowing the credit for TDS amounting to Rs. 3,39,080/- to the appellant.

ITA 46/CHD/2023 A.Y.2020-21 Page 2 of 12 2. That the Learned CIT(A) gravely erred in upholding the action of the Learned Assessing Officer in rejecting the claim of the appellant that the mistake was outside the purview of a mistake apparent from record. 3. That the Learned CIT(A) gravely erred in not appreciating that by not giving the credit for TDS, the appellant has not been denied the right to claim of TDS against income which has already been taxed in the earlier years.”

3. The assessee is an individual engaged in the business of civil construction work like roads and related works. He filed return of income for assessment year 2020-21 under e- filing on 29.12.2020, declaring a total income of Rs.33,68,860/-. He paid a total tax of Rs.12,86,462/- and claimed a refund of Rs.4,30,380/-. While processing the return u/s 143(1) of the Income Tax Act, the AO CPC, Bangalore gave the credit of prepaid tax of Rs.9,49,371/-, instead of taxes paid of Rs.12,86,462/-, thereby disallowing the credit of Rs.3,37,091/- and allowing, instead, refund of only Rs.1,03,070/-, including interest. In response to the intimation issued u/s 143(1), the assessee filed a rectification application on 04.04.2022. This was accepted by the AO and the assessee was issued additional refund of Rs.3,42,150/-, including interest, vide order dated 06.06.2022. Thereafter, the AO, CPC reversed the rectification order dated 06.06.2022 and raised the demand

ITA 46/CHD/2023 A.Y.2020-21 Page 3 of 12 of Rs.3,39,080/- (Rs.1,03,070/- and Rs.2,36,010/-) vide Demand Notice dated 20.10.2022. The assessee filed appeal against the said order. By virtue of the impugned order, the ld. CIT(A) dismissed the assessee's appeal, confirming the demand of Rs.3,39,080/-. Aggrieved, the assessee is in further appeal.

4. The ld. Counsel for the assessee contended that the ld. CIT(A) has erred in upholding the AO’s action of not allowing the credit for TDS amounting to Rs.3,39,080/- to the assessee; that the ld. CIT(A) erred in upholding the AO’s action of rejecting the claim of the assessee that the mistake was outside the purview of a mistake apparent from record within the meaning of Section 154 of the Income Tax Act; and that the ld. CIT(A) erred in failing to appreciate that while not giving the credit for TDS, the assessee has been denied the right to his claim of TDS against income which has already been brought to tax in the earlier years.

5. On the other hand, strongly supporting the impugned order, the ld. DR has contended that as rightly observed by the ld. CIT(A), the issue of credit for TDS and taxing the corresponding income is governed by the provisions of Section 199 of the Income Tax Act and Rule 37BA of the ITA 46/CHD/2023 A.Y.2020-21 Page 4 of 12 Income Tax Rules; that as per these provisions, credit for TDS deducted can be considered in the hands of the assessee only on the basis of details as furnished by the deductor, as mandated under these provisions and if there is any mis-match in the TDS claim as per the return filed vis-à- vis the TDS statement filed by the deductor, the same can be rectified by getting appropriate correction statement filed by the deductor; that the TDS credit available to the assessee gets modified as and when a correction statement is filed by the deductor; that in the present case, the assessee claims that the income relatable to the TDS has already been offered to tax in the earlier year, on accrual basis and the deductor has reported TDS on payment basis in subsequent years, resulting in a mis-match; that credit for TDS can be claimed only in the year in which the related income is offered to tax; that in case any credit in TDS of earlier years is claimed in this year, or part of TDS credit of current year is not claimed and is sought to be carried forward to the next year, etc., the appropriate details are required to be entered in the Income Tax Return, in Schedule-TDS, so that while processing the returns, the extent of TDS credit allowable during the year can be properly mapped by the CPC; that as evident from the return of income filed in the ITA 46/CHD/2023 A.Y.2020-21 Page 5 of 12 assessee's case, no such details were entered in the Schedule-TDS regarding credit for TDS of earlier years; that as such, credit for TDS was rightly granted by the CPC as

per the details furnished by the assessee in the return of income and as matched by the credit available as per the records, which is in accordance with the provisions of Section 199 of the Act and Rule 37BA of the Rules; that therefore, the ld. CIT(A) found the intimation issued by the CPC u/s 154 read with Section 143(1) of the Act, correcting the claim of TDS in accordance with the notice on record, to be tenable on facts and in law; that as also further correctly held by the ld. CIT(A), the explanations offered by the assessee and the additional documents that sought to rely on involve detailed investigation of new facts and evidences outside the record of the AO and such investigation was clearly outside the scope of the provisions of Section 143(1) of the Act; that therefore, the intimation issued by the CPC was correctly upheld by the ld. CIT(A); and that therefore, the order passed by the ld. CIT(A) is well versed and it is entitled to be confirmed on dismissing the appeal filed by the assessee.

ITA 46/CHD/2023 A.Y.2020-21 Page 6 of 12 6. We have heard the parties and have perused the material on record. It is undisputed that the assessee paid total tax of Rs.12,86,462/-, which included TDS amounting to Rs.12,74,553/-, at a declared total income of Rs.33,68,860/-, claiming a refund of Rs.4,30,380/-. The mis-match in question occurred due to the fact that the assessee follows the accrual method of accounting, whereas the Government Departments follow the CASS system of accounting. Due to this difference, there was a difference in the receipts/contract amount as per Form 26AS and as per the Profit & Loss Account maintained by the assessee.

Following the accrual system of accounting, the assessee had shown receipts in his books of account in the earlier assessment year and had declared the same in the GST Returns. On the other hand, the Municipal Corporation showed it in the year in which it made the payment to the assessee. TDS had been deducted on gross payments, i.e., including GST, whereas in the books of the assessee, it was shown excluding the GST. The GST was claimed as input tax credit and was shown as an asset on the asset side of the assessee's audited balance sheet. Resultantly, there was a difference of Rs.1,65,38,416/- in the income declared in the Profit & Loss Account and in comparison to the income

ITA 46/CHD/2023 A.Y.2020-21 Page 7 of 12 as per Form 26AS, i.e.,, as per the books of account, the income was of Rs.3,60,52,983/- and as per the 26AS statement, the income was of Rs.5,25,91,399/-, comprising of income of Rs.4,82,93,575/- from the Dy. Controller (Finance & Accounts), Municipal Corporation, Ludhiana and of Rs.42,97,824/- from the Improvement Trust, on which, TDS was deducted and claimed. The assessee submitted before the ld. CIT(A) vide written submissions, which has been reproduced in para 3.2 of the impugned order. In order to reconcile the said difference, before the ld. CIT(A), the assessee filed the following ;

ITA 46/CHD/2023 A.Y.2020-21 Page 8 of 12 bills/payments in FY 2019-20 in the year of payment and deducted TPS accordingly.

ITA 46/CHD/2023 A.Y.2020-21 Page 9 of 12 Municipal Corporation, Ludhiana has not deducted TDS on it and not shown in 26AS statement of FY 2017-18.

7.1 The assessee stated that out of the work done (uncertified) of Rs.1,02,89,239/-, payment of certain bills was received in Financial Year 2019-20 and it was reflected in the 26AS statement for Financial Year 2019-20, as the other party had made payment in this year and had also deducted TDS. The assessee furnished before the ld. CIT(A), the bills/invoices. The assessee also filed a copy of the ledger account of Financial Year 2018-29, of work done of Rs.1,54,43,635/-, net of GST, such copy was filed as Annexure-10. Further, the assessee filed as Annexure-11, a copy of ledger account of Rs.91,40,233/- of Financial Year 2018-19 work done (uncertified) which was shown in the Profit & Loss Account for Financial Year 2018-19 and was subjected to tax, though the Municipal Corporation, Ludhiana had not deducted TDS on it and had not shown it in the 26AS Statement of Financial Year 2018-19. The assessee produced the bills/invoices, the payment of which, out of the said work done (uncertified) of Rs.91,40,233/- was received in Financial Year 2019-20 and stood reflected in the 26AS Statement of Financial Year 2019-20.

ITA 46/CHD/2023 A.Y.2020-21 Page 10 of 12 7.2 The assessee, thus, contended that it was clear that the difference was mainly due to offering of income on accrual basis by the assessee, whereas the other party/customer was following the CASS system of accounting. The assessee submitted that since he had paid due tax on income in earlier Financial Year, in which, respective income has been declared and the TDS has been deducted by the customer in the next Financial Year, the assessee claimed the same TDS in the year of deduction, as the corresponding income had already been declared and the assessee was fully entitled to claim the same in the year in which the TDS was deducted.

8.1 The ld. CIT(A), it is seen, has nowhere controverted the above submissions made by the assessee before them, and he has just brushed aside the explanation offered by the assessee alongwith the documents filed, by observing that going into the same would amount to a detailed investigation of new facts and circumstances outside the records of the AO and also purview of the provisions of Section 143(1) of the Act.

8.2 While doing so, the ld. CIT(A) has failed to appreciate that it remains undisputed that the assessee cannot and ITA 46/CHD/2023 A.Y.2020-21 Page 11 of 12 ought not to be denied the benefit of TDS which has been claimed earlier, only because the payments were shown in the next year by the customer and the TDS was also deducted in that year against the income already shown by the assessee. It was, undisputedly, duly appearing in Form 26AS, wherein it was claimed by the assessee. It is trite that the income, against which the TDS is being claimed, having been taxed in the earlier years, the right to claim such TDS cannot be refused.

Order pronounced on 05.02.2024.