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Income Tax Appellate Tribunal, DELHI BENCH “G” DELHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI ANUBHAV SHARMA
PER PRADIP KUMAR KEDIA, A.M.:
The captioned appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘CIT(A)’ in short] dated 08.02.2023 arising from rectification order passed under Section 154 by the ADIT, CPC dated 03.06.2020 in relation to intimation dated 21.02.2020 processed by CPC under Section 143(1) of the Income Tax Act, 1961 (the Act) concerning AY 2018-19.
The grounds of appeal raised by the assessee read as under:
“1. The action of Ld. AO /CIT(A) in assessing the net salary at Rs 96,94,478.00 shown in the IT after deducting forfeited salary amount of Rs 84,48,161.00 from gross salary of Rs. 1,81,42,639.00 and not allowing credit of Gross TDS of Rs. 65,07,550.00 on Gross Salary is illegal, arbitrary, unwarranted, uncalled for, and against the facts and circumstances of the case.
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The action of Ld.AO /CIT(A) in not allowing credit of TDS of Rs 65,07,550.00 corresponding to salary from PWC forfeited of Rs 84,48,161.00 is illegal, arbitrary, unwarranted, uncalled for, and against the facts and circumstances of the case. 3. The action of Ld. AO /CIT(A) in not allowing credit of TDS of Rs 65,07,5,50.00 corresponding to Gross Salary of Rs 1,81,42,639.00 in view of Section 199 read with Rule 37BA The action of Ld. AO /CIT(A) is illegal, arbitrary, unwarranted, uncalled for, and against the facts and circumstances of the case. 4. The action of Ld. CIT(A) in confirming the action of Ld.AO in rejecting the claim of refund of Rs 30,82,510.00 as per ITR is illegal, arbitrary, unwarranted, uncalled for, and against the facts and circumstances of the case. 5. The action of Ld. CIT(A) in confirming the action of Ld.AO in giving notice u/s. 193(9) for treating IT as defective Us 139(9)(a) for the reason that entire salary as per Form 26AS is not disclosed though corresponding TDS has been claimed is illegal, arbitrary, unwarranted, uncalled for, and against the facts and circumstances of the case. 6. The action of Ld. CIT(A) in confirming the action of Ld.AO in not appreciating the fact that salary of Rs 84,50,561.00 out of total salary of Rs 1,81,42,639.00 was forfeited by the employer as the appellant left the job, hence it was never due nor received by the appellant. 7. The action of Ld. CIT(A) in confirming the action of Ld.AO in not allowing credit of 30,82,510.00 as claimed in the IT is illegal, arbitrary, unwarranted, uncalled for, and against the facts and circumstances of the case. 8. The action of Ld. CIT(A) in confirming the action of Ld.AO in rejecting the application u/s. 154 is illegal, arbitrary, unwarranted, uncalled for, and against the facts and circumstances of the case. 9. The action of Ld. CIT(A) in confirming the action of Ld.AO in not allowing reasonable opportunity to the appellant is illegal, arbitrary, unwarranted, uncalled for, and against the facts and circumstances of the case. 10. The action of Ld. CIT(A) in confirming the action of Ld. AO on facts and in law in rejecting the refund claim in ITR which is debatable in nature and not permissible u/s. 143(1)(a)/154 of the Income tax Act.” 3. Briefly stated, the assessee was employed with Price
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Waterhouse Coopers Pvt. Ltd. (PwC) at the relevant time in the Financial Year 2017-18. As per Annual Information Statement of the Income Tax Department shown in Form 26AS, the salary of the assessee was reported at Rs.1,81,42,639/- and the employer is shown to have deducted TDS of Rs.64,10,453/- on such salary. The assessee in its return of income however declared a sum of Rs.96,94,478/- towards salary received and claimed TDS deducted at Rs.64,10,453/-. As stated, the difference between salary reported as per Form 26AS and salary reported as per return of income represents forfeiture of salary of Rs.84,48,161/- (Rs.181,42,639 (-) Rs.96,94,478/-). While processing the return of income under Section 143(1), the CPC adopted salary of Rs.96,94,478/- as returned by the assessee but however allowed TDS credit of Rs.34,25,052/- corresponding to the salary reported. The TDS credit attributable to the forfeited salary was thus not refunded to the assessee as claimed in the return of income.
Aggrieved by the denial of refund of TDS deducted by the employers as attributable to forfeited salary, the assessee moved application before CPC seeking rectification under Section 154 of the Act. However, status quo was maintained in the rectification proceedings and no relief was granted by the CPC to the assessee.
Aggrieved, the assessee preferred appeal against the aforesaid rectification order dated 03.06.2020 passed under Section 154 by the CPC before CIT(A), NFAC.
The CIT(A) however declined to interfere with the impugned rectification order. For doing so, the CIT(A) referred to and relied upon the provisions of Section 199 r.w. Rule 37BA of the Income Tax Rules.
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Further aggrieved, the assessee preferred appeal before the Tribunal.
In the course of hearing before the Tribunal, the assessee moved an application for admission of additional evidences under Rule 29 of the Income Tax (Appellate Tribunal) Rules vide letter dated 28.08.2023. The contract showing terms and conditions of employment and an affidavit dated 23rd August, 2023 was sought to be placed for consideration of Tribunal by way of additional evidences. The ld. counsel for the assessee referred to the provisions of Section 199 and also the Rule 37BA of the Income Tax Rules to submit that the action of the Revenue is erroneous in denying the refund of tax deducted on forfeited salary. The ld. counsel for the assessee submits that Section 199 provides that the tax deducted on behalf of the assessee is to be treated as payment of tax by the assessee and therefore, assessee is eligible for refund of excess tax collected by the Revenue. The ld. counsel also adverted to sub Rule (3) of Rule 37BA to submit that the expression used in sub Rule (3) is “assessable” which is not equivalent to the expression “assessed” and thus despite the fact that salary forfeited has not been assessed and included in the intimation processed under Section 143(1), the TDS corresponding to forfeited salary cannot be retained by the Revenue. The TDS qua the forfeited salary belongs to the assessee and therefore, the Revenue has committed error in wrongfully gaining from such TDS by not refunding it to the assessee. The ld. counsel thus sought suitable relief in the matter.
The ld. DR for the Revenue, on the other hand, relied upon the first appellate order and submitted that the refund claim of the assessee is not justified in view of the expressed provisions of the Act. The ld. DR submits that the Assessee is not entitled to the
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refund of the tax deducted at source by the employer where the salary forfeited itself neither has been included in the return of income nor has been assessed by the CPC. The ld. DR thus submits that no interference with the order of the CIT(A) is called for.
We have considered the rival submissions and perused the material available on record.
The controversy relates to entitlement of assessee on tax deducted at source in relation to salary forfeited by the employer in the facts of the case narrated above. As noted above, the genesis of controversy has come to surface in a rectification proceeding under Section 154 of the Act.
11.1 Section 154 of the Act provides for rectification of any mistake apparent from record. Hence, the scope and ambit of Section 154 is quite narrow.
11.2 A patent, manifest and self-evident error is one which does not require elaborate discussion of evidence or arguments to establish it. An error cannot be seen to be apparent on the face of record if one has to travel beyond the record to see whether the action is correct or not. An error apparent from record means an error which strikes one on mere looking and does not need any serious justification. It is trite that the power of rectification can be exercised only when the mistake which is sought to be rectified is an obvious and patent mistake which is apparent from record in distinction to a purported mistake which requires to be established by arguments and a long drawn process of reasoning on points on which there may possibly be two opinions.
11.3. In the instant case, the assessee has sought to rely upon
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additional evidences to establish the factum of apparent mistake. Rectification based on additional evidences is not permissible under narrow and limited scope of Section 154 of the Act; secondly the plea of the assessee on expression “assessable” used in sub Rule (3) of Rule 37BA involves interpretative process. Hence, such action being subjective is plainly opposed to the basic tenets of Section 154 of the Act. Therefore without expressing our opinion on merits, we are convinced that alleged error sought to be pointed out on behalf of the assessee does not fall within the sweep of prima facie mistake of apparent nature envisaged under Section 154 of the Act. The appeal of the assessee in rectification proceedings is thus not maintainable and hence requires to be dismissed at the threshold.
11.4 However, on conspectus of all the facts and circumstances and having regard to the fact that plea of the assessee has not been addressed on merits, we consider it expedient to grant liberty to the assessee to pursue appellate remedy against the original proceedings in accordance with law if so legally advised. It shall be open to the assessee to raise an appropriate plea for condonation of delay owing to the ongoing rectification proceedings before the appellate authority.
11.5 In terms of delineations noted above, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed. 12. Order was pronounced in the open Court on 05/10/2023
Sd/- Sd/- [ANUBHAV SHARMA] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /10/2023 Prabhat