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Income Tax Appellate Tribunal, DELHIBENCH ‘A’, NEW DELHI
Before: Sh. C. M. GargDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of ld. CIT(A)-2, New Delhi dated 27.01.2017.
The assessee has raised the following grounds of appeal:
“1.(i) That on the facts and in the circumstance of the case the learned CIT (Appeals) erred in holding that the appeal filed by the assessee was non-est.
(ii). That the learned CIT (Appeal) erred in not holding that the order u/s 154 for the A.Y. 2001-02 passed by the A.O. reducing the refund by withdrawing benefit of TDS on advance rent received should have been followed through to its logical end by allowing credit in the future year where the assessee was legitimately entitled to such TDS credit.
2. That the learned CIT (Appeal) erred in not holding that it being against principles of taxation and natural justice to recover from the assessee tax amount in excess of amount of that is legitimately due cannot be sustained and therefore
erred in not directing the A.O. to pass rectification order allowing refund of the excess tax paid, whether in A.Y. 2001- 02 or in a subsequent assessment year.”
The present 'appeal' has been filed by the assessee against the order dated 24.11.2015 passed by the DCIT, Circle-4(2), disposing of the grievance petition of the assessee company in regard to non-allowing during the A.Y. 2001-02 of certain amount of TDS which pertains to the subsequent A.Y. 2002-03. Section 246A (1) of the I.T. Act mentions the orders against which an assessee may appeal before the Commissioner (Appeals). It is seen that orders of an Assessing Officer disposing of grievance petitions of assessee’s are not appealable before CIT (Appeals). Accordingly, the appeal filed by the assessee against the letter of the Assessing Officer dated 24.11.2015, disposing of the assessee's grievance petition, is treated as non-est.
The only issue involved in the appeal relates to not allowing full credit in respect of tax deducted at source as claimed by the assessee in its return of total income for the reason that out of the TDS claimed a portion of tax relates to income under the head house property assessable in the subsequent assessment year. The copy of order filed along with Form 35.
However, the records support that notwithstanding such order passed by the Assessing Officer he has not allowed the assessee such credit for TDS in the subsequent year and therefore deprived the assessee benefit/refund of tax both in the assessment year 2001-02 as well as in the subsequent assessment year 2002-03.
Briefly stated the facts of the case are that the assessee owns properties which it has leased out to various parties. In respect of the assessment year 2001-02, the assessee had claimed credit for TDS of Rs.54,23,068/- on rent of Rs.1,56,18,636/-.
However, while computing assessable income from house property the income was determined u/s 22 for the relevant assessment year 2001-02 at Rs.1,01,95,028/- the difference being on account of rent received in advance to be adjusted in period subsequent to assessment year 2001-02. Accordingly, as against tax deducted at source of Rs.54,23,068/- the assessee was allowed credit of tax of Rs.26,41,956 only (net of adjustment of tax determined on assessed income) and the balance amount of Rs.27,81,652 refund of tax the assessee was deemed to be carried forward to subsequent year 2002-03, wherein the advance rent was appropriated.
In the meantime, the assessee had already filed its return of income for the assessment year 2002-03 claiming refund of Rs.8,31,276 on the basis of TDS as deducted on rent actually received in terms of certificates issued by the payer. The assessee did not claim adjustment for the brought forward balance' of TDS because up to that time the order of adjustment of TDS had not been made by the AO and the assessee had no inclination that he will not be allowed full credit in the A.Y. 2001-02.
The CPC processed the return as filed and it was granted refund together with interest u/s 244A on the basis of the said return copy acknowledgement of return 86 intimation from CPC are enclosed on record. As the CPC was not concerned with the order of the AO for the assessment year 2001-02 it never took credit of the TDS deducted in preceding year the benefit of which the assessee was to receive assessment year 2002-03 as per the impugned order of AO u/s 154. Similarly, as intimation and refund from CPC was in accordance with the return as filed by the assessee itself, the assessee had no cause of action to seek any redressal for carried forward TDS benefit as per the order of the AO from the CPC and therefore the assessee could not file any claim before the said functionary.
In such circumstances, it was incumbent on the AO who passed the order u/s 154 for A.Y. 2001-02 to take it to its logical conclusion by also rectifying the subsequent intimation of CPC and allow benefit of the TDS carried forward from A. Y. 2001-02, which he had not done. The assessee had filed an application in the Grievance Cell seeking redressal but the officer has dismissed its application vide letter dated 24.11.2015 with the remarks that proportionate TDS had already been allowed to the assessee in A.Y. 2001-02.
What the officer failed to appreciate was that even though for purpose of communication reference was being made to A.Y. 2001-02 (being the starting point), it was the carried forward of claim of TDS which the AO was obliged to allow but failed to do so. Accordingly, the present appeal seeking appropriate relief is filed before you.
The ld. DR has not disputed the facts.
Reference is invited to the Circular No. 5/2001 dated 02.03.2001 pertaining to giving due credit for TDS u/s 199. The said circular is as under:
“1177. Problems faced by assessees in getting due credit for tax deducted at source under section 199
A number of representations has been received by the Board pointing out the problems being faced by the assessees in getting due credit for tax deducted at source under the provisions of section 199 of the Income- tax Act, 1961 in respect of tax deducted in terms of section 194-1 of the Act. Such problems in getting due credit for tax deducted at source mainly relate to the following situations:
(a) Tax is deducted at source under the provisions of section 194-1 of the Act on advance rent pertaining to more than one financial year to be adjusted against future rent. (b) Subsequent to the deduction of tax at source on advance rent pertaining to one or more financial years :
(i) Rent agreement gets terminated/cancelled resulting into refund of balance amount of advance rent to the tenant. (ii) Rented property is transferred by way of sale, lease, gift, etc., with tenant in occupation or otherwise resulting into refund of balance amount of advance rent to the transferee or the tenant, as the case may be.
2.1 In the situation mentioned at (a) in para above, difficulty in getting due credit for tax deducted arises because the entire amount of advance rent does not accrue to the assessees as income in one financial year since the income from the property is taxed on the basis of annual letting value whereas the tax is deducted at source on the entire amount of advance rent pertaining to more than one financial year. Therefore, credit for entire amount of tax deducted at source is not allowed in terms of section 199 of the Act because the credit is to be given for the assessment year for which such income is assessable. Thus, the assessees do not get credit for the entire amount of tax deducted at source in the first assessment year, in which part of the advance rent is offered as rental income, on the basis of the Certificate furnished under section 203 of the Act. Further there is a difficulty in claiming the credit in the remaining assessment years to which balance of advance rent relates in the absence of the Certificate for tax deducted at source for these years.
2.2 In the situation as at (b) mentioned at Para 1, difficulty in getting due credit for tax deducted at source arises because rental income ceases to accrue to the assessees on account of termination/cancellation of Rent agreement of transfer of the rented property subsequent to the deduction of tax at source on advance rent pertaining to one or more financial years. The credit is not given in the hands of the assessees in whose names Certificate for tax deduction at source stands because there is no relatable rental income and, further credit for tax is not allowed to any person other than the person in whose name Certificate for tax deducted at source has been issued. Thus, in such cases, even though tax has been deducted at source and paid to the Government, due credit for such tax deducted is not allowed.
3. The matter has been considered by the Board and it has been decided that credit for tax deducted at source shall be allowed to the assessees on whose behalf such tax has been deducted and to whom Certificate for tax deducted at source has been furnished under section 203 of the Act as under:
(i) In such cases as referred to in (a) above where advance rent is spread over more than one financial year and tax is deducted thereon, credit shall be allowed in the same proportion in which such income is offered for taxation for different assessment years based on the single Certificate furnished for tax so deducted on the entire advance rent. (ii) In respect of the situation as at (b), credit for the entire balance of tax deducted at source, which has not been given credit so far, shall be allowed in the assessment year relevant to the financial year during which the rent agreement gets terminated/cancelled or rented property is transferred and balance of advance rent is refunded to the transferee or the tenant, as the case may be.”
Notwithstanding any procedural constraints, the revenue authorities are not entitled to appropriate the taxes which have been paid in excess of the due taxes to be paid by the assessee.
In the backdrop of accuracy of these facts, we hereby order the AO to call for the record of AY 2002-03 and pass appropriate rectification order giving full credit for the TDS amounts to the assessee and issue refund of tax which the assessee is entitled consequent to such rectification order. Since, a long period of 20 years have already been elapsed, this action be completed by the revenue authorities within 6 months from the date of this order.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 28/04/2023.