Relief for Taxpayers: ITAT Quashes ₹1 Crore Tax Demand Based on TDS Mismatch

Relief for Taxpayers: ITAT Quashes ₹1 Crore Tax Demand Based on TDS Mismatch

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, ruled that a huge tax demand cannot be raised against a taxpayer merely because of a mismatch in the Tax Deducted at Source (TDS) reflected in Form 26AS if the taxpayer presents satisfactory evidence of having correctly claimed the TDS credit.

Key Points of the Judicial Ruling

• TDS Mismatch is Not Definitive: The ITAT’s core ruling is that the data automatically populated in Form 26AS or the Annual Information Statement (AIS) is not the final, conclusive basis for raising a tax demand. The tax authorities must conduct a proper assessment that considers the actual books of accounts and evidence provided by the taxpayer.
• Taxpayer’s Evidence Prevails: The Tribunal accepted the taxpayer’s contention that they had correctly accounted for the TDS and that the discrepancy was primarily due to reporting errors or misclassification by the deductor.
• Quashing the Demand: The ITAT quashed the tax demand (reportedly around ₹1 crore), providing significant relief. The decision reinforces the principle that procedural and technical errors by third parties (deductors) or in the automated tax portal system should not result in an unfair, large tax liability for the assessee.
• Need for Due Diligence: The ruling necessitates that tax authorities exercise proper due diligence and cannot automatically rely on data mismatches without giving the taxpayer an opportunity to explain and furnish proof of their legitimate TDS claim.