TDS Credit Dispute Remanded for Factual Verification by Commissioner (Appeals)
Issue:
Whether the Centralized Processing Centre (CPC) and subsequently the Commissioner (Appeals) can reduce an assessee’s claimed Tax Deducted at Source (TDS) credit solely based on a discrepancy between gross receipts in Form 26AS and income reported in the return, without verifying the assessee’s explanatory submissions.
Facts:
For the assessment year 2023-24, the assessee filed its return of income, claiming a certain amount of TDS credit. During the processing of the return, the CPC observed that the gross receipts reflected in Form 26AS (on which the TDS credit was claimed) were higher than the total receipts shown under all heads of income in the return. The CPC concluded that while TDS credit was claimed, the corresponding receipts were not offered in the relevant income schedules to arrive at the taxable total income. Consequently, the CPC treated the return as defective, computed and reduced the TDS credit. The Commissioner (Appeals) upheld this order. It was noted that the assessee had provided explanatory submissions and a reply to the Commissioner (Appeals), but the Commissioner (Appeals)’s decision did not appear to have verified these facts, either directly or through the Assessing Officer.
Decision:
The matter was remanded back to the Commissioner (Appeals). The court held that since the assessee had made explanatory submissions and provided a reply, the Commissioner (Appeals) had erred by not verifying the facts furnished by the assessee, either by himself or through the Assessing Officer, before upholding the CPC’s order.
Key Takeaways:
- TDS Credit and Income Mismatch: A common issue arises when the income reflected in Form 26AS (based on TDS deducted by payers) does not match the income declared by the assessee in their income tax return.
- CPC’s Role: The Centralized Processing Centre (CPC) primarily performs automated processing of returns. Discrepancies like mismatches between Form 26AS and declared income often lead to a reduction in TDS credit or classification of the return as defective.
- Duty of Commissioner (Appeals): The Commissioner (Appeals) acts as the first appellate authority. Their role is to provide a reasoned decision after considering all facts and evidence presented by the assessee. Even if a CPC order is being reviewed, the Commissioner (Appeals) cannot simply uphold it without independently verifying the assessee’s explanations and supporting documents.
- Importance of Factual Verification: Proper factual verification, either directly by the Commissioner (Appeals) or by directing the Assessing Officer to conduct an inquiry, is crucial before passing an appellate order, especially when the assessee provides explanations for discrepancies.
- Remand for Due Process: When an appellate authority fails to conduct proper factual verification or consider the assessee’s submissions, the higher courts often remand the case back for a fresh hearing, ensuring adherence to principles of natural justice and fair adjudication.
IN THE ITAT RAIPUR BENCH
Jagannath Transport Corporation
v.
Deputy Commissioner of Income-tax
Partha Sarathi Chaudhury, Judicial Member
and ARUN KHODPIA, Accountant Member
and ARUN KHODPIA, Accountant Member
IT Appeal No. 162 RPR OF 2025
[Assessment year 2023-24]
[Assessment year 2023-24]
MAY 7, 2025
Bikram Jain, CA for the Appellant. Dr. Priyanka Patel, Sr. DR for the Respondent.
ORDER
Arun Khodpia, Accountant Member.- The captioned appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals)/ Addl / JCIT (A)-1, Nasik, [in short “Ld. CIT(A)”], passed on 22.01.2025, under section 250 of the Income Tax Act, 1961 (in short “the Act”), for the Assessment Year 2023-24, which in turn arises out of the intimation passed u/s 143(1) by the Centralized Processing Centre (hereinafter referred to as “CPC”), Bengaluru, dated 24.04.2024.
2. The grounds of appeal raised by the assessee are as under:
1. On the facts and in the circumstances of the case, the ADDL/JCIT has erred in sustaining the order of CPC, Bangalore, where in CPC, Bangalore proportionately disallowed the TDS claimed by the assesse amounting to Rs.23,10,058/- with respect to difference between the gross turnover as per form 26AS and total receipts offered to tax under various heads in the return. The disallowance Rs.23,10,058/- of TDS made by the CPC, Bangalore and sustained the same by ADDL/JCIT is unjustified, unwarranted and uncalled for.
2. The appellant reserves the right to add, amend or alter any grounds of appeal at any time of hearing.
3. Brief facts of the case are that the assessee had filed its Return of Income for the Assessment Year 2023-24 on 28.10.2023, declaring total income of Rs. 2,23,12,720/-, claiming refund of Rs.71,77,330/-. While processing the return of assessee, the same was considered defective by the CPC and notice u/s 139(9) was issued on 13.02.2024, stating that the gross receipts of assessee reflecting in Form 26AS, on which credit for TDS has been claimed, are higher than the total of the receipts shown under all heads of income, in the return of income. Thus, while credit for TDS is being claimed, the corresponding receipts are not offered in the respective income schedules, to arrive at the taxable total income. Hence, the return of income filed is regarded as defective, as provided in Explanation (a) under section 139(9) and accordingly, the TDS credit granted to assessee was computed and has been reduced to Rs. 1,26,52,567/- as against of Rs.1,49,62,620/- claimed by the assessee in its return income. Consequently, the refund amount claimed by the assessee has been reduced to Rs. 23,10,053/-.
4. Being aggrieved with the reduction in refund through intimation order u/s 143(1) by the CPC. The appellant / assessee filed an appeal before the First Appellate Authority, wherein the appeal of assessee is dismissed by the Ld. CIT(A) with the following observations:
In view of the above, it is inferred that the information regarding the deduction of tax and deposit of such tax deducted by the deductor has to be given to the Central Government and in a certificate to be issued to the deductee. This can be evidenced by TDS certificate and Form 26AS. A perusal of the Form 26AS of the appellant shows that Rs. 1,26,64,229/- was deducted against a payment of Rs. 2,23,12,720/-. Since TDS of Rs. 1,26,64,229/- is evidenced by Form 26AS pertaining to the appellant, the grant of credit of TDS of Rs. 1,26,64,229/- against the TDS claimed in ITR of Rs. 1,49,74,282/- oy the CPC and disallowed the TDS of Rs. 23,10,053/-is correct and justified. The contention made by the appellant is not acceptable. The ground raised by the appellant is dismissed.
5. At the outset, it is submitted by the Ld. AR on behalf of the assessee that the TDS claimed by the assessee in its return are not allowed by the CPC on account of variation in gross receipts shown by the assessee in its return of income and the gross receipt as per Form 26AS. It was the submission that the reason for higher amount that gross receipt in Form 26AS was on account of deduction of TDS on GST amounts also by some parties and some parties are following cash basis of accounting system, due to which they deducted TDS in the year of payment, and accordingly, the said receipts were already accounted for by the assessee in the earlier year, therefore, such receipts need not be taken as income for the year under consideration. To explain the aforesaid facts and contentions, a written synopsis has been furnished by the Ld. AR along with reconciliation regarding gross receipts of the assessee as per its return of income viz-a-viz gross receipts in Form 26AS. For the sake of completeness, the synopsis submitted by the assessee is extracted as under:
6. Based on aforesaid submission, it was the prayer by the counsel of the assessee that, the assessee had rightly claimed the TDS, which is wrongly been understood by the CPC and, the Ld. Addl/ JCIT had interpreted without verifying the facts and reconciliation submitted and explained by the assessee. Under such facts and circumstances, the TDS credit claimed by the assessee shall be allowed and the disallowance proposed by the Ld. AO and confirmed by the First Appellate Authority are liable to be deleted.
7. Per contra, Ld. Sr. DR, representing the revenue submitted that since the assessee was unable to explain the variation in gross receipts shown in the Form 26AS as against the lower amount shown by the assessee in its Return of Income, therefore, the Ld. CIT(A) had rightly confirmed the disallowance and dismissed the appeal of the assessee. Ld. Sr. DR vehemently supported the order of revenue authorities and requested to uphold the same.
8. We have considered the rival submissions, perused the material available on record. On perusal of the findings of Ld. CIT(A), it is found that the assessee had made explanatory submissions and reply before the First Appellate Authority, however, the decision of the Ld. CIT(A) was without verifying the facts by himself or through the Ld. AO, therefore, in the interest of justice, the reconciliation prepared and submitted by the assessee before us, needs further verification by the revenue authorities. Consequently, the matter deserves to be restored back to the file of Ld. CIT(A), who had decided the issue without adhering to the provisions of section 250(4) & (6).
9. In terms of our aforesaid observations, the matter is directed to set aside to the file of Ld. CIT(A) to verify the facts furnished by the assessee and accordingly decided the issue afresh in according to the provisions of law, within a period of 3 months from receipt of this order.
10. Needless to say, the assessee shall be afforded with reasonable opportunity of being heard in the set aside appellate proceedings. The assessee as conceded through its authorized representative before us, also directed to cooperate and assist proactively in the set aside proceedings, failing which the Ld. CIT (A) would be at liberty to decide the case in accordance with the mandate of law.
11. In result, appeal of the assessee is allowed for statistical purposes, in terms of over aforesaid observations.