TDS Credit Allowed for Legal Heir: Tribunal Emphasizes Income Assessment Criteria

The Tribunal allowed the appeal of the assessee, setting aside the orders of the Assessing Officer and the CIT (A) that denied TDS credit of Rs. 5,89,348/- deposited in the deceased husband's PAN account but offered for tax by the assessee as the legal heir. The Tribunal emphasized that credit for TDS should be granted if the income is assessed in the hands of the assessee, even if the TDS is in the name of another person. The order under Section 154 was found erroneous for not considering this aspect and lacking a reasonable opportunity for the assessee to be heard, leading to the allowance of the TDS credit claim.

---

---

Issues Involved:
1. Denial of TDS credit of Rs. 5,89,348/- deposited in the PAN of the deceased husband of the assessee.
2. Validity of the order under Section 154 of the Income Tax Act.
3. Principles of natural justice and statutory reasonable opportunity of being heard.

Issue-wise Detailed Analysis:

1. Denial of TDS Credit of Rs. 5,89,348/-:
The primary issue in this appeal is the denial of TDS credit of Rs. 5,89,348/-, which was deposited by the deductor in the PAN account of the deceased husband of the assessee. The assessee, as the legal heir, succeeded the proprietorship of M/s Gupta Electric Works and filed the return of income declaring total income of Rs. 7,72,960/-. The return was processed by the Central Processing Unit (CPC) under Section 143(1), and an adjustment was made due to the TDS credit being in the name of the deceased husband. The Tribunal noted that the income on which TDS was deducted was offered for tax by the assessee, and therefore, the TDS credit should be allowed to the assessee. Rule 37BA of the Income Tax Rules, 1962, supports this view, providing that credit for tax deducted at source should be given if the income is offered to tax by the assessee, even if the TDS is in the name of another person. The Tribunal also referenced the decision of the Hon'ble Andhra Pradesh High Court in CIT vs. Bhooratnam & Company, which held that credit for TDS should be granted if the income is assessed in the hands of the assessee.

2. Validity of the Order Under Section 154 of the Income Tax Act:
The assessee challenged the order under Section 154 of the Act, which was rejected by the Assessing Officer and upheld by the CIT (A). The Tribunal found that the order under Section 154 was erroneous as it did not consider the relevant facts that the income on which TDS was deducted was offered for tax by the assessee. The Tribunal emphasized that the wrong submission of PAN should not debar the claim of TDS credit, especially when the income is included and assessed in the hands of the assessee. The Tribunal also referred to Circular No. 22 of 1961, which allows for the credit/refund due to the estate of a deceased person to be paid to the legal heir upon furnishing an indemnity bond.

3. Principles of Natural Justice and Statutory Reasonable Opportunity of Being Heard:
The assessee argued that the order under Section 154 was passed without granting a statutory reasonable opportunity of being heard, which is contrary to the principles of natural justice. The Tribunal agreed with the assessee, noting that the Assessing Officer did not appreciate the admitted facts and failed to provide an opportunity for the assessee to present her case. The Tribunal emphasized the importance of following the principles of natural justice and providing a fair opportunity to the assessee before passing any order.

Conclusion:
The Tribunal concluded that the denial of TDS credit to the assessee was unjustified and arbitrary. The impugned orders of the Assessing Officer and the CIT (A) were set aside, and the claim of the assessee for TDS credit was allowed. The appeal of the assessee was allowed, and the order was pronounced in the open court on 22nd March 2021.

---