Tribunal directs examination on disallowance & TDS credit issues under Section 40(a)(i) for tax matters

The Tribunal allowed the appeal for statistical purposes, directing further examination and verification of the issues raised regarding disallowance under Section 40(a)(i) and the TDS credit matters. The Tribunal found that the first appellate authority did not consider all submissions due to the faceless scheme and therefore directed the issues to be restored for further examination, including the verification of TDS credit and corresponding income offered for tax. The assessee was given an opportunity to present a reconciliation statement in this regard.

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Issues involved:
The appeal challenges the order passed by the National Faceless Appeal Centre for the assessment year 2019-20, specifically addressing the disallowance made under Section 40(a)(i) of the Income-Tax Act, 1961, and other related directions issued by the first appellate authority.

Issue 1 - Disallowance under Section 40(a)(i) of the Act:
The assessee contested the disallowance made under Section 40(a)(i) before the first appellate authority, arguing that the Centralized Processing Centre (CPC) exceeded its scope by making the disallowance under Section 143(1)(a) of the Act. Additionally, the assessee claimed a non-discrimination clause based on tax treaties with certain countries. The Commissioner (Appeals) upheld the disallowance at 100%, prompting the assessee to request restoration of the issue to the first appellate authority. The Tribunal found that the first appellate authority did not consider all submissions due to the faceless scheme and therefore directed the issue to be restored for further examination.

Issue 2 - Direction to verify TDS credit income:
The assessee challenged the direction of the first appellate authority to the Assessing Officer to verify if the corresponding income for which TDS credit was claimed had been offered for tax. The Tribunal upheld the authority's decision, noting that the authority had the power to remand the matter to the Assessing Officer for verification. The Tribunal directed the Assessing Officer to verify the income related to the TDS credit claimed by the assessee and allow the credit after due verification and hearing.

Issue 3 - Non-grant of TDS credit:
The assessee raised the issue of non-grant of TDS credit amounting to Rs. 5,76,79,710, stating that although the TDS amount appeared in Form 26AS, it was inadvertently not claimed in the return of income. The Departmental Representative argued that this issue was not raised in the grounds of appeal before the first appellate authority. However, the Tribunal found that the issue was indeed raised in written submissions before the authority, leading to the decision to restore the matter to the Assessing Officer for verification of the TDS credit and corresponding income offered for tax, with the assessee given an opportunity to present a reconciliation statement.

In conclusion, the Tribunal allowed the appeal for statistical purposes, directing further examination and verification of the issues raised regarding disallowance under Section 40(a)(i) and the TDS credit matters.

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