TDS credit in rectification can be allowed on Form 26AS verification, while refund interest may still be denied

TDS credit reflected in Form 26AS may be allowed in rectification proceedings even if the corresponding claim was omitted from the return, where the tax deduction is verifiable and the omission is only a technical mistake; the prepaid tax credit was therefore directed to be granted after verification. Interest on the refund arising from that credit is not payable where the assessee did not claim the full credit in the return and no material shows timely notice to the Assessing Officer, so the non-grant of refund interest was not attributed to the revenue.

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Issues: (i) Whether credit of tax deducted at source reflected in Form 26AS could be directed to be granted in rectification proceedings despite the corresponding claim not having been uploaded in the return of income; and (ii) whether interest was payable on the refund arising from such credit.

Issue (i): Whether credit of tax deducted at source reflected in Form 26AS could be directed to be granted in rectification proceedings despite the corresponding claim not having been uploaded in the return of income.

Analysis: The credit claimed by the assessee was verifiable from Form 26AS. The omission in the return was treated as a technical mistake and not a valid basis to deny credit where the tax deduction itself was not disputed and the Assessing Officer had access to verify the same. The rectification nature of the dispute and the mandate to allow due credit under the governing provisions supported the direction to grant the prepaid tax credit after verification.

Conclusion: The direction to allow TDS credit was upheld in favour of the assessee.

Issue (ii): Whether interest was payable on the refund arising from such credit.

Analysis: The assessee had not claimed the full credit in the return and no material showed that the omission was brought to the Assessing Officer's notice in time. In these circumstances, the non-grant of refund interest was not found to be attributable to the revenue authorities.

Conclusion: The claim for interest on the refund was rejected.

Final Conclusion: The order granting TDS credit was sustained, but the ancillary claim for refund interest failed, resulting in dismissal of both the Revenue's appeal and the assessee's cross objection.

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