2025 (9) TMI 951 - AT - Income Tax

Form 26AS confirms claimed TDS; tax authority must grant credit matching return, appeal allowed in full

ITAT (Mumbai) held that Form 26AS reflected the TDS entries claimed by the assessee, so there was no mismatch as alleged by CPC. The tribunal found no ... Non-grant of credit for tax deducted at source - HELD THAT:- As evident from Form 26AS, we find that the TDS entries towards the TDS done by the respective entities are duly reflected as so claimed by the assessee in its return of income and as such, there is no mismatch as so pointed out by CPC. We, therefore, do not find any justifiable basis for denial of credit so made by the assessee company in its return of income. AO is accordingly directed to take into consideration the entries so reflected in the Form 26AS and grant the necessary credit to the assessee company. Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the assessee is entitled to credit for tax deducted at source (TDS) of Rs. 9,04,380/- where the Central Processing Centre (CPC) / assessing officer denied part of the TDS claimed on the basis of alleged non-matching with Form 26AS. 2. Whether a rectification under section 154 (suo-moto rectification by CPC) can deny TDS credit when Form 26AS on record contains entries corresponding to the TDS amounts claimed in the return. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to TDS credit of Rs. 9,04,380/- where CPC denied part credit for alleged non-matching with Form 26AS Legal framework: The statutory scheme for claiming credit of tax deducted at source requires that TDS claimed in the taxpayer's return be matched with the entries in Form 26AS and the records processed by the tax administration; credit is to be allowed where appropriate documentary and electronic records substantiate the deduction and credit. Precedent Treatment: The Court applied established administrative practice that credit is dependent on matching of entries in Form 26AS with the return; no separate precedent was cited or overruled in the reasoning, and the Tribunal followed the matching principle but emphasised factual matching on the material before it. Interpretation and reasoning: The Tribunal examined the Form 26AS as available on the assessee's paper book (data updated till 14.11.2017) and found entries for the exact TDS amounts claimed: Adani Petronet Port Ltd. Rs. 8,86,944; Karaikal Port Pvt. Ltd. Rs. 3,76,062; Starlift Services Pvt. Ltd. Rs. 85,985. The CPC's rectification disallowed credit on the ground of non-matching at the time of processing; however, the Tribunal found that there was no factual mismatch between the TDS claimed in the return and the entries in Form 26AS on record. The Tribunal rejected CPC's factual position that a single entry of Rs. 8,86,944 had been partly allowed and partly disallowed (specifically that Rs. 4,42,333 of that amount was not reflected), noting that the documentary record shows a single entry of Rs. 8,86,944 and thus no basis for partial denial. On the totality of entries as reflected in Form 26AS, the Tribunal concluded that the assessee's claim of TDS credit was substantiated. Ratio vs. Obiter: Ratio - Where Form 26AS on record contains entries corresponding to TDS amounts claimed in the return, denial of TDS credit by CPC on the ground of non-matching is not justified. Obiter - Observations on the CPC's internal processing timeline or reasons for initial non-matching are incidental and not essential to the decision. Conclusions: The Tribunal directed the assessing officer to take into consideration the entries reflected in Form 26AS and grant the TDS credit of Rs. 9,04,380/-. The appeal was allowed on this limited issue. Issue 2 - Validity of section 154 rectification denying TDS credit where Form 26AS on record supports the claim Legal framework: Section 154 permits rectification of mistakes apparent from record; rectification can alter intimation issued under section 143(1) where an apparent mistake exists. Administrative rectifications by CPC should be consistent with documentary records and statutory entitlement to TDS credit. Precedent Treatment: The Tribunal did not expressly invoke or distinguish prior judicial decisions on the scope of section 154, but applied the statutory rectification concept to the facts, treating the rectification as obligatory to accord with documentary evidence rather than as infallible administrative finality. Interpretation and reasoning: The Tribunal treated the CPC's rectification as susceptible to review where it produced a factual outcome inconsistent with the records (Form 26AS) before the Tribunal. The rectification by CPC denied part credit on an asserted mismatch; the Tribunal found that the asserted mismatch was factually incorrect on the evidence. Therefore, the rectification could not stand to deprive the assessee of a legitimate credit. The Tribunal directed the AO to give effect to the Form 26AS entries in granting credit, effectively correcting the CPC's rectification in conformity with record. Ratio vs. Obiter: Ratio - A rectification under section 154 that results in denial of TDS credit is not sustainable if the rectification contradicts documentary evidence (Form 26AS) demonstrating the entitlement to credit. Obiter - Remarks concerning the CPC's methodology in matching records are explanatory and not necessary for the holding. Conclusions: The Tribunal set aside the part denial effected by the CPC's rectification and directed grant of the TDS credit by the AO in accordance with Form 26AS; the rectification was effectively corrected to reflect the documentary record. Cross-references and Practical Outcome 1. The Tribunal's findings on Issue 1 and Issue 2 are interlinked: the substantive entitlement to TDS credit (Issue 1) was determined by reference to Form 26AS, which in turn rendered the CPC's rectification under section 154 impermissible to the extent it denied credit (Issue 2). 2. Relief granted: The AO is directed to consider the Form 26AS entries and allow credit of Rs. 9,04,380/-; the appeal is allowed on this ground.