2025 (12) TMI 28 - AT - Income Tax

Full TDS credit allowed as per Form 26AS despite turnover mismatch linked to e-commerce TDS under section 194O

ITAT Delhi held that the assessee is entitled to full TDS credit as reflected in Form 26AS, despite discrepancies between turnover shown in the return and ... Entitlement to allow credit for TDS as per Form 26AS filed by the Assessee - Restriction of the TDS credit based on turnover discrepancies between return income and Form 26AS - principal activity of wholesale and retail goods - HELD THAT:- It is the specific case of the Assessee that the Assessee has claimed the TDS correctly as per 26AS. The Co-ordinate Bench of the Tribunal Hyderabad Bench in an identical situation, and similarly placed assessee, in the case of Shri Gopikishan Pallod Hyderabad [2025 (6) TMI 1931 - ITAT HYDERABAD], held as under:- 'Provisions of section 194O of the Act deals with payment of certain sums by e-commerce operators to e- commerce participants. As per the said provision, where sale of goods or provision of service of an e-commerce participant is facilitated by e-commerce operator, such e-commerce operator at the time of credit of amount or at the time of payment whichever is earlier deduct income tax @ 1% of the gross amount of such sale or service of goods. - If we consider sale return, then the turnover declared by the assessee tallies with the turnover reported in Form 26AS with reference to TDS credit as per section 194O of the Act. - TDS has been deducted by the e-platform operators at the time of sales whereas the money is returned to the buyer after e-platform operators deducted TDS. Therefore, in our considered view, the reasons given by the learned CIT(A) to reject the explanation of the assessee is on assumption and presumption, but not based on fact. - direct the Assessing Officer to allow credit for TDS as per Form No.26AS filed by the assessee.' By respectfully following the order of the Tribunal in the case Of Shri Gopikishan Pallod (supra), thus, we set aside the order of the Ld. CIT(A) and direct the Assessing Officer to allow credit for TDS as per Form No. 26AS filed by the Assessee in both the Assessment Years under consideration. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether credit for tax deducted at source can be restricted by the processing authority on the basis of turnover discrepancy between the return of income and Form 26AS, despite the assessee having claimed TDS in full as reflected in Form 26AS. 1.2 Whether, in circumstances where the assessee explains the turnover difference with reference to business model and sales returns and has offered the entire related income to tax, full TDS credit as per Form 26AS is mandatorily allowable. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Restriction of TDS credit on account of turnover discrepancy vis-à-vis Form 26AS; entitlement to full TDS credit where income relatable to such TDS is offered to tax (a) Legal framework (as discussed) 2.1 The Tribunal, by reproducing and relying on an earlier coordinate bench decision, referred to the scheme of section 194-O concerning deduction of tax at source at 1% on the gross amount of sale of goods or services facilitated by an e-commerce operator in favour of an e-commerce participant, and to Rule 37BA of the Income Tax Rules, 1962, which provides that TDS credit shall be allowed in the year in which the income relatable to such TDS is declared. (b) Interpretation and reasoning 2.2 The Tribunal noted that the Centralized Processing Centre had restricted TDS credit on the ground of discrepancy between turnover as per the assessee's return/books and turnover as per Form 26AS, and that the first appellate authority had confirmed this approach. 2.3 The Tribunal recorded the assessee's contention that TDS had been claimed strictly in accordance with Form 26AS and that the apparent difference in turnover arose from the business model involving wholesale and retail trading and was explained by sales returns, while the entire income pertaining to the TDS reflected in Form 26AS had been offered to tax in the relevant years. 2.4 The Tribunal relied on and 'respectfully followed' the reasoning of a coordinate bench, where in an identical factual situation involving an e-commerce participant, it was held that: 2.4.1 The assessing authority had erred in allowing only proportionate TDS credit by misconstruing the turnover figures and ignoring the reconciliation of gross sales, sales returns, and net sales, which, when properly reconciled, tallied with the turnover reflected in Form 26AS. 2.4.2 When sales returns exist, TDS would have been deducted by the e-commerce operator at the time of original sale, and refund to buyers would occur after deduction of TDS, so the mere existence of sales returns does not negate the assessee's right to TDS credit where the corresponding income has been offered to tax. 2.4.3 The first appellate authority's view, that sales returns necessarily implied replacement or refund including TDS amount, was based on assumptions and presumptions and not on the actual mechanism of TDS deduction by e-commerce operators or the facts of the case. 2.4.4 Where the assessee has explained the turnover difference and established that income corresponding to the TDS amount has been fully offered to tax in the year under consideration, Rule 37BA and section 194-O do not justify proportionate restriction of TDS credit; full credit as per Form 26AS must be allowed. 2.5 Applying the above coordinate bench reasoning to the present appeals, the Tribunal held that the assessee herein was 'similarly placed' and that the matter was covered by the earlier decision. Accordingly, the restriction of TDS credit by CPC and its confirmation by the appellate authority could not be sustained. (c) Conclusions 2.6 The Court held that, where the assessee has claimed TDS strictly as per Form 26AS, has reconciled any turnover difference with reference to its business model and sales returns, and has offered the entire income relatable to such TDS to tax in the relevant assessment years, the processing authority is not justified in restricting TDS credit merely on the basis of an apparent turnover discrepancy. 2.7 The orders of the appellate authority confirming proportionate restriction of TDS credit were set aside, and the Assessing Officer was directed to allow full TDS credit as per Form 26AS for both assessment years under consideration.