TDS credit mismatch with Form 26AS in 143(1) intimation-verification u/s199/Rule 37BA ordered; revenue appeal dismissed

The dominant issue was whether TDS credit could be restricted in intimation issued u/s 143(1) despite the assessee claiming full credit as reflected in Form 26AS. The ITAT held that, under s. 199 read with Rule 37BA, credit is allowable only after verification that the TDS has been properly deducted and that the corresponding income relating to the gross receipts has been offered. Since the first appellate authority had already remitted the matter to the AO with a direction to verify these conditions and then grant full TDS credit as per Form 26AS, the Revenue had no sustainable grievance. The Revenue's appeal was dismissed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the appellate direction to allow full credit of tax deducted at source (TDS) as reflected in Form 26AS, but only after verification under section 199 read with Rule 37BA, warranted interference in appeal.

(ii) Whether any sustainable grievance survived to the Revenue when the first appellate authority merely restored the matter to the assessing authority for due verification before granting TDS credit.

(iii) Whether cross-objections, expressly stated to be "not pressed", required any adjudication on merits.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Interference with direction to allow TDS credit as per Form 26AS subject to verification

Legal framework (as discussed by the Tribunal): The Court considered the first appellate authority's direction requiring verification of TDS credit and correlation of the income with gross receipts in accordance with section 199 read with Rule 37BA, while dealing with restriction of TDS credit made in an intimation under section 143(1).

Interpretation and reasoning: The Court noted that the first appellate authority held the restriction of TDS credit in the intimation under section 143(1) to be erroneous and not sustainable. However, the appellate relief was not unconditional: the matter was restored to the assessing authority with a direction to allow full TDS credit reflected in Form 26AS only after due verification of "proper TDS" and whether the income related to the gross receipt was in accordance with section 199 read with Rule 37BA. The Court treated this as a remand for verification rather than a final grant without checks, and therefore found that the Revenue, in substance, retained the opportunity to verify and apply the statutory conditions before allowing credit.

Conclusions: Since the first appellate authority directed verification by the assessing authority before allowing credit, the Court held that the Revenue "should not have any grievance" and found no merit in the grounds seeking to set aside the appellate order. The Revenue's appeals for all relevant years, raising identical grounds, were dismissed on the same reasoning.

Issue (iii): Cross-objections not pressed

Interpretation and reasoning: The Court recorded that the cross-objections were expressly not pressed by the assessee and that the departmental representative had no objection to such withdrawal.

Conclusions: The cross-objections were dismissed as "not pressed", without adjudication on merits.

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