2025 (6) TMI 76 - AT - Income Tax

Denial of credit of TDS - HELD THAT - CIT(A) has not commented anything on the merits of the case related to the refund in respect of TDS credit to the assessee trust. The rectification application filed by the assessee on 08-02-2023 was not rejected or accepted by the AO. On 23-04-2024 the CPGRAM disposed of the complaint of the assessee trust dated 11-04-2024 thereby stating the case closed . It will be appropriate that the matter may be remanded back to the AO with the direction that if the credit of TDS is in the name of trustee and the trust being given the details whether money are credited by trustee into the account of the trust the same should be taken into account and the due credit to the assessee trust be given accordingly.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in these appeals pertain to:

• Whether the Commissioner of Income Tax (Appeals) erred in holding that the appeals filed by the assessee were time-barred and in refusing to condone the delay;
• Whether the assessee is entitled to credit of Tax Deducted at Source (TDS) aggregating Rs. 35,493 (AY 2020-21), Rs. 29,880 (AY 2021-22), and Rs. 41,697 (AY 2022-23) which was not allowed by the Assessing Officer;
• Whether the demand raised by the Assessing Officer on account of non-credit of TDS was justified;
• Whether the Commissioner of Income Tax (Appeals) erred in dismissing the appeals without adjudicating on the merits of the TDS credit claim and without remanding the matter to the Assessing Officer for consideration of the assessee's submissions;
• Whether the closure of CPGRAM grievance application constitutes an appealable order under the Income Tax Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Delay in filing the appeal before CIT(A) and condonation of delay

Relevant legal framework and precedents: The limitation period for filing appeals before the Commissioner of Income Tax (Appeals) is prescribed under the Income Tax Act, 1961. The Supreme Court and various High Courts have held that limitation periods must be strictly adhered to, but courts possess discretion to condone delay if sufficient cause is shown. Further, during the Covid-19 pandemic, the Supreme Court directed exclusion of the period of limitation till 28 February 2022 in certain cases.

Court's interpretation and reasoning: The CIT(A) held that the appeals were filed late by 919 days and refused to condone the delay, also observing that the closure of the CPGRAM grievance was not an appealable order. The assessee contended that the appeal was filed within time considering the exclusion of limitation period due to Covid-19 and that the grievance closure date (23-04-2024) triggered the limitation period for filing appeal.

Key evidence and findings: The appeals were filed on 29-05-2024, against the grievance closure dated 23-04-2024, and the assessee submitted that the rectification application was filed timely on 13-04-2023. The Tribunal noted the assessee's explanation regarding Covid-19 related extension and the sequence of events.

Application of law to facts: The Tribunal found the assessee's explanation for delay genuine and condoned the delay in filing the appeal before the Tribunal (delayed by 104 days) due to inadvertence in submission of the CIT(A) order to the chartered accountant. The Tribunal implicitly recognized the Covid-19 extension and the grievance closure date as relevant for limitation calculation.

Treatment of competing arguments: The Revenue relied on the assessment order and CPGRAM disposal to justify non-entitlement to appeal and non-condonation of delay. The Tribunal disagreed with the CIT(A)'s refusal to condone delay and held the delay explanation satisfactory.

Conclusions: Delay in filing the appeal before the Tribunal was condoned. The question of delay before the CIT(A) was not explicitly reversed but the Tribunal's directions effectively allowed reconsideration on merits.

Issue 2: Entitlement to credit of TDS and rejection of refund claim

Relevant legal framework and precedents: Section 143(1) of the Income Tax Act deals with intimation and adjustment of refunds or demands. Section 154 provides for rectification of mistakes apparent from record. The credit of TDS is allowable only if reflected in the correct PAN and properly claimed. The Supreme Court and Tribunal decisions emphasize that TDS credit must be allowed if the amount is rightly attributable to the assessee.

Court's interpretation and reasoning: The Assessing Officer did not allow the TDS credit of Rs. 35,493 (AY 2020-21) and similarly for other years, claiming that the TDS was reflected in the name of a trustee (Hasmukhbhai S Dave) and not the trust itself. The rectification application filed under section 154 was neither accepted nor rejected by the AO but the CPGRAM grievance was closed without resolution. The CIT(A) dismissed the appeal on procedural grounds without addressing the merits.

Key evidence and findings: The assessee submitted Form 26AS of the trustee showing the TDS credit and contended that the trustee had not claimed this TDS in his own assessment and had credited the amount to the trust. The rectification application was filed timely. The Tribunal noted absence of any order on merits by the AO or CIT(A).

Application of law to facts: The Tribunal found that the merits of the TDS credit claim were not adjudicated by the CIT(A). It held that if the TDS credit is in the name of the trustee and the trustee has transferred the amount to the trust account, then the trust is entitled to claim the credit. The Tribunal directed remand to the AO to consider these facts and grant due credit accordingly.

Treatment of competing arguments: The Revenue relied on the initial assessment and CPGRAM disposal to deny credit. The Tribunal rejected the procedural dismissal and emphasized the need for merits examination and proper consideration of the assessee's claim.

Conclusions: The Tribunal set aside the orders and remanded the matter to the AO for fresh consideration of TDS credit claim in the name of the trust, directing that credit be given if justified.

Issue 3: Legality of raising demand on account of non-credit of TDS

Relevant legal framework and precedents: Demand notices under the Income Tax Act are issued when there is a shortfall in tax paid or credited. However, if TDS credit is rightly attributable to the assessee, raising demand is erroneous.

Court's interpretation and reasoning: The demand raised (Rs. 5,467 for AY 2020-21 and corresponding amounts for other years) was based on non-credit of TDS. Since the Tribunal directed remand for fresh consideration of TDS credit, the demand's legality depends on the outcome of that exercise.

Key evidence and findings: No fresh findings on demand legality were made by the Tribunal; rather, the demand was linked to the TDS credit issue.

Application of law to facts: The Tribunal's direction to re-examine TDS credit implies that the demand may be withdrawn if credit is allowed.

Treatment of competing arguments: The Revenue defended the demand based on existing orders; the Tribunal prioritized correct crediting of TDS over procedural dismissal.

Conclusions: The demand is stayed pending fresh adjudication on TDS credit by the AO.

Issue 4: Whether closure of CPGRAM grievance is an appealable order

Relevant legal framework and precedents: Generally, orders passed by CPGRAM are not statutory orders under the Income Tax Act and hence not appealable before the CIT(A). Appeals lie against orders passed under the Act.

Court's interpretation and reasoning: The CIT(A) held that CPGRAM closure is not appealable and dismissed the appeals on that ground. The Tribunal did not expressly overturn this finding but noted that the grievance closure date was relevant for limitation purposes.

Key evidence and findings: The grievance closure was on 23-04-2024, and the appeals were filed on 29-05-2024.

Application of law to facts: The Tribunal implicitly accepted that while CPGRAM closure is not appealable, the grievance closure date can be relevant to determine when the cause of action arose for filing appeal.

Treatment of competing arguments: The Revenue relied on the non-appealability of CPGRAM orders; the Tribunal focused on substantive rights and limitation computations.

Conclusions: CPGRAM closure itself is not appealable, but the date is relevant for limitation calculation for filing appeal against statutory orders.

3. SIGNIFICANT HOLDINGS

"Since the CIT(A) has not commented anything on the merits of the case related to the refund in respect of TDS credit to the assessee trust... it will be appropriate that the matter may be remanded back to the Assessing Officer with the direction that if the credit of TDS is in the name of trustee and the trust being given the details whether money are credited by trustee into the account of the trust, the same should be taken into account and the due credit to the assessee trust be given accordingly."

"The delay before the Tribunal has been explained by the assessee trust and it appears genuine, hence the delay is condoned."

Core principles established include:

• The necessity of adjudicating on the merits of TDS credit claims rather than dismissing appeals on procedural grounds;
• The recognition of Covid-19 related extension of limitation periods in computing delay;
• The principle that TDS credit can be allowed to the trust if the trustee's TDS amount has been transferred to the trust;
• The importance of remanding matters to the Assessing Officer for fresh consideration when procedural lapses have prevented adjudication on merits;
• While CPGRAM grievance closure is not appealable, it can be relevant for limitation purposes.

Final determinations on each issue:

• Delay in filing appeal before the Tribunal is condoned;
• The appeals are partly allowed and remanded to the Assessing Officer for fresh consideration of TDS credit claims;
• The demand raised on account of non-credit of TDS is subject to reassessment post remand;
• The procedural dismissal of appeals by CIT(A) is set aside;
• The appeals for all three assessment years are disposed of by applying the same directions as in AY 2020-21.