2025 (5) TMI 1588 - AT - Income Tax

Short grant of tax deducted at source ( TDS ) - HELD THAT - Short grant of TDS merit needs to be verified by the Ld.AO having regards to the evidences filed by the assessee. We direct the AO to verify the claim of assessee in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in the present appeal are:

- Whether there was a short grant of Tax Deducted at Source (TDS) credit amounting to INR 60,97,956 as claimed by the assessee in the Return of Income (ROI) for the assessment year 2017-18, which was not fully granted by the Assessing Officer (AO) and subsequently by the Commissioner of Income Tax (Appeals) [CIT(A)].

- Whether the delay of approximately 510 days in filing the appeal before the Tribunal is liable to be condoned, considering the reasons provided by the assessee for not filing the appeal within the prescribed time limit.

- On the merits, whether the claim of short credit of TDS is sustainable and requires verification by the AO in light of the evidence and reconciliation of receipts with Form 26AS and Profit & Loss Account.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of Delay in Filing Appeal

Relevant legal framework and precedents: The Tribunal considered principles under Section 51 of the Limitation Act, 1963, which empowers courts to condone delay if sufficient cause is shown. The Tribunal relied on authoritative precedents including the Hon'ble Madras High Court's decisions in Sreenivas Charitable Trust and Venkatadri Traders Ltd., which emphasize a liberal and pragmatic approach towards condonation of delay, prioritizing substantial justice over procedural technicalities. The Supreme Court's ruling in Mrs. Sandhya Rani Sarkar vs. Smt. Sudha Rani Debi was cited to highlight that non-opposition by the Revenue to condonation applications may itself constitute sufficient cause. Further, the Supreme Court's observations in Collector Land Acquisition Vs. Mst. Katiji & Ors. were relied upon to underscore the elasticity of the term "sufficient cause" and the necessity of a just and liberal approach in condoning delays.

Court's interpretation and reasoning: The Tribunal noted that the assessee had filed an application under Section 154 of the Income Tax Act seeking rectification of the alleged short grant of TDS credit. The assessee's bonafide belief that the AO would rectify the mistake led to the delay in filing the appeal before the Tribunal. The Tribunal found this explanation to constitute "sufficient cause" for the delay, despite the period being substantial (510 days). It emphasized that the delay should not be a bar to adjudicating the matter on merits, especially when the delay arises from a genuine belief and bonafide conduct.

Key evidence and findings: The absence of any counter-affidavit or opposition from the Revenue to the condonation application was a significant factor. The Tribunal also considered the small quantum of the disputed amount and the procedural history, including the rejection of the rectification application by the AO.

Treatment of competing arguments: The Revenue relied on the orders of the lower authorities and did not file opposition against the condonation application. The Tribunal found no compelling reason to reject the application for condonation of delay.

Conclusion: The delay of 510 days in filing the appeal before the Tribunal was condoned as there existed a reasonable and sufficient cause, and the principles of substantial justice warranted hearing the appeal on merits.

Issue 2: Merits of the Short Grant of TDS Credit

Relevant legal framework and precedents: The claim for credit of TDS is governed by the provisions of the Income Tax Act, which entitle the assessee to credit for tax deducted at source, provided the corresponding receipts are declared and reconciled with Form 26AS and the books of accounts. The CIT(A) had earlier dismissed the claim on the ground that the assessee failed to reconcile the receipts as per Form 26AS with those reflected in the Profit & Loss Account, making it impossible to ascertain whether the receipts corresponding to the TDS credit were declared in the relevant assessment year.

Court's interpretation and reasoning: The Tribunal observed that the issue of short grant of TDS credit requires verification by the AO based on the evidence filed by the assessee. The Tribunal did not express a conclusive opinion on the correctness of the claim but directed the AO to verify the claim in accordance with law, ensuring that the assessee is given a proper opportunity of being heard. The Tribunal's approach was to allow the matter to be examined afresh rather than uphold the rejection outright.

Key evidence and findings: The CIT(A) had noted that the assessee could not reconcile all receipts with Form 26AS even after a remand report. However, the Tribunal emphasized that the AO must verify the claim based on the evidence and allow the assessee to present its case fully.

Treatment of competing arguments: The Revenue's stand was that the lower authorities rightly dismissed the claim due to lack of reconciliation. The Tribunal, while acknowledging this, did not foreclose the possibility of the claim being substantiated upon proper verification.

Conclusion: The appeal on this ground was allowed partly for statistical purposes, with a direction to the AO to verify the claim of short TDS credit in accordance with law and after affording the assessee a fair hearing.

3. SIGNIFICANT HOLDINGS

On the question of condonation of delay, the Tribunal held:

"The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits. The expression 'sufficient cause' employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts."

Further, the Tribunal reiterated the principle that:

"Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period."

The Tribunal emphasized the primacy of substantive justice over procedural technicalities by quoting Justice Krishna Iyer:

"Any interpretation that alludes substantive justice is not to be followed and that substantive justice must always prevail over procedural technicalities."

On the merits, the Tribunal held that:

"The short grant of TDS merit needs to be verified by the Ld.AO having regards to the evidences filed by the assessee. We direct the Ld.AO to verify the claim of assessee in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee."

The final determination was that the appeal was partly allowed for statistical purposes, with directions for fresh verification of the TDS credit claim by the AO.