Assessee Entitled to TDS Credit on Salary Income Even if Not Fully Reflected in Form 26AS: ITAT allows Claim based on Form 16 [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Bench at Mumbai, directed the Assessing Officer (AO) to grant full Tax Deducted at Source (TDS) credit of ₹14,78,140 to the assessee, for the Assessment Year (AY) 2011–12.

The Tribunal stated that a mere technical discrepancy or non-reflection of TDS in Form 26AS cannot be a valid ground to deny credit where the deduction and deposit of tax are duly substantiated through Form 16 and other evidence.

The assessee, Tan Boon Hoe, who was employed with M/s Urban Transit Private Limited during the relevant year, earned a salary income of ₹52,70,290 on which TDS of ₹14,78,140 was duly deducted and deposited by the employer. However, while processing the return under Section 143(1) ofthe Income Tax Act, 1961, the Centralized Processing Centre (CPC) failed to grant the claimed TDS credit.

Aggrieved, the assessee approached the Commissioner of Income Tax (Appeals) [CIT(A)] - National Faceless Appeal Centre (NFAC), submitting copies of the employment contract, Form 16, pay slips, and bank statements.

The CIT(A) acknowledged that TDS was properly deducted by the employer and directed the AO to verify Form 26AS and allow credit accordingly, allowing the appeal for statistical purposes.

When the AO gave effect to the appellate order, only partial credit of ₹5,31,197 was allowed. The assessee filed a rectification petition under Section 154, seeking full credit of ₹14,78,140. The CIT(A) disposed of the rectification application reiterating that it was the AO’s responsibility to verify records and grant credit of prepaid taxes.

The assessee then filed a second appeal before the ITAT contending that the CIT(A) failed to issue specific directions, resulting in continued denial of legitimate TDS credit.

The Bench comprising Vikram Singh Yadav (Accountant Member) and Kavitha Rajagopal (Judicial Member) observed that the salary income of ₹52,70,290 had already been offered to tax and the TDS of ₹14,78,140 was duly reflected in Form 16 issued by the employer.

The Tribunal held that the employer had deducted and deposited the tax with the Government treasury, and thus, there was no justification for denying credit merely due to non-appearance of the details in Form 26AS.

“The same cannot be a basis to deny the TDS credit in respect of which the assessee is lawfully eligible,” the Bench remarked, directing the AO to verify Form 16 and related evidence and allow the full TDS credit of ₹14,78,140 after providing a reasonable opportunity to the assessee.

The appeal was accordingly allowed for statistical purposes.

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