Buyer’s TDS Error on Joint Ancestral Property Won’t Deny Father Full Credit: ITAT [Read Order]

Nanasaheb Bhagawan Sasar and his son Amit Sasar, both residents of Pune, were joint owners of ancestral land which they sold for a total consideration of Rs. 13 crore during the assessment year 2022–23. The sale proceeds were split equally, with each party receiving Rs. 6.5 crore.

However, the buyer deducted the entire TDS amounting to Rs. 13 lakh solely in the father's PAN instead of splitting it between both sellers, a technical error that would later become the point of dispute. After sale, both the father and son individually filed their returns, each reporting their respective share of capital gains and paying the correct taxes on their income. The father claimed the full TDS credited in his account as reflected in Form 26AS, while the son did not claim any TDS credit in his return.

When the Central Processing Centre (CPC) processed the father’s return, it allowed only proportionate TDS credit of Rs. 6.5 lakh; since the income declared was for only half the sale consideration, resulting in a demand for additional tax and interest. Despite rectification requests and submissions explaining the procedural mishap, the father was denied full credit for the TDS. The first appeal before the Additional Joint Commissioner also failed, with authorities upholding the view that the TDS credit should only correspond to the income offered, regardless of the error made by the buyer. Left with no other remedy, the assessee approached the Income Tax Appellate Tribunal, Pune.

The legal arguments before the tribunal centered on the notion that technical mistakes by third parties should not override substantive compliance by the taxpayer.

The counsel for the assessee relied on clear statutory provisions. Section 199 of the Income Tax Act read with Rule 37BA; and on precedents from earlier judgements. Notably, the tribunal cited the Anil Ratanlal Bohora vs ACIT and iGate Infrastructure Management Services Ltd. vs DCIT decisions, which held that the deductee is entitled to full credit for TDS deposited in their name, provided the co-owner does not claim the same and tax corresponding to their share is paid.

The principle established in these cases is that mistakes by deductors, such as crediting the entire TDS to one joint owner, should not harm the taxpayer who otherwise fulfils their obligations. The Tribunal also referenced CBDT Instruction No.5/13, emphasizing that the Revenue must give credit if the deductor has made the payment into the government account and the facts are undisputed.​

The bench composed of R.K. Panda, Vice President, and Astha Chandra, Judicial Member, concluded that the Revenue cannot enrich itself at the cost of the assessee due to a procedural error by the buyer. They held that, in the absence of any contrary material from the Revenue, the full TDS credited in Form 26AS should be allowed to the assessee since the son had declared and paid taxes on his share but not claimed any TDS.

In conclusion, the Tribunal set aside the lower orders and restored the matter to the Central Processing Centre for adjudication afresh, instructing the credit of the entire Rs. 13 lakh TDS to be given to the father after verification.