Case Note & Summary
The petitioners, LML Ltd. and its director Sanjeev Shriya, challenged intimations issued under Section 143(1)(a) of the Income Tax Act, 1961 for the assessment years 1989-90 and 1990-91, as well as a rectification order under Section 154 for AY 1989-90. The assessee had filed its return of income for AY 1989-90 claiming credit for tax deducted at source (TDS) of Rs. 89,39,431/- by LML Fibres Ltd. and Rs. 9,92,324/- by Prakriti Synthetics Ltd., based on TDS certificates issued by those companies. The Assessing Officer issued an intimation under Section 143(1)(a) on 28/5/1990 disallowing the TDS credit on the ground that the TDS was not reflected in the tax credit register. Subsequently, a rectification order under Section 154 was passed on 5/2/1991 to withdraw the TDS credit that was allegedly allowed in the intimation. For AY 1990-91, a similar intimation under Section 143(1)(a) was issued on 27/3/1991 disallowing TDS credit. The petitioners argued that the TDS certificates were genuine and the tax had been deducted and paid to the government, and that the Assessing Officer was not justified in denying credit without verification. The court held that the intimations under Section 143(1)(a) were summary in nature and could not be used to disallow TDS credit without proper verification of the TDS certificates. The court also held that the rectification order under Section 154 was invalid because the original intimation had not granted any TDS credit, and the rectification was based on a mistaken belief. The court allowed the writ petition, quashed the intimations and the rectification order, and directed the Assessing Officer to verify the TDS certificates and grant credit if the tax had been deducted and paid to the government.
Headnote
A) Income Tax - TDS Credit - Section 143(1)(a) and Section 199 of Income Tax Act, 1961 - The assessee claimed TDS credit based on certificates issued by deductors, but the Assessing Officer disallowed the credit in the intimation under Section 143(1)(a) on the ground that the TDS was not reflected in the tax credit register. The court held that the Assessing Officer was not justified in denying TDS credit without verifying the certificates, as the assessee had filed the TDS certificates along with the return. The court directed the Assessing Officer to verify the TDS certificates and grant credit accordingly. (Paras 1-10) B) Income Tax - Rectification - Section 154 of Income Tax Act, 1961 - The Assessing Officer passed a rectification order under Section 154 to withdraw the TDS credit earlier allowed in the intimation. The court held that the rectification order was invalid because the original intimation had not granted any TDS credit, and the rectification was based on a mistaken belief. The court set aside the rectification order. (Paras 5-10) C) Income Tax - Intimation - Section 143(1)(a) of Income Tax Act, 1961 - The intimation under Section 143(1)(a) is a summary assessment and cannot be used to disallow TDS credit without proper verification of the TDS certificates. The court held that the Assessing Officer must examine the TDS certificates and grant credit if the tax has been deducted and paid to the government. (Paras 1-10)
Issue of Consideration
Whether the Assessing Officer was justified in issuing intimations under Section 143(1)(a) of the Income Tax Act, 1961 without granting credit for tax deducted at source (TDS) as per the TDS certificates filed by the assessee, and whether the subsequent rectification order under Section 154 was valid.
Final Decision
Writ petition allowed. Intimations dated 28/5/1990 and 27/3/1991 and rectification order dated 5/2/1991 are quashed. Assessing Officer directed to verify TDS certificates and grant credit if tax has been deducted and paid to the government.
Law Points
- TDS credit must be allowed based on TDS certificates filed with return
- even if not reflected in Form 26AS
- Section 143(1)(a) intimation cannot disallow TDS credit without proper verification
- Section 154 rectification cannot be used to deny TDS credit already allowed
