TDS Credit Cannot Be Denied Due to Reporting Mismatch

Apurva Ashwin Desai Vs Addl./JCIT (ITAT Mumbai)

TDS Credit Cannot Be Denied for Reporting Mismatch; Rectification u/s 154 Allowed

The assessee was denied credit of tax deducted at source (TDS) despite the deductions being duly reflected in Form 26AS. The denial was based on an alleged mismatch between the sale consideration of one property as reported by the buyer in the TDS statement and the figure disclosed by the assessee in the return computation.

The Tribunal noted that TDS of ₹8,33,184 on rental income from HSBC Bank and ₹2,10,000 on sale of two residential flats were undisputedly deducted, deposited with the Government and clearly appearing in Form 26AS (as seen from the reproduced 26AS extract on page 3). The first appellate authority itself had accepted the correctness of rental TDS but still refused overall credit citing the value mismatch in one sale transaction.

It was held that such a mismatch in transaction value cannot be a ground to deny TDS credit in rectification proceedings under section 154. Once tax is deducted and credited to the Central Government and reflected in the assessee’s 26AS, denial of credit is a patent mistake apparent from the record. Any discrepancy in the deductor’s reporting cannot prejudice the deductee, nor can the Revenue re-examine the transaction value at the stage of granting TDS credit.

Since the assessee had disclosed the transactions and even claimed capital loss in the return, the issue did not involve any debatable or roving factual enquiry beyond the scope of section 154.

Accordingly, the Assessing Officer was directed to grant full TDS credit of ₹8,33,184 (rent) and ₹2,10,000 (property sales) strictly as per Form 26AS, and the assessee’s appeal was allowed.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The present appeal has been filed by the assessee against the order dated 27.06.2025 passed by the learned Addl./JCIT(A)-2, Chennai, arising out of rectification proceedings under section 154 of the Income-tax Act, 1961, for the assessment year 2023-24. The grievance of the assessee lies in a narrow compass and relates solely to denial of credit of tax deducted at source, which according to the assessee stands duly reflected in Form No. 26AS and is fully reconcilable with the income disclosed in the return.

2. Briefly stated, the assessee had filed the return of income for the year under consideration on 30.07.2023, which was processed under section 143(1). Since proper credit of TDS was not granted by the CPC, an application under section 154 was moved. Though an order came to be passed on 28.05.2024 determining the total income at nil, the credit of TDS was still not allowed. In appeal, the assessee placed on record the computation of income, Form No. 26AS, and complete particulars relating to rental income as well as sale of two residential flats, contending that there was no factual dispute whatsoever insofar as deduction and deposit of tax at source was concerned.

3. The learned first appellate authority, while dealing with the rectification appeal, recorded certain observations with reference to Form No. 26AS and the computation of income furnished by the assessee, and on that basis proceeded to hold that the issue involved a mismatch requiring factual verification and therefore fell outside the purview of section 154. The relevant portion of the appellate order, as relied upon, is reproduced hereunder:

“6.2 During the appellate proceedings, the appellant submitted his reply and reiterated the statement of facts and furnished the copy of rectification order, computation of income etc for the period under consideration.

6.3 Vide grounds of this appeal, the appellant has raised objection towards the non credit of the TDS while processing the return of income. On perusal of the Form 26AS and the computation of income as furnished by the appellant it is observed that the TDS credit of Rs. 8,33,184/- by the HSBC on the rent payments is found to be in order. The relevant portion of the 26AS is reproduced as below-

On further perusal of the Form 26AS it was observed that the appellant has sold two properties for the sale consideration of Rs. 1,25,00,000/- and Rs 85,00,000/-

6.4 However, on examining the computation of income filed, it is noticed that the appellant has declared the sale consideration for both transactions as 1,25,00,000 each, which is inconsistent with the values reported in Form 26AS. Specifically, the second transaction, reported by the deductor as 85,00,000 in the TDS return (Form 2008), has been declared by the appellant in the computation at 1,25,00,000, resulting in a mismatch.

This discrepancy raises suspicion that whether the entire TDS credit claimed actually pertains to income that has been correctly offered to tax. Therefore, the correctness of the TDS claim, hinges upon factual reconciliation of the declared income and the actual transaction values.

4. We have heard the rival submissions and perused the material available on record. On a careful consideration of the factual matrix, it is evident that the assessee had received rental income from HSBC Bank Ltd., on which tax amounting to Rs. 8,33,184/- was duly deducted and deposited. The said deduction finds clear reflection in Form No. 26AS and its correctness has, in fact, not been doubted by the first appellate authority. Apart from the rental receipts, the assessee had also sold two residential flats, and tax aggregating to Rs. 2,10,000/- was deducted at source in respect of the said transactions, which again stands duly reflected in Form No. 26AS.

5. The denial of credit has been sought to be justified on the premise that there is an inconsistency between the value of one of the transactions as reported by the deductor in the TDS return and the consideration disclosed by the assessee in the computation of income. In our considered opinion, such an approach is clearly misplaced in the context of section 154. Once tax has been deducted at source, deposited with the exchequer, and the same is duly reflected in Form No. 26AS of the assessee, the credit thereof cannot be withheld merely on the basis of a perceived mismatch in transaction values, particularly when the assessee has disclosed the transaction and claimed the resultant capital loss in the return of income.

6. The scope of rectification under section 154 extends to correcting mistakes apparent from the record. Denial of TDS credit, despite its clear reflection in Form No. 26AS and absence of any dispute regarding deduction and deposit of tax, constitutes a patent and manifest error. The issue does not travel into any debatable or contentious factual territory warranting a roving enquiry. At this stage, the Revenue cannot sit in judgment over the deductor’s reporting, nor can the assessee be made to suffer for discrepancies, if any, in the TDS statement filed by the payer.

7. In view of the foregoing discussion, we hold that the authorities below were not justified in denying credit of tax deducted at source to the assessee. Accordingly, we direct the Assessing Officer to grant credit of TDS amounting to Rs. 8,33,184/- in respect of rental income and Rs. 2,10,000/- in respect of sale of properties, strictly in accordance with Form No. 26AS.

8. In the result, the appeal filed by the assessee stands allowed.

Order pronounced on 28t^h January, 2026.