Naik Naik And Co. Vs CIT (ITAT Mumbai)
Form 26AS Not Final Word- Its a departmental statement that reflects deductor’s compliance- TDS Credit Cannot Be Denied for Deductor’s Default – Section 205 Protects Deductee
The appeal by Naik Naik & Co., a law firm, arose from denial of TDS credit of ₹96,12,846 & consequential levy of interest u/s 234B & 234C while processing return u/s 143(1).
The firm, following cash system, received professional receipts net of TDS from clients & offered full gross receipts to tax. CPC disallowed credit of ₹96.12 lakh on the sole ground that it was not reflected in Form 26AS, raising demand of ₹1.09 crore including interest.
In appeal, Assessee produced invoices, TDS advices & bank statements proving tax deduction at source. Mismatch arose because several deductors either failed to deposit tax or misreported in e-TDS returns. In particular, Future Retail Ltd. (in liquidation) deducted ₹73.63 lakh but did not deposit, while in MEP Infraprojects Ltd. the deducted tax was deposited belatedly & later reflected in updated 26AS.
CIT(A) dismissed the claim, holding 26AS decisive, & suggested Assessee should get deductors to rectify their statements. He also upheld levy of interest as mandatory.
Before Tribunal, Assessee relied on Section 205, which expressly bars recovery once tax has been deducted from income, irrespective of whether deductor deposited it. It invoked CBDT Instruction dated 1.6.2015 & Office Memorandum dated 11.3.2016, both clarifying that assessees cannot be made to suffer demand due to deductor’s default. It further cited Yashpal Sahni v. Rekha Hajarnavis (293 ITR 539 Bom.), Pushkar Prabhat Chandra Jain v. UOI (2019 Bom HC) & Incredible Unique Buildcon (Delhi HC, 2023) which all held that once TDS is deducted, deductee cannot be denied credit or forced to pay again.
