Aarti Gupta Vs ITO (ITAT Chandigarh)
In a ruling by the Income Tax Appellate Tribunal, the Tribunal held that TDS credit cannot be denied to a legal heir merely due to a PAN mismatch when the income of the deceased has been offered to tax. The assessee filed the return for AY 2019–20 as the legal heir of her deceased husband and declared interest income of ₹5,23,957 on which TDS of ₹52,913 had already been deducted. The CPC denied the credit during processing under Section 143(1) because the TDS was reported in the PAN of the deceased and not the legal heir. The CIT(A) upheld the denial citing Rule 37BA, which links TDS credit to the PAN reported in the TDS statement. The Tribunal observed that the denial was purely technical, as the income had already been taxed. It also noted that requiring revision of the TDS statement years later would be impractical. Accordingly, the Tribunal directed CPC to grant the TDS credit and revise the demand.
Facts of the Case
The assessee Ms. Aarti Gupta filed the return of income for AY 2019-20 as the legal heir of her deceased husband, Shri Vinod Kumar Gupta.
(i) The deceased had earned interest income of ₹5,23,957 during the relevant year.
(ii) TDS of ₹52,913 had been deducted by the payer on such interest income.
(iii)The TDS was reported in the TDS return against the PAN of the deceased assessee.
After the death of the assessee, the legal heir offered the said interest income in her return of income and claimed the corresponding TDS credit of ₹52,913.
However, while processing the return u/s 143(1), CPC denied the TDS credit on the ground that the TDS was reflected in Form 26AS of the deceased PAN and not in the PAN of the legal heir.
The assessee filed rectification applications u/s 154, which were rejected by CPC. The rejection was upheld by the CIT(A) on the basis that Rule 37BA allows TDS credit only to the person in whose PAN the deductor reports the TDS.
Statutory Provision
Section 199 of the Income-tax Act, 1961- Provides that credit for TDS shall be given to the person from whose income the tax has been deducted.
Rule 37BA of the Income-tax Rules, 1962- Rule 37BA(2)(i) provides that: Credit for TDS shall be given to the person to whom the payment has been made or credit has been given, and in whose name the tax deduction has been reported by the deductor.
Thus, technically the system allows credit to the PAN mentioned in the TDS statement.
Issue Whether TDS credit can be denied to the legal heir when:
(i) the income of the deceased has been offered to tax by the legal heir, but
(ii) TDS was reported in the PAN of the deceased assessee.
Decision of the Tribunal- The ITAT Chandigarh allowed the appeal of the assessee and directed CPC to grant the TDS credit.
Reasoning and Decision of the Tribunal
The Tribunal, after considering the facts of the case and the submissions made by the parties, observed that it was an undisputed position that the assessee, Ms. Aarti Gupta, had filed the return of income in the capacity of the legal heir of her deceased husband, Shri Vinod Kumar Gupta. The income in question, namely the interest income amounting to ₹5,23,957, was admittedly earned by the deceased during the relevant previous year. After the demise of the assessee’s husband, the legal heir discharged her statutory obligation by offering the said income to tax in the return filed on behalf of the deceased. Therefore, there was no dispute with regard to the identity of the income, the person entitled to represent the deceased, or the fact that the income had been duly subjected to taxation.
The Tribunal further noted that the denial of TDS credit by the Centralized Processing Centre (CPC) arose solely on account of a technical mismatch in the PAN details appearing in the TDS statement. The deductor had deducted tax at source on the interest payment and reported such deduction against the PAN of the deceased assessee, whereas the return of income had been filed using the PAN of the legal heir while representing the estate of the deceased. Consequently, the credit for TDS was not reflected in the Form 26AS of the legal heir and was therefore denied at the stage of processing of return under section 143(1). The Tribunal observed that such denial was not based on any dispute regarding the deduction of tax or the genuineness of the income, but was merely a result of a system-driven mismatch arising from the PAN under which the TDS had been reported.
The Tribunal emphasized that once the income corresponding to the TDS had been offered to tax and accepted by the department, the denial of credit of the tax already deducted would be unjustified. In other words, the revenue authorities cannot accept the taxation of the income in the hands of the legal heir while simultaneously refusing to grant the credit of tax that had been deducted from that very income. Such an approach would defeat the basic principle embodied in section 199 of the Income-tax Act, which provides that credit of tax deducted at source should be granted to the person from whose income the tax has been deducted. The Tribunal thus held that substantive rights cannot be denied merely on account of procedural or technical defects, particularly where the tax has already been collected by the government.
Another significant factor considered by the Tribunal was the practical difficulty faced by the assessee in seeking revision of the TDS return by the deductor. The Tribunal observed that the TDS statement related to Assessment Year 2019-20, and requiring the legal heir to approach the deductor to revise the TDS return at such a belated stage would be impractical and unreasonable. In many cases, the deductor may no longer be in a position to revise the TDS statement, and the legal heir may not have any control over the deductor’s compliance. Therefore, insisting upon revision of the TDS return as a precondition for granting credit would impose an undue hardship on the assessee, despite the fact that the tax had already been deducted and deposited with the government.
In light of these considerations, the Tribunal held that the denial of TDS credit was purely technical in nature and contrary to the principles of fair taxation. Since the income had been duly offered to tax by the legal heir and the corresponding tax had already been deducted and deposited by the deductor, the assessee was legitimately entitled to the credit of such TDS. Accordingly, the Tribunal directed the CPC to grant the TDS credit of ₹52,913 to the assessee and revise the tax demand in accordance with law.
Thus, the Tribunal concluded that where the legal heir offers the income of the deceased to tax, the corresponding TDS credit cannot be denied merely because the TDS was reported against the PAN of the deceased, especially when the denial arises solely due to a technical mismatch in the system.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
1. Aforesaid appeal by assessee for Assessment Year (AY) 2019-20 arises out of an order of learned Addl. / Joint Commissioner of Income Tax (Appeals)-9, Mumbai [CIT(A)] dated 11-10-2025 in the matter of an rectification intimation issued by CPC U/S 154 on 04-03-2021. The sole grievance of the assessee is denial of TDS Credit for Rs.52,913/-. Having heard rival submissions, the appeal is disposed-off as under.
2. The assessee is a legal heir of her deceased husband Shri Vinod Kumar Gupta. The assessee’s husband earned interest income of Rs.5,23,957/- during this year on which impugned TDS of Rs.52,913/-was deducted by the payer. The assessee, as a legal heir of her husband, offered the interest income on behalf of her husband in her income tax return and accordingly, the assessee claimed credit of corresponding TDS. The credit was denied by CPC while processing the return u/s 143(1) on 24-01-2020. The assessee filed rectification on 17-02-2020 which is still pending. The assessee had filed revised return of income which was processed u/s 143(1) on 16-04-2020 against which another rectification was filed by the assessee on 22-022021. This rectification was rejected by CPC on 04-03-2021 on the ground that TDS claim related to deceased person and there was no return of income for deceased PAN. Aggrieved by rejection of rectification, the assessee preferred further appeal.
3. The Ld. CIT(A) observed that TDS claimed in the return of income was not reflected in Form 26AS against the PAN of the assessee. The TDS was deducted and reported by the deductor against the PAN of the deceased assessee. As per Rule 37BA, the TDS credit would be given to the person in whose name it is reported by the deductor in the TDS statement. Since TDS was reported against the PAN of the deceased whereas the return of income was filed under the PAN of legal heir, thereby using the PAN of the legal heir, there was a mismatch in the system. The TDS credit could be allowed to legal heir only if the deductor revises the TDS statement to reflect the PAN of the legal heir which was not done. Therefore, the appeal of the assessee was dismissed against which the assessee is in further appeal before us.
4. The undisputed fact is that the assessee is a legal heir of her deceased husband. The interest income earned by the deceased husband has been offered by her in the capacity of a legal heir. The denial of TDS credit is merely on technical grounds. Once the income has been offered to tax, corresponding TDS credit would also be available to the assessee since accepting a part of the transaction cannot be held to be justified. Requiring the legal heir to approach the deductor to revise TDS statements, at this stage, may not be feasible / possible considering the fact that the TDS statement pertain to AY 2019-20. Therefore, we direct CPC to grant impugned TDS credit to the assessee and revise the tax demand.
5. The appeal stand allowed.
Order pronounced on 9th March, 2026.
