TDS credit must be allowed even without income tax return, says Income Tax Appellate Tribunal

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the income tax department cannot deny credit for tax deducted at source (TDS) once the corresponding income reflected in Form 26AS is brought to tax, as per a TOI report. The ruling came in a reassessment matter involving a Navi Mumbai taxpayer, where the entire income shown in Form 26AS was taxed without granting TDS credit on the grounds that no income tax return had been filed. Reassessment based on Form 26AS and AIR data The case pertained to a Navi Mumbai resident, Soman, whose assessment for the financial year 2010-11 was reopened under Section 147 based on information in the annual information return (AIR) and Form 26AS. These records indicated certain receipts credited to his account, though the order does not specify the nature of the income. As the taxpayer had neither filed an income tax return nor responded to notices issued under Section 148, the assessing officer completed the proceedings ex-parte. The officer treated the entire receipts appearing in Form 26AS as taxable income. Tribunal rejects denial of TDS credit Before the ITAT, the taxpayer argued that once the receipts were taxed, denying TDS credit would amount to double taxation and unjust enrichment of the revenue. The income tax department contended that no formal claim for TDS credit had been made since no return was filed. The tribunal rejected this argument and held that TDS credit is consequential and co-terminus with the assessment of the corresponding income. It ruled that taxes already deducted and deposited with the government cannot be denied on technical grounds. The ITAT directed the assessing officer to verify the TDS reflected in Form 26AS and allow the corresponding credit. Principle reinforced on linkage of income and TDS Tax experts note that the ruling strengthens the principle that once the department relies on Form 26AS data to tax income, the matching TDS credit must also be given effect. While Form 26AS has since been replaced under the Income Tax Act, 2025 by the annual information statement in Form 168, the underlying principle remains unchanged. Taxes deducted and deposited with the government cannot be disregarded while determining final tax liability.