Addition on the basis of TDS claimed due to Cash system of accounting is not sustainable

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Addition on the basis of TDS claimed due to Cash system of accounting is not sustainable

In terms of Rule 37BA of Income Tax Rules-1962 read with section 199 of Income Tax Act-1961, revenue could not, merely because credit for tax deducted at source was erroneously claimed by assessee, bring corresponding professional receipts to tax, if such receipts were otherwise not assessable as income in accordance with law
*[2018]100 taxmann.com 150 (Delhi – Trib.)*
Dhruv Sachdeva
v.
Assistant Commissioner of Income Tax, New Delhi
——————————
Section 199 of the Income-tax Act, 1961, read with rule 37BA of the Income-tax Rules, 1962 – Deduction of tax at source – Credit for tax deducted (Procedure of) – Assessment year 2011-12 –
👉Assessee was following cash system of accounting –
 👉He received certain amount as professional receipts after payer deducted tax at source under section 194J –
 👉Assessee claimed credit for prepaid taxes on account of TDS, even in respect of those professional receipts appearing in Form 26AS which were not shown by assessee as professional receipts in return of income for relevant year –
– In course of assessment, Assessing Officer made addition which had resulted because of mismatch between gross professional receipts as per Form 26AS and receipts shown by assessee in return of income
-Commissioner (Appeals) relying upon Rule 37BA, confirmed said addition on ground that assessee had taken credit of corresponding tax deducted at source
~Whether provisions under Rule 37BA do not authorize revenue to bring such amounts to tax which are not assessable during relevant year on basis of regular method of accounting followed by assessee – Held, yes –
~Whether, therefore, revenue could not, merely because credit for tax deducted at source was erroneously claimed by assessee, bring corresponding professional receipts to tax, if such receipts were otherwise not assessable as income in accordance with law – Held, yes –
~Whether in view of aforesaid, impugned order of Commissioner (Appeals) was to be set aside and matter was to be remanded back to recompute income of assessee in accordance with cash system of accounting followed by him – Held, yes [Para 4.2]
 [In favour of assessee/Matter remanded]

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