The officer has passed a s.154 order shifting my TDS credit to the next year because the payer's accounting year is different from mine. Can he do that by rectification?
No. The Rajasthan High Court held that the credit belongs to the year in which the income is assessed in the recipient's hands, not the year fixed by the payer's accounting year or the date on the certificate, and in any event the point was at best debatable, so s.154 could not be used at all. The consequential withdrawal of s.214 interest and charging of s.215 interest also fell.
Decided by the High Court (Bench not shown in the text retrieved) on 1996-04-06, reported as [1996] 220 ITR 636 (Raj). It bears on section 199, section 154, section 203, section 194A, section 200, section 214, section 215 of the Income Tax Act 1961, in TDS Defaults, Assessment & Scrutiny and How Tax Law Is Read matters.
The year-of-credit dispute is now governed by Rule 37BA(3)(i), which says in terms that credit is given for the assessment year for which the income is assessable, and this is the High Court authority behind that rule - it is still being relied on by Tribunal benches deciding 26AS-in-the-wrong-year cases. The second holding is the one people forget: where two views are possible on the year of credit, the officer cannot reach the result by rectification. That converts a difficult merits argument into a jurisdictional one. The judgment also records the Madras view in Tanjore Permanent Bank that credit given where the corresponding income was never offered CAN be rectified - so the s.154 shield works only when the income has been offered in the year in which credit is claimed.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For AY 1977-78 the assessee, which kept accounts to the Diwali year, produced certificates from Surana Enterprises showing tax of Rs.30,100 deducted on 13 December 1976 and 28 February 1977, and the credit was allowed in the original assessment under s.143(3). The payer kept accounts to 30 June, and under the rules then in force had to deposit the deducted tax within two months of the end of the month in which its accounts were made up - which fell in AY 1978-79. The Inspecting Assistant Commissioner passed an order under s.154 holding it a mistake apparent from the record that credit had been given in AY 1977-78, withdrew the credit and directed it to be allowed in AY 1978-79, and also withdrew the interest allowed under s.214. The Commissioner (Appeals) set that order aside, holding that credit must be given in the year in which the income from which the deduction was made is taxed. The Tribunal restored the rectification, holding that s.199 admitted of only one interpretation. Two questions were referred to the High Court.
The reference was answered in favour of the assessee and against the Revenue. The Tribunal was not justified in holding that s.199 admits of only one interpretation - that credit follows the previous year in which the tax was deducted - and the Inspecting Assistant Commissioner was not competent to invoke s.154 to withdraw the credit; nor was the Tribunal justified in confirming the withdrawal of interest under s.214 and the charging of interest under s.215 (paras 13 and 14).
The tax deducted related to the income of the previous year 1976-77, so under the law then in force the following assessment year, 1977-78, was the year of credit; the law as it stood did not make the payer's accounting year relevant. The liability to deduct and to deposit is fastened on the payer, and the consequences of his failure are in s.201 - he can be treated as an assessee in default and prosecuted. Any ambiguity had been cleared by the 1987 amendment, which tied credit to the assessment year for which the income is assessable. The Madras decision in CIT v. Tanjore Permanent Bank Ltd. was distinguished on the facts: there, credit had been given although the income had not been offered for assessment, which could properly be rectified; here the income had been offered in AY 1977-78. Applying T.S. Balaram, ITO v. Volkart Brothers, a mistake apparent from the record must be obvious and patent and not a debatable point of law established by a long-drawn process of reasoning, and where two plausible views exist there is no such mistake.
If there are two plausible views, it cannot be considered to be a mistake apparent.
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Handle my notice → Ask a CA on WhatsAppNo. The Rajasthan High Court held that the credit belongs to the year in which the income is assessed in the recipient's hands, not the year fixed by the payer's accounting year or the date on the certificate, and in any event the point was at best debatable, so s.154 could not be used at all. The consequential withdrawal of s.214 interest and charging of s.215 interest also fell. This was decided by the High Court (Bench not shown in the text retrieved) and bears on section 199, section 154, section 203, section 194A, section 200, section 214, section 215 of the Income Tax Act 1961. It is reported as [1996] 220 ITR 636 (Raj). The year-of-credit dispute is now governed by Rule 37BA(3)(i), which says in terms that credit is given for the assessment year for which the income is assessable, and this is the High Court authority behind that rule - it is still being relied on by Tribunal benches deciding 26AS-in-the-wrong-year cases. The second holding is the one people forget: where two views are possible on the year of credit, the officer cannot reach the result by rectification. That converts a difficult merits argument into a jurisdictional one. The judgment also records the Madras view in Tanjore Permanent Bank that credit given where the corresponding income was never offered CAN be rectified - so the s.154 shield works only when the income has been offered in the year in which credit is claimed. If it applies to you, the first step is this: Show that the income on which the tax was deducted was offered to tax in the year for which credit is claimed; that is the foundation and without it the argument fails.
For AY 1977-78 the assessee, which kept accounts to the Diwali year, produced certificates from Surana Enterprises showing tax of Rs.30,100 deducted on 13 December 1976 and 28 February 1977, and the credit was allowed in the original assessment under s.143(3). The payer kept accounts to 30 June, and under the rules then in force had to deposit the deducted tax within two months of the end of the month in which its accounts were made up - which fell in AY 1978-79. The Inspecting Assistant Commissioner passed an order under s.154 holding it a mistake apparent from the record that credit had been given in AY 1977-78, withdrew the credit and directed it to be allowed in AY 1978-79, and also withdrew the interest allowed under s.214. The Commissioner (Appeals) set that order aside, holding that credit must be given in the year in which the income from which the deduction was made is taxed. The Tribunal restored the rectification, holding that s.199 admitted of only one interpretation. Two questions were referred to the High Court. The matter was decided on 1996-04-06 by the High Court (Bench not shown in the text retrieved). On those facts the High Court held as follows. The reference was answered in favour of the assessee and against the Revenue. The Tribunal was not justified in holding that s.199 admits of only one interpretation - that credit follows the previous year in which the tax was deducted - and the Inspecting Assistant Commissioner was not competent to invoke s.154 to withdraw the credit; nor was the Tribunal justified in confirming the withdrawal of interest under s.214 and the charging of interest under s.215 (paras 13 and 14).
The tax deducted related to the income of the previous year 1976-77, so under the law then in force the following assessment year, 1977-78, was the year of credit; the law as it stood did not make the payer's accounting year relevant. The liability to deduct and to deposit is fastened on the payer, and the consequences of his failure are in s.201 - he can be treated as an assessee in default and prosecuted. Any ambiguity had been cleared by the 1987 amendment, which tied credit to the assessment year for which the income is assessable. The Madras decision in CIT v. Tanjore Permanent Bank Ltd. was distinguished on the facts: there, credit had been given although the income had not been offered for assessment, which could properly be rectified; here the income had been offered in AY 1977-78. Applying T.S. Balaram, ITO v. Volkart Brothers, a mistake apparent from the record must be obvious and patent and not a debatable point of law established by a long-drawn process of reasoning, and where two plausible views exist there is no such mistake. In the words reproduced by the source cited on this page: "If there are two plausible views, it cannot be considered to be a mistake apparent." The decision followed or applied T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 (SC) - followed; CIT v. Tanjore Permanent Bank Ltd. [1984] 149 ITR 788 (Mad) - considered and distinguished.
It was decided by the High Court on 1996-04-06 and is reported as [1996] 220 ITR 636 (Raj). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 199, section 154, section 203, section 194A, section 200, section 214, section 215, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The reference was answered in favour of the assessee and against the Revenue. The Tribunal was not justified in holding that s.199 admits of only one interpretation - that credit follows the previous year in which the tax was deducted - and the Inspecting Assistant Commissioner was not competent to invoke s.154 to withdraw the credit; nor was the Tribunal justified in confirming the withdrawal of interest under s.214 and the charging of interest under s.215 (paras 13 and 14). It arises in TDS Defaults, Assessment & Scrutiny and How Tax Law Is Read matters, on section 199, section 154, section 203, section 194A, section 200, section 214, section 215 of the Income Tax Act 1961, and was decided by Bench not shown in the text retrieved. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Take the s.154 point first - if the officer is shifting credit between years, say that the question is at best debatable and outside the scope of rectification, citing Volkart Brothers. For years governed by the current law, plead Rule 37BA(3)(i) directly: credit is given for the assessment year for which the income is assessable, and where the income is assessable over several years, proportionately. Make clear that the payer's accounting year, the date on the certificate and the quarter in which the deductor filed its statement are all irrelevant to the recipient's year. Chase the consequential relief - interest under s.214/244A that was withdrawn, and interest under s.215/234B that was charged, both go with the credit.
Still good law. The statutory provisions it construed have since been replaced - s.199 was substituted with effect from 1 April 2010 and the year-of-credit rule now appears in Rule 37BA(3)(i) - but the result under the current rule is the same, and the judgment continues to be relied on: the Ahmedabad Bench of the Tribunal applied it in Adroit Structural Engineers Pvt. Ltd. on 20 December 2023 for the proposition that credit is not to be denied because the payer's assessment year of deduction differs from the recipient's. No full citator check was carried out. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The report retrieved carries no coram. The statutory provisions construed are historical: the pre-1987 s.199, which gave credit 'in the assessment ... made for the immediately following assessment year', and the s.199 as amended by Act No. 11 of 1987, which introduced the words 'for the assessment year for which such income is assessable'. Section 199 was substituted again with effect from 1 April 2010 and the year-of-credit rule now sits in Rule 37BA(3). Use this judgment for the principle and for the s.154 holding, not for the statutory text. Paragraph 13 as printed reads 'the Inspecting Assistant Commissioner (Assessment) was not competent to invoke jurisdiction under Section 154' while restating the question, which had been framed the other way round; the answer recorded in para 14 is in favour of the assessee. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The reference was answered in favour of the assessee and against the Revenue. The Tribunal was not justified in holding that s.199 admits of only one interpretation - that credit follows the previous year in which the tax was deducted - and the Inspecting Assistant Commissioner was not competent to invoke s.154 to withdraw the credit; nor was the Tribunal justified in confirming the withdrawal of interest under s.214 and the charging of interest under s.215 (paras 13 and 14).
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