TDS cannot be denied even if I-T return is not filed: ITAT

Mumbai: In a peculiar case, income-tax officials during reassessment considered the entire income reflected in Form 26AS as taxable in the hands of a Mumbai based taxpayer. However, no credit was given for tax that had been deducted at source (TDS).

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that once income reflected in Form 26AS is taxed, the income tax department cannot deny the taxpayer credit for tax deducted at source (TDS) merely because no Income-tax (I-T) return was filed.

The tribunal observed that granting TDS credit is “consequential and co-terminus” with the assessment of the corresponding income and that taxes already deducted and deposited with the govt cannot be denied on “technical grounds”.

The case involved a Navi Mumbai resident, one Soman, whose assessment for the financial year 2010-11 was reopened under Section 147 on the basis of information in the annual information return (AIR) and Form 26AS which showed certain receipts (income) in his hand. The ITAT order does not specify the nature of such income.

Since Soman had not filed an I-T return nor responded to notices under Section 148, the I-T officer completed the assessment ex-parte and treated the entire receipts appearing in Form 26AS as taxable income.

The taxpayer successfully argued before the ITAT that once the receipts were brought to tax, denial of TDS credit would amount to double taxation and unjust enrichment of the revenue. The I-T department, on the other hand, contended that since no I-T return had been filed, no formal claim for TDS credit was made before the I-T officer. The ITAT did not agree with this contention and directed the I-T officer to verify the TDS from Form 26AS and grant credit for tax already deducted at source.

Tax experts say the ruling reinforces the principle that once the revenue relies on Form 26AS data and treats income as taxable, the corresponding TDS credit reflected in the same statement must necessarily follow. While Form 26AS has now been replaced under the Income-Tax Act, 2025, by the new annual information statement framework in Form 168, the underlying principle remains unchanged — taxes already deducted and deposited with the govt cannot be ignored when computing a taxpayer’s final liability.Get the latest lifestyle updates on Times of India, along with Bakrid wishes, messages and eid 2026