TDS Reflected in Form 26AS Must Be Allowed Even if Return Was Not Filed | Biz Flow Kit

In a reassessment case, the Income Tax Department treated the entire income reflected in Form 26AS as taxable income for a Mumbai-based taxpayer. However, despite considering the income reported in Form 26AS, the department failed to allow credit for the tax already deducted at source (TDS).

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that once the income shown in Form 26AS is taxed, the income tax department cannot refuse the credit to the taxpayer for tax deducted at source (TDS) only on the grounds of non-submission of the ITR.

The tribunal noted that granting TDS credit is both “consequential and co-terminus” with the assessment of the respective income, and taxes already deducted and deposited with the government cannot be rejected on “technical grounds.”

U/s 147, the case involved a Navi Mumbai resident, one Soman, whose assessment for the FY 2010-11 was reopened based on the information in the annual information return (AIR) and Form 26AS exhibiting receipts (income) in his hand. The order of the ITAT does not mention the type of such income.

The IT officer completed the assessment ex parte and considered the entire receipts appearing in Form 26AS as taxable income due to non-filing of the return and not responding to notices under section 148 by Soman.

The taxpayer claimed before the ITAT that once the receipts were taxed, denying TDS credit would lead to double taxation and unjust enrichment for the revenue. Meanwhile, the IT department claimed that since no return had been submitted, no formal claim for TDS credit was made before the IT officer. The ITAT refused this claim and asked the IT officer to check the TDS from Form 26AS and grant credit for tax already deducted at source.

The ruling supports the principle that once the revenue relies on Form 26AS data and considers income as taxable, the related TDS credit shown in the same statement should be adhered to. Form 26AS has been substituted under the Income Tax Act of 2025 by a new annual information statement framework known as Form 168.

However, the fundamental principle remains the same: any taxes that have already been deducted and deposited with the government must be taken into account when calculating a taxpayer’s final liability.