I-T Dept. cannot deny advance tax credit inadvertently left unclaimed in ITR

The Mumbai ITAT, while considering the issue of the Assessee’s eligibility to receive credit of advance tax deposited but mistakenly not claimed while filing returns, held that inadvertent omission by the Assessee to claim the credit for the advance tax while filing its original return or revised return, did not absolve the AO from its statutory duty as per Section 219 of the Income Tax Act to grant the credit in the regular assessment, more so when the advance tax amount is duly reflected in Form 26AS, which forms part of the Department’s records.

A Division Bench of BR Baskaran, Accountant Member, and Sandeep Singh Karhail, Judicial Member, observed that the Assessing Officer (AO) had erred in not considering this aspect while passing the assessment order, and therefore directed the AO to grant credit of advance tax of about Rs 1.10 Crores deposited by the Assessee.

The Appellant-Assessee was represented by Mr. Manish Kanth, whereas the Respondent-Revenue was represented by Ms. Mahita Nair.

The Assessee is engaged in the business of providing freight forwarding and supply chain management services to global customers of DAMCO Group. It filed returns for the relevant year, declaring income of about Rs 18.58 Crores. On assessment, the AO assessed the income at about Rs 38 Crores.

On appeal, the ITAT allowed partial relief to the Assessee. Subsequently, the Assessee noticed that advance tax of about Rs 1.10 Crores had been paid for the relevant AY. As the time limit for filing revised return had lapsed, the Assessee filed application under Section 154 for rectification of mistake apparent on record in the assessment order passed by the AO.

However, the AO rejected this application on grounds of delay, namely that it was filed after lapse of three years from the date of passing the assessment order. These findings of the AO were upheld by the Commissioner of Income Tax (Appeals).

On considering the contentions of both parties, the Bench observed that the advance tax amounts paid by the Assessee were duly reflected in the Form 26AS furnished by the Assessee and that it was not related to any fresh claim of allowance or deduction.

The Bench further observed there to be no need to verify with documentation as to whether the Assessee sought credit of TDS and co-related with corresponding income. The Bench also referred to Section 219 of the Income Tax Act 1961, which mandates that credit of advance tax shall be given to the assessee in regular assessment.

Considering the facts as well as the relevant provisions under the Income Tax Act 1961, the Bench noted that inadvertence on part of Assessee to claim credit of advance tax while filing return or revised return, did not absolve the AO from statutory duty under Section 219 of the Act, to grant such credit in the regular assessment, more so where the amount duly reflects in Form 26AS, which further forms part of the Department’s records.

With these observations, the AO was directed to grant credit of the advance tax deposited.

Cause Title: Damco India Pvt. Ltd Vs Commissioner of Income Tax (Appeals) [ ITA No.140/Mum/2022 / 2023-Enterslice-8-ITAT-Del]

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Damco-India-verses-CIT