Short allowance of Claimed TDS by rectification without giving proper hearing - professional income - cash basis of accounting TDS mismatches

Facts:

Assessee a professional LLP had claimed a TDS credit of Rs. 4.3 crores. While passing assessment order TDS allowed was Rs. 4.1 crores. The reason for difference in TDS was assessee was following cash basis while their customers were on mercantile basis of accounting. The mismatch of overlapping TDS of TDS pertaining to earlier years was also explained adequately by the assessee. Assessee preferred a rectification and while passing rectification order AO further made the allowable TDS credit as Rs. 2.1 crores. CIT(A) upheld the orders of the AO's rectification. On higher appeal with the plea that to enhance income by short allowing TDS via rectification, the AO ought to have given a proper notice/hearing and in the absence of the same the rectification itself was invalid.

Held in favour of the assessee. The ITAT directed the AO to verify and allow the TDS claims of the assessee.

Ed. Note: Reference be made to the Finance Bill, 2023 proposed insertion of Section 155(20) and the article titled - Correcting mismatches in TDS published by Tax publishers for a detailed reading.

Case: Kalyaniwalla & Mistry LLP v. Asstt. DIT 2023 TaxPub(DT) 1156 (Mum-Trib)