Assessee is an e commerce participant & selling goods through Amazon Seller Services (P) Ltd & Reliance Retail Ltd etc. Assessee has made a turnover of Rs1.39 crores through e-commerce operators on which TDS @ 1% has been deducted by the e-commerce platform operators. Out of the above sale, assessee has shown sales return of Rs 23.87 lakhs & the net sales turnover declared by the assessee for the year under consideration was at Rs.1.15 Cr. Assessee has claimed TDS credit of Rs 1,62,412 on the basis of Form No.26AS.   CPC, allowed the proportionate credit for TDS at Rs1,38,211 & according to   CPC as per Rule 37BA credit for TDS shall be allowed in the year in which income relatable to said TDS has been declared. CIT(A) upheld the AO’s order.

On appeal, Tribunal observed that  AO misunderstood the facts & observed that the assessee has reported only part of the turnover & not entire turnover on which TDS has been deducted, only on the basis of the turnover reported in financial statement, even though the assessee has reconciled the said turnover with sales return.  AO is erred in allowing credit for TDS on proportionate basis, even though the assessee has offered the income in total for the year under consideration.

Assessee has explained the said difference with the sales return & if the same is  considered, then the turnover declared by the assessee tallies with the turnover reported in Form 26AS with reference to TDS credit as per section 194O . Although, these facts has been explained to the  CIT (A), but the  CIT (A) based on assumption & presumption rejected the explanation of the assessee on the ground that if at all sales turnover is there, then the assessee must have replaced with other goods or refund gross amount including TDS amount. TDS has been deducted by the e-platform operators at the time of sales whereas the money is returned to the buyer after e-platform   deducted TDS. Tribunal ruled that the reasons given by the  CIT (A) .

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

This appeal filed by the assessee is directed against the order dated 19/12/2024 of the learned CIT (A)-NFAC Delhi, relating to A.Y.2023-24.

2. There is a delay of 29 days in filing the present appeal by the assessee before the Tribunal. The assessee has explained the reasons for such delay in filing the appeal. After considering the explanation of the assessee, we condone the delay of 29 days in filing the present appeal and admit the appeal for adjudication.

3. The brief facts of the case are that, the assessee is an individual carrying on the business of retail trading of electronic appliances in the trade name of M/s. Keerti Electron is through e-commerce platform operators i.e. Amazon Seller Service (P) Ltd and Reliance Retail Ltd, etc. The assessee has filed his return of income for the A.Y 2023-24 on 28/07/2023 by declaring total income of Rs.8,43,290/-. The assessee has reported his turnover at Rs.1,15,55,700 and declared profit from the business at Rs.6,94,235.83. The assessee has claimed credit for TDS as per Form No.26AS at Rs.1,62,412/-. The return of income filed by the assessee has been processed and intimation u/s 143(1) of the Act has been issued by the Assessing Officer, CPC. The Assessing Officer while processing the return of income has allowed TDS credit for Rs.1,38,211/- as against the claim of the assessee at Rs.1,62,412/- on the basis of Rule 37BA of the I.T. Rules, 1962 and observed that the appellant has reported total receipt of Rs.1,20,51,834/- whereas the total receipts as per Form 26AS from various deductors was at Rs.1,41,61,845/-. Therefore, allowed TDS on proportionate basis in terms of total receipts reported by the assessee to the total receipts as per Form No.26AS.

4.  Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT (A). Before the learned CIT (A) the assessee challenged the denial of credit for TDS in light of relevant provisions of Rule 37BA of the I.T. Rules, 1962 and provisions section of 194 O of the I.T. Act, 1961 and argued that, as per the provision of section 194 O of the Act, where sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform, such e-commerce operator shall, at the time of credit of amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier, deduct income-tax at the rate of one per cent of the gross amount of such sales or services or both. Further, there is a sales returns of Rs.23,87,202/- on which the e-commerce platform operators have already deducted TDS and reported in Form No.26AS. Therefore, he submitted that the provisions of Rule 37BA of the I.T. Rules is not applicable and therefore, the Assessing Officer should have allowed TDS as per From-26AS.

5. The learned CIT (A) after considering the relevant provisions of Rule 37BA, rejected the argument of the Assessing Officer and upheld the reasons given by the assessee to allow the proportionate credit for TDS by holding that although TDS has been deducted before the sales return happened, but the fact remains that against this sale return, the money is refunded by the purchaser, then the tax deducted may be adjusted in his sale against the same purchaser. No adjustment is required, if the sale return is replaced by the goods by the purchaser as in that case, the seller on which the tax was deducted u/s 194 O of the Act has been compensated with goods replaced. Thus, in common parlance, any prudent businessman will not complete the sales return transaction partly i.e. returning the consideration without the element of TDS. Therefore, held that there is no merit in the argument of the assessee and accordingly, dismissed the appeal filed by the assessee.

6. Aggrieved, the assessee is in appeal before the Tribunal.

7. The learned Counsel for the assessee submitted that the learned CIT (A) is erred in upholding the reasons given by the Assessing Officer to allow proportionate credit for TDS, even though the assessee has claimed TDS as per Form 26AS and further, the said claim is in accordance with Rule 37BA of the I.T. Rules, 1962. The learned Counsel for the assessee referring to the provisions of section 194 O of the Act has submitted that, as per section 194 O, where sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operators through his digital or electronic facility or platform, such e-commerce operator, at the time of credit of amount of sale or service or both to the account of e-commerce or at the time of payment thereof whichever is earlier deduct income tax @ 1% of the gross amount of such sales of serve or goods. The learned Counsel for the assessee, further referring to the provisions of section 52 of the GST Act submitted that as per the GST Act, every electronic commerce operation, not being an agent shall collect an amount calculated at such rate not exceeding 1% as may be notified by the Govt, of the net value of taxable sale made through it by other suppliers where the consideration with respect to such supply is to be collected by the operator. The learned Counsel for the assessee referring to the above provisions submitted that as per Income Tax, TDS has to be collected on gross sales, whereas as per GST, TDS has to be collected on net sales. The E-commerce Platform Operators like Amazon Seller Services (P) Ltd and Reliance Retail Ltd have deducted TDS on gross sales, whereas the appellant has reported net sales after sales return, however, claimed TDS has deducted by the e-commerce platform operators as per Form 26AS of the Act. Although, the assessee has explained the relevant details before the learned CIT (A), but the learned CIT (A) rejected the explanation furnished by the assessee on the presumption that the assessee has refunded money to the buyers including TDS even though fact remains that the assessee has accounted the sales return but the Platform Operator have deducted TDS on gross sales. Therefore, he submitted that the learned CIT (A) is erred in sustaining the reasons given by the Assessing Officer to allow proportionate credit for TDS and thus, requested to give a direction to allow credit as per Form 26AS.

8. On the other hand, the Sr. AR for the Revenue has supported the order of the learned CIT (A) and submitted that the fact with regard to the sales return is not explained by the assessee, whether the sales return are net of TDS or gross amount. In case, the assessee refunded the gross amount to the buyer then the question of allowing credit for TDS on gross amount does not arise. The learned CIT (A) after considering the relevant fact has rightly confirmed the reasons given by the Assessing Officer and thus, the order of the learned CIT (A) should be upheld.

9. We have heard the rival contentions, perused the relevant material available on record and gone through the orders of the authorities below. Provisions of section 194 O of the Act deals with payment of certain sums by e-commerce operators to e-commerce participants. As per the said provision, where sale of goods or provision of service of an e-commerce participant is facilitated by e-commerce operator, such e-commerce operator at the time of credit of amount or at the time of payment whichever is earlier deduct income tax @ 1% of the gross amount of such sale or service of goods. In the present case, the appellant is an e-commerce participant and selling goods through Amazon Seller Services (P) Ltd and Reliance Retail Ltd etc., The appellant has made a turnover of Rs.1,39,42,905.95 through e-commerce operators on which TDS @ 1% has been deducted by the e-commerce platform operators. Out of the above sale, the assessee has shown sales return of Rs.23,87,202.48 and the net sales turnover declared by the assessee for the year under consideration was at Rs.1,15,55,703.47. The assessee has claimed TDS credit of Rs.1,62,412/- on the basis of Form No.26AS. The Assessing Officer CPC, allowed the proportionate credit for TDS at Rs.1,38,211/- and according to the Assessing Officer CPC as per Rule 37BA of the I.T Rules,1962 credit for TDS shall be allowed in the year in which income relatable to said TDS has been declared.

10. We find that, the assessee has reported the income relatable to TDS credit of Rs.1,62,412/- for the year under consideration. However, the Assessing Officer misunderstood the facts and observed that the assessee has reported only part of the turnover and not entire turnover on which TDS has been deducted, only on the basis of the turnover reported in financial statement, even though the assessee has reconciled the said turnover with sales return. The assessee has reported sales return of Rs.23,87,202/- on which TDS has been deducted by the e-commerce platform operators. If we consider gross sales, sales return and net sales declared by the assessee, it tallies with the total sales achieved through e-commerce platform operators on which TDS has been deducted. Therefore, we are of the considered view that the Assessing Officer is erred in allowing credit for TDS on proportionate basis, even though the assessee has offered the income in total for the year under consideration. The reasons for the Assessing Officer to allow proportionate TDS is difference in turnover as per Form 26AS and turnover reported in the books. The assessee has explained the said difference with the sales return. If we consider sale return, then the turnover declared by the assessee tallies with the turnover reported in Form 26AS with reference to TDS credit as per section 194 O of the Act. Although, these facts has been explained to the learned CIT (A), but the learned CIT (A) based on assumption and presumption rejected the explanation of the assessee on the ground that if at all sales turnover is there, then the assessee must have replaced with other goods or refund gross amount including TDS amount. In our considered view, the TDS has been deducted by the e-platform operators at the time of sales whereas the money is returned to the buyer after e-platform operators deducted TDS. Therefore, in our considered view, the reasons given by the learned CIT (A) to reject the explanation of the assessee is on assumption and presumption, but not based on fact. Since the assessee has explained the reasons for difference in turnover and further made out a case that the total income pertains to TDS credit of Rs.1,62,412/- has been offered to tax for the year under consideration, in our considered view, the Assessing Officer ought to have allowed TDS of Rs.1,62,412/- as per Form 26AS. The learned CIT (A) without considering the relevant facts, has simply upheld the order of the Assessing Officer. Thus, we set aside the order of the learned CIT (A) and direct the Assessing Officer to allow credit for TDS of Rs.1,62,412/- as per Form No.26AS filed by the assessee.

11.  In the result, appeal filed by the assessee is allowed.

Order pronounced in the Open Court on 25th June, 2025.