Tribunal Rules Seller Cannot Be Denied TDS Credit Due to Buyer’s Late Payment

A seller sold property in the financial year 2021-22 and paid tax for that year. The buyer deposited TDS late, which caused a discrepancy. The Tribunal ruled that the seller should not be penalised for the buyer’s delay and ordered that the TDS credit must be given in the correct year, i.e., AY 2022-23.

The present appeal has been filed by a taxpayer named Abdul Rahman Asad (Appellant) against the DCIT, Circle Int. Tax 1(1)(1), New Delhi (Respondent), in the Income Tax Appellate Tribunal (ITAT) Benches ‘D’: New Delhi, before Shris. Rifaur Rahman (Accountant Member) and Shri Yogesh Kumar U.S. (Judicial Member). The case is related to the assessment year 2022-23 and was decided on November 12, 2025. The assessee challenged an order dated March 03, 2025, passed by the Commissioner of Income-tax (Appeals), Delhi – 42 [“Ld. CIT(A)”].

Background of Case:

The assessee is a Non-Resident of India (NRI) and on July 27, 2022, filed his income tax return (ITR) for the assessment year 2022-23, disclosing a total taxable income of Rs. 486,560. Where it declared that he generated income of Rs. 464,444 from his house property, Rs. 32,115 from his income from other sources, and Rs. 555,123 generated as loss from the long-term capital gain (LTGC), resulting in claiming the prepaid tax of Rs. 21,60,112 against the total tax payable of Rs. 12,301. While processing his ITR, the assessing officer allowed the TDS of Rs. 60,872, against the claim of prepaid taxes of Rs. 21,60,112. The Centralised Processing Centre (CPC) did not allow the credit of TDS of Rs. 20,99,240, which was deducted/deposited on the sale of the immovable property by the buyer of the property.

Dissatisfied assessee then filed an appeal before the CIT(A), Delhi-42. However, they refused to allow the TDS credit made in assessment year 2022-23, saying it was deposited in the next year.

Assessee’s Arguments:

The assessee argued that the sale occurred in September 2021, so the income was correctly declared in the assessment year 2022-23. According to Sections 45 and 199 of the Income Tax Act, income is taxable in the year of transfer (not when TDS is deposited). He also filed Form 71, which allows the Assessing Officer to give TDS credit in the correct year if the buyer deposited it late.

ITAT’s Findings

The Income Tax Appellate Tribunal (ITAT) endorsed the arguments of the assessee. It was observed that the sales and income clearly belong to AY 2022-23. It was not the fault of the seller that the buyer deposited TDS late. Section 155(20) and Rule 134 permit the assessee to get TDS credit by filing Form 71, even if the buyer deposited it later.

In the final decision, the ITAT allowed the assessee’s appeal and directed the assessing officer to allow the assessee’s TDS credit of Rs. 20,99,240 for AY 2022-23.