NAVIN VINODKUMAR AGARWAL,THANE V. DCIT 14(1)(2), AAYAKAR ABHAVAN MUMBAI

ITA 8445/MUM/2025

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The case involves Navin Vinodkumar Agarwal, an individual deriving income from salary, who appealed against the order of the Additional/Joint Commissioner of Income-tax (Appeals)–7, Kolkata, for the Assessment Year 2018-19. The primary issue was the restricted allowance of Tax Deducted at Source (TDS) credit to the extent of 2,21,231/-, despite a higher TDS amount reflected in Form 26AS. The Central Processing Centre (CPC), Bengaluru, had processed the return and restricted the TDS credit, leading to the appeal. The CIT(A) upheld CPC's decision, citing that the assessee did not offer a differential amount claimed as non-taxable reimbursements to tax. The Tribunal, however, found merit in the assessee's arguments regarding the exempt allowances and directed a fresh examination of the claims.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840325 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 08-12-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARI
• Assessee Lawyers: MAHESH SABOO
• Keywords: Set aside; Salary income; TDS; Rectification of order; FORM 26AS
• Section: 154

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 8445/MUM/2025 Assessment Year: 2018-19 Navin Vinodkumar Agarwal, Villa No. 18, Palava Golf Links Dombivali East Thane, Thane-421204. Vs. DCIT 14(1)(2), Aayakar Bhavan, Churchgate, Mumbai-400020. PAN NO. AEKPA 7396 F Appellant Respondent Assessee by : Mr. Mahesh Saboo Revenue by : Mr. Swapnil Choudhari, Sr. DR Date of Hearing : 17/02/2026 Date of pronouncement : 23/02/2026 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against the order dated 04.12.2025 passed by Ld. Additional/Joint Commissioner of Income-tax (Appeals)–7, Kolkata [hereinafter ‘Ld. CIT(A)’], for the Assessment Year 2018-19. The solitary grievance of the assessee pertains to the restricted allowance of Tax Deducted at Source Printed from counselvise.com (TDS) credit to the exte ₹48,70,790/-, resulting in a short 2. Briefly stated, facts of the case are that the assessee individual deriving income from salary. For the year under consideration, the assessee filed re consideration on 29.03.2019 declaring total income at Rs.1,41,32,020/- The return was processed by the Central Processing Centre (CPC), Bengaluru, which restricted the TDS credit. Aggrieved the assessee filed rectification 09.09.2022 under Section 154 Act), seeking credit of the TDS of Rs.48,70,790/ without a speaking order, leading to the first appeal. 3. The Ld. CIT(A) sustained the action of the CPC, while the employer’s Form 16 reflected a gross salary of ₹1,61,83,715/-, the assessee reported only return of income. The Ld. CIT(A) invoked the mandate of 199 of the Act, which stipulates that TDS credit is co the offer of corresponding income to tax. Since the assessee purportedly failed to offer a differential amount of (claimed as non-taxable reimbursements), the Ld. CIT(A) held th the corresponding tax deducted on such amount could not be credited to the assessee. reproduced as under: Navin Vinodkumar Agarwal ITA No. 8445/MUM/2025 (TDS) credit to the extent of ₹46,49,559/- against a claim of , resulting in a short-credit of ₹2,21,231/ Briefly stated, facts of the case are that the assessee individual deriving income from salary. For the year under the assessee filed return of income for the year under consideration on 29.03.2019 declaring total income at The return was processed by the Central Processing Centre (CPC), Bengaluru, which restricted the TDS Aggrieved the assessee filed rectification application dated Section 154 of the Income Tax Act, 1961 (the seeking credit of the TDS of Rs.48,70,790/-, but without a speaking order, leading to the first appeal. The Ld. CIT(A) sustained the action of the CPC, while the employer’s Form 16 reflected a gross salary of , the assessee reported only ₹1,54,42,015/ return of income. The Ld. CIT(A) invoked the mandate of of the Act, which stipulates that TDS credit is co the offer of corresponding income to tax. Since the assessee purportedly failed to offer a differential amount of taxable reimbursements), the Ld. CIT(A) held th the corresponding tax deducted on such amount could not be credited to the assessee. The relevant finding of ld CIT(A) is : Navin Vinodkumar Agarwal 2 ITA No. 8445/MUM/2025 against a claim of 2,21,231/-. Briefly stated, facts of the case are that the assessee is an individual deriving income from salary. For the year under turn of income for the year under consideration on 29.03.2019 declaring total income at The return was processed by the Central Processing Centre (CPC), Bengaluru, which restricted the TDS application dated of the Income Tax Act, 1961 (the , but was rejected without a speaking order, leading to the first appeal. The Ld. CIT(A) sustained the action of the CPC, reasoning that while the employer’s Form 16 reflected a gross salary of 1,54,42,015/- in the return of income. The Ld. CIT(A) invoked the mandate of Section of the Act, which stipulates that TDS credit is co-extensive with the offer of corresponding income to tax. Since the assessee purportedly failed to offer a differential amount of ₹7,41,700/- taxable reimbursements), the Ld. CIT(A) held that the corresponding tax deducted on such amount could not be The relevant finding of ld CIT(A) is Printed from counselvise.com “5.1 I have carefully gone through the rectification order u/s 154, the grounds of appeal and submission made regard. Briefly stating facts of the case is that the appellant filed rectified return of income which was processed u/s 154 of the I.T. Act by CPC making certain adjustments over and above the returned income. The only issue invol credit of TDS as claimed in the return was not allowed by CPC in the impugned order u/s 154. 5.2 The appellant has raised only one ground of appeal against the action of AO, CPC in not allowing credit of full TDS as claimed in return of income and without assigning any reason. Facts involved in the issue is that the appellant is a salaried employee and filed return of income u/s 139(4) of the I.T. Act. CPC issued a defective notice u/s 139(9) of the Act in respect of the sa to the said notice, appellant filed a rectified return of income on 03.08.2020 disclosing taxable income of Rs.1,41,32,020/ claiming credit of TDS for Rs.48,70,790/ by order u/s 154 dated 24.08.2020 ac but allowing credit of TDS to the extent of only Rs.46,49,559/ Appellant filed rectification request with CPC against the said order against which another order u/s 154 dated 09.09.2020 was passed by CPC but without modifying 24.08.2020. Appellant claimed that TDS of Rs.48,70,790/ reflected in Form 26AS and CPC resorted to short credit of TDS without assigning any reason. In order to verify the matter, the return of income (as available in appe portal), Form 26AS and Form 16 issued by employer were examined. It is noted that gross salary paid by employer was Rs.1,61,83,715/ whereas appellant reported gross salary of only Rs in the return of income. The appellant claimed that the shortfall of Rs.7,41,700/ the employer. The appellant was asked by notice dated 23.11.2025 to obtain certificate from the employer tha Rs.7,41,700/ response to the said notice, the appellant filed reply dated 28.11.2025 where he submitted many other details and documents but did not submit any clarification from employer t reimbursement. In this regard, two things are required to be highlighted. First, Clause 7 of Schedule S (Details of Income from Salary) of the return of income is specifically meant for reporting any exempt allowances included within salary. But app reported the same at 'nil'. Second, as to why employer will include any reimbursement of expenses paid to their employee within the gross salary as 'reimbursement' is not in the nature of salary. As per the provisions of section 199, credit of TDS s Navin Vinodkumar Agarwal ITA No. 8445/MUM/2025 5.1 I have carefully gone through the rectification order u/s 154, the grounds of appeal and submission made by the appellant in this regard. Briefly stating facts of the case is that the appellant filed rectified return of income which was processed u/s 154 of the I.T. Act by CPC making certain adjustments over and above the returned income. The only issue involved in this case is that full credit of TDS as claimed in the return was not allowed by CPC in the impugned order u/s 154. 5.2 The appellant has raised only one ground of appeal against the action of AO, CPC in not allowing credit of full TDS as claimed in return of income and without assigning any reason. Facts involved in the issue is that the appellant is a salaried employee and filed return of income u/s 139(4) of the I.T. Act. CPC issued a defective notice u/s 139(9) of the Act in respect of the said return. In response to the said notice, appellant filed a rectified return of income on 03.08.2020 disclosing taxable income of Rs.1,41,32,020/ claiming credit of TDS for Rs.48,70,790/-. CPC processed the return by order u/s 154 dated 24.08.2020 accepting the returned income but allowing credit of TDS to the extent of only Rs.46,49,559/ Appellant filed rectification request with CPC against the said order against which another order u/s 154 dated 09.09.2020 was passed by CPC but without modifying the earlier order dated 24.08.2020. Appellant claimed that TDS of Rs.48,70,790/ reflected in Form 26AS and CPC resorted to short credit of TDS without assigning any reason. In order to verify the matter, the return of income (as available in appellant's profile in e portal), Form 26AS and Form 16 issued by employer were examined. It is noted that gross salary paid by employer was Rs.1,61,83,715/- on which TDS of Rs.48,70,790/- was deducted whereas appellant reported gross salary of only Rs.1,54,42,015/ in the return of income. The appellant claimed that the shortfall of Rs.7,41,700/- was non taxable reimbursement of expenses paid by the employer. The appellant was asked by notice dated 23.11.2025 to obtain certificate from the employer that they had paid Rs.7,41,700/- as non taxable reimbursement to the appellant. In response to the said notice, the appellant filed reply dated 28.11.2025 where he submitted many other details and documents but did not submit any clarification from employer t reimbursement. In this regard, two things are required to be highlighted. First, Clause 7 of Schedule S (Details of Income from Salary) of the return of income is specifically meant for reporting any exempt allowances included within salary. But app reported the same at 'nil'. Second, as to why employer will include any reimbursement of expenses paid to their employee within the gross salary as 'reimbursement' is not in the nature of salary. As per the provisions of section 199, credit of TDS shall be allowed to Navin Vinodkumar Agarwal 3 ITA No. 8445/MUM/2025 5.1 I have carefully gone through the rectification order u/s 154, by the appellant in this regard. Briefly stating facts of the case is that the appellant filed rectified return of income which was processed u/s 154 of the I.T. Act by CPC making certain adjustments over and above the ved in this case is that full credit of TDS as claimed in the return was not allowed by CPC in 5.2 The appellant has raised only one ground of appeal against the action of AO, CPC in not allowing credit of full TDS as claimed in the return of income and without assigning any reason. Facts involved in the issue is that the appellant is a salaried employee and filed return of income u/s 139(4) of the I.T. Act. CPC issued a defective id return. In response to the said notice, appellant filed a rectified return of income on 03.08.2020 disclosing taxable income of Rs.1,41,32,020/- and . CPC processed the return cepting the returned income but allowing credit of TDS to the extent of only Rs.46,49,559/-. Appellant filed rectification request with CPC against the said order against which another order u/s 154 dated 09.09.2020 was the earlier order dated 24.08.2020. Appellant claimed that TDS of Rs.48,70,790/- was well reflected in Form 26AS and CPC resorted to short credit of TDS without assigning any reason. In order to verify the matter, the llant's profile in e- filing portal), Form 26AS and Form 16 issued by employer were examined. It is noted that gross salary paid by employer was was deducted .1,54,42,015/- in the return of income. The appellant claimed that the shortfall of was non taxable reimbursement of expenses paid by the employer. The appellant was asked by notice dated 23.11.2025 t they had paid as non taxable reimbursement to the appellant. In response to the said notice, the appellant filed reply dated 28.11.2025 where he submitted many other details and documents but did not submit any clarification from employer towards reimbursement. In this regard, two things are required to be highlighted. First, Clause 7 of Schedule S (Details of Income from Salary) of the return of income is specifically meant for reporting any exempt allowances included within salary. But appellant reported the same at 'nil'. Second, as to why employer will include any reimbursement of expenses paid to their employee within the gross salary as 'reimbursement' is not in the nature of salary. As hall be allowed to Printed from counselvise.com that taxpayer and in that year in whose name and in which year the corresponding income is offered to tax. Since the appellant failed to offer income to the extent of Rs.7,41,700/ TDS to the extent of Rs.2,21,231/ There is no infirmity in the action of CPC and is upheld. The appeal is accordingly dismissed. 4. Before us, the Ld. counsel for the assessee referred to the Paper Book page 4 which is form No. 16 Department’s portal source (TDS) returns filed by the deductor of tax at source According to the said Rs.1,61,83,715/- was credited as gross salary and tax of Rs.48,70,790/- was deducted. The Paper Book page 6, according to which gross salary of Rs.1,59,86,215/- was credited to the assessee and after reducing the tax exempt allowance like conveyance allowance (Rs.19,200/ medical allowance (Rs.15,000/ (Rs.5,10,000/-) aggregating to Rs.5,44,200/ reimbursements, net salary was offered to tax. of the assessee that the Ld. Assessing Officer and the Ld. CIT(A) has not considered the claim of the assessee of exempted allowance and restricted the credit of the TDS 5. We have heard rival submission and persused the material on record. The crux of the dispute lies in the mechanical application of the \"matching principle\" under with Rule 37BA of Income Navin Vinodkumar Agarwal ITA No. 8445/MUM/2025 that taxpayer and in that year in whose name and in which year the corresponding income is offered to tax. Since the appellant failed to offer income to the extent of Rs.7,41,700/- to tax, corresponding TDS to the extent of Rs.2,21,231/- was also not allowed credit. There is no infirmity in the action of CPC and is upheld. The appeal is accordingly dismissed.” Before us, the Ld. counsel for the assessee referred to the Paper Book page 4 which is form No. 16, generated from the nt’s portal on the basis of quarterly tax deducted at source (TDS) returns filed by the deductor of tax at source According to the said Form No. 16, total amount of was credited as gross salary and tax of was deducted. The assessee further referred to the Paper Book page 6, according to which gross salary of was credited to the assessee and after reducing exempt allowance like conveyance allowance (Rs.19,200/ medical allowance (Rs.15,000/-), house rent allowance aggregating to Rs.5,44,200/- , net salary was offered to tax. It is the contention of the assessee that the Ld. Assessing Officer and the Ld. CIT(A) has not considered the claim of the assessee of exempted allowance and restricted the credit of the TDS accordingly. 5. We have heard rival submission and persused the The crux of the dispute lies in the mechanical application of the \"matching principle\" under Section 199 of Income-tax Rules, 1962. The Revenue’s stand is Navin Vinodkumar Agarwal 4 ITA No. 8445/MUM/2025 that taxpayer and in that year in whose name and in which year the corresponding income is offered to tax. Since the appellant failed to tax, corresponding was also not allowed credit. There is no infirmity in the action of CPC and is upheld. The appeal Before us, the Ld. counsel for the assessee referred to the , generated from the on the basis of quarterly tax deducted at source (TDS) returns filed by the deductor of tax at source. total amount of was credited as gross salary and tax of assessee further referred to the Paper Book page 6, according to which gross salary of was credited to the assessee and after reducing exempt allowance like conveyance allowance (Rs.19,200/-), rent allowance besides other It is the contention of the assessee that the Ld. Assessing Officer and the Ld. CIT(A) has not considered the claim of the assessee of exempted allowance and 5. We have heard rival submission and persused the relevant The crux of the dispute lies in the mechanical Section 199 read tax Rules, 1962. The Revenue’s stand is Printed from counselvise.com that if a portion of the \"gross salary\" is not refl salary,\" the tax deducted on that portion must be forfeited. We find this interpretation to be narrow and legally flawed. 5.1 In a salaried employment structure, tax is deducted on the estimated income under under Section 2(24) may be exempt under whole of the payment, the credit cannot be denied merely because a component of that payment is legally exempt from the char To do so would result in the State retaining tax on income that is admittedly not taxable, which is contrary to Constitution of India. 5.2 Upon a perusal of the records, we find that the lower authorities have failed to factua allowances\" and \"reimbursements\" claimed by the assessee. If these amounts are indeed exempt under the law, the mere fact that they reduce the \"taxable income\" below the \"gross salary\" reflected in Form 16 cannot be a g deducted and paid to the credit of the Central Government. 5.3 However, the claim of exempt allowances requires a factual verification with supporting certificates, we deem it fit to the impugned order and Assessing Officer (AO) for a fresh adjudication. The assessee is Navin Vinodkumar Agarwal ITA No. 8445/MUM/2025 that if a portion of the \"gross salary\" is not reflected as \"taxable salary,\" the tax deducted on that portion must be forfeited. We find this interpretation to be narrow and legally flawed. In a salaried employment structure, tax is deducted on the estimated income under Section 192. The \"income\" as d Section 2(24) includes various components, some of which may be exempt under Section 10. If the tax is deducted on the whole of the payment, the credit cannot be denied merely because a component of that payment is legally exempt from the char To do so would result in the State retaining tax on income that is admittedly not taxable, which is contrary to Article 265 Constitution of India. Upon a perusal of the records, we find that the lower authorities have failed to factually verify the nature of the \"exempt allowances\" and \"reimbursements\" claimed by the assessee. If these amounts are indeed exempt under the law, the mere fact that they reduce the \"taxable income\" below the \"gross salary\" reflected in Form 16 cannot be a ground to deny the full credit of tax actually deducted and paid to the credit of the Central Government. However, the claim of exempt allowances requires a factual verification with supporting certificates, we deem it fit to er and restore the matter to the file of the Assessing Officer (AO) for a fresh adjudication. The assessee is Navin Vinodkumar Agarwal 5 ITA No. 8445/MUM/2025 ected as \"taxable salary,\" the tax deducted on that portion must be forfeited. We find In a salaried employment structure, tax is deducted on the . The \"income\" as defined includes various components, some of which . If the tax is deducted on the whole of the payment, the credit cannot be denied merely because a component of that payment is legally exempt from the charge of tax. To do so would result in the State retaining tax on income that is Article 265 of the Upon a perusal of the records, we find that the lower lly verify the nature of the \"exempt allowances\" and \"reimbursements\" claimed by the assessee. If these amounts are indeed exempt under the law, the mere fact that they reduce the \"taxable income\" below the \"gross salary\" reflected in round to deny the full credit of tax actually deducted and paid to the credit of the Central Government. However, the claim of exempt allowances requires a factual verification with supporting certificates, we deem it fit to set aside the matter to the file of the Assessing Officer (AO) for a fresh adjudication. The assessee is Printed from counselvise.com directed to provide a detailed reconciliation between the Gross Salary as per Form 26AS/Form 16 and the taxable salary reported in the return. The AO shall, after verifying the exempt nature of the allowances in accordance with the law, allow the consequential TDS credit. 5.4 The sole ground of appeal of the assessee is allowed for statistical purposes. 6. In the result, the appeal of the assessee statistical purposes. Order pronounced in the open Court on Sd/- (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 23/02/2026 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Navin Vinodkumar Agarwal ITA No. 8445/MUM/2025 directed to provide a detailed reconciliation between the Gross Salary as per Form 26AS/Form 16 and the taxable salary reported AO shall, after verifying the exempt nature of the allowances in accordance with the law, allow the consequential TDS The sole ground of appeal of the assessee is allowed for In the result, the appeal of the assessee statistical purposes. ounced in the open Court on 23/02/2026. Sd/ (KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Navin Vinodkumar Agarwal 6 ITA No. 8445/MUM/2025 directed to provide a detailed reconciliation between the Gross Salary as per Form 26AS/Form 16 and the taxable salary reported AO shall, after verifying the exempt nature of the allowances in accordance with the law, allow the consequential TDS The sole ground of appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for /02/2026. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "