When Mr Yadav from Etawah, Uttar Pradesh gave his property which was jointly owned by him and his mother and sister, on rent, State Bank of India (SBI) offered to take it at Rs 40.62 lakh annual rent.
On February 5, 2020, a lease deed was signed between Yadav, his mother and sister as co-owners/landlord and landladies and the tenant, SBI. The lease was set for the period from September 26, 2014 to September 25, 2024.
Also the sale deed mentioned Yadav and his mother and sister’s PAN and said that SBI must pay the rent to all the three lessors jointly. With this income, Yadav purchased a car for Rs 20.79 lakh. On February 3, 2021 Yadav filed his income tax return (ITR) for AY 2020-2021 declaring a total income of Rs 22.08 lakh.
After filing the ITR, everything was going fine in Yadav’s life when one day he got a tax notice under Section 148. Subsequently, on November 11, 2024, December 20, 2024 and December 30, 2024 he got Section 142(1) tax notice and reminders to reply to them. This is when Yadav got attentive to the tax issue and tried to explain it to the tax department.
The issue was the Income Tax Department’s software caught a mismatch between Yadav’s declared income and his purchases. Yadav being unaware of this mismatch initially had difficulty apprehending it but he tried to explain his income sources and submitted the evidence also.
The Income Tax Assessing Officer (AO) from ITO, Near Balram Singh Chauraha, Etawah, listened to Yadav and accepted his explanation for the source of funds for the car purchase and also accepted the SBI rent joint bank account issue but disagreed with the TDS on rent claim.
The AO found that according to Yadav’s Form 26AS, SBI deducted Rs 4.06 lakh TDS on rent paid, but Yadav reported only one-third of the rent received from SBI. So the AO therefore held that Yadav should get 1/3rd of the TDS credit i.e. Rs 1.35 lakh and accordingly prepared an assessment order on February 14, 2025.
Also read: Paying Rs 55,000 rent on time could not save salaried taxpayer from Rs 1 lakh penalty for missing TDS, know why
Feeling aggrieved, Yadav tried to convince the commissioner of appeals (CIT A) but failed to do so. Thus Yadav filed an appeal before the Income Tax Appellate Tribunal (ITAT) Agra. Chartered Accountant Rajesh Malhotra represented him before ITAT Agra.
Sunil Kumar Singh, Judicial Member and Brajesh Kumar Singh, Accountant Member of ITAT Agra heard his case on June 22, 2026 and passed their judgement on July 30, 2026. Yadav won the case.
Also read: Paying rent above Rs 50,000? Failure to deduct TDS can make you an assessee in default; know what to do
Mihir Tanna, associate director, S.K Patodia LLP says: For specified nature of income, income tax provisions distinguish the legal owner of income/asset with the beneficial owner of income/asset. Accordingly, in certain cases though income received by a particular person is taxable in the hands of another person.
Tanna says that for such types of cases, credit for TDS should be given to said a
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