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Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Before: Shri Sanjay Garg
order : June 09, 2023 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The present appeals have been preferred by the assessee against the separate orders dated 22.09.2021 & 06.10.2021 respectively of the National Faceless Appeal Centre (hereinafter referred to as the ‘CIT(A)’) passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). Since, common issues are involved in both the appeals, hence these have been heard together and are being disposed of by this common order. The appeal in 2019-20 is taken as lead case for the purpose of narration of facts.
ITA 514/Kol/2021 – The assessee has taken the following grounds of appeal: &514/Kol/2021 Assessment years: 2018-19 & 2019
20. Anirudh Bhuwalka
1. a.(i) The ld. CIT(A) erred in law and on facts in not adjudicating the issue in appeal raised by your appellant in Ground No. 1&2 of the appeal filed before him along with Form 35 on 16.07.2020 wherein your appellant had claimed that by operation of section 205 or otherwise once the tax was deducted at source by the payer, the credit for the same should be given to the payee irrespective of the fact of depositing the deducted tax by the payer with the Government of India in its Treasury Department. In as much as on such deduction the payee became fully entitled to claim the credit of such tax so deducted which could not have been denied by the AO. a.(ii) Your appellant submits that the fact that the tax was deducted at source by the payer is not in dispute and the credit therefore was allowable in accordance with law and section 205 of the Act and also instruction no. 275/29/2014-IT-(B) dt. 01.06.2015. a.(iii) Your appellant prays that the credit for the amount of Rs. 10,09,289 being TDS be allowed in computing the tax payable by your appellant. 2. b.(i) The Ld. CIT(A) erred in adjudicating the appeal vide his order dt. 06.10.2021 without giving any opportunity of hearing to your appellant. b.(ii) Your appellant strongly submits that it was denied the opportunity of hearing as also representing its case in appeal and the CIT(A) has passed the order in gross violation of the provisions of natural justice, equity and fairness. b.(iii) Your appellant prays that the orders of the CIT(A) and that of the AO be quashed. 3. c. The ld. CIT(A) erred in law and on facts in not appreciating that the ld. A.O had issued the intimation u/s 143(1) by: i. Making an unauthorized adjustment in computing the tax liability of the appellant and ii. By not issuing any prior intimation as required by s. 143(1) of the adjustment to the tax payable claimed by your appellant while filing the return of income resulting into denial of an opportunity.
As per the statement of facts furnished by the assessee, the brief facts of the case are that “the assessee herein filed his Return of income for Assessment Year 2019-20 electronically on 30.12.2019 declaring a total income of Rs. 37,87,390/- and claiming refund at Rs.36,360/.
&514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka During the year under consideration, the assessee had earned salary income of Rs. 39,02,400/- from M/s. AMW Motors Limited on which allegedly tax was deducted at source under Section 192 of the Act amounting to Rs. 10,09,289/-. In the Return of income, the assessee had duly filed the details of tax deducted at source (TDS) of Rs. 10,09,289/- in the relevant schedule therein. The Return was processed by CPC, Bengaluru vide Intimation under Section 143(1) of the Income Tax Act, 1961 ("the Act") dated 26.05.2020, wherein the claim of TDS of Rs. 10,09,289/- was not allowed to the assessee company as the same was not reflecting in Form 26AS. Consequentially, interest under Sections 234B and 234C of the Act were charged at Rs. 1,36,206/- and Rs. 49,129/- respectively in the said Intimation, determining a total demand of Rs. 11,58,260/-.
Being aggrieved by the action of the C.P.C/Assessing Officer in not granting the benefit of TDS deducted by his employer, assessee preferred appeal before the CIT(A). It was contended before the CIT(A) that the provisions of Section 205 of the Act, where tax is deductible at source under the provisions of the Act, and has been so deducted, the assessee shall not be called upon to pay the tax himself to the extent of deduction so made. That in the instant case, it was for the department to recover such amount from the deductor and take action against him as may be warranted, in law, but the same could not be levied once again on the assessee who had suffered the deduction. Thus, the demand determined under the Intimation was thus bad in law, against the principles of natural justice and fair play. &514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka
The ld. CIT(A) considering the above submissions of the assessee, passed the following directions:
“I have considered the grounds of appeal
, gone through the submissions of the appellant and seen the order of the AO u/s. 143(1) of the Act. The grounds of appeal relate to denial of TDS credit which according to the appellant was deducted from his salary income but is not appearing in Form
26. AS and as a result demand along with interest u/s 234B and 234C has been levied upon him. Considering the facts and circumstances of the case I deem it fit to refer the matter to the AO who will examine the claims of the appellant and allow necessary relief/ credit permissible by law. Subject to the above the appeal is allowed.” However, the assessee did not get satisfied with the above directions of the CIT(A) and has come further in appeal before this Tribunal.
Earlier, the case was fixed on 31.01.2022 but no one put in appearance on behalf of the assessee. The appeal of the assessee was dismissed by the Tribunal on merits observing as under:
“4. A perusal of the above grounds of appeal reveals that the main grievance of the assessee is that he has not been given the credit of the taxes deducted at source by the payer.
5. A perusal of the impugned orders of the Ld. CIT(A) reveals that the ld. CIT(A) after considering the submissions of the assessee has directed the Assessing Officer (for short ‘A.O’) to verify the claim of the assessee and allow the necessary credit of the taxes paid/deducted at source as per law. Since the ld. CIT(A) has already granted relief to the assessee by directing the A.O to verify the claim of the assessee, I therefore do not find any reason to interfere in the order of the ld. CIT(A). The appeals of the assessee are, therefore, dismissed.”
7. Though the ld CIT(A) had directed the Assessing Officer to look into and verify the claim of the assessee and allow the necessary permissible relief, still the assessee preferred appeal to this Tribunal. The Tribunal also took note of the fact that the Ld. CIT(A), has already granted the relief to assessee, however, since the appeal of the assessee was decided &514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka ex parte of the assessee by this Tribunal, therefore, the assessee preferred appeal before the Hon’ble High Court of Calcutta, whereupon, the Hon’ble Calcutta High Court vide order dated 06.09.2022 in ITAT/163/2022, IA No.GA/1/2022 restored the matter to the Tribunal with a direction to decide the appeals of the assessee afresh. The operating part of the order of the Hon’ble High Court of Calcutta is reproduced as under:
“For all the above reasons, the appeal (ITAT 163/2022) is allowed and the order passed by the learned tribunal is set aside and the appeals are restored to the file of the learned tribunal to be heard and decided on merits in accordance with law. The appellant is directed to appear before the tribunal on the date fixed by the tribunal without seeking unnecessary adjournment and shall proceed to co-operate with the tribunal for expeditious disposal of the appeal. Consequently, the substantial questions of law are left open.” In view of the above directions of the Hon’ble Calcutta High Court, the appeal was restored and listed for hearing.
The ld. Counsel for the assessee has submitted that if the employer or payer of the assessee did not deposit the tax deducted at source out of salary payable to the assessee, the assessee cannot be burdened with the tax liability and that the assessee may be given the credit of the TDS deducted at source by his employer and after setting off of the tax demand, the balance amount be refunded to the assessee.
In view of the above submissions of the ld. Counsel, this Tribunal passed the following order on 18.01.2023:
“The 1d. AR of the assessee has submitted that in this case though the employer of the assessee had deducted TDS but the same was not deposited with the Department, for which, there was no fault of the assessee. Further that the Department has refused to give credit of the &514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka said TDS deducted by the employer of the assessee. The ld. counsel for the assessee is directed to furnish the details of the employer along with name, address, PAN number etc. Adjourned on 8th February 2023.” 10. Therefore, the case was adjourned to 08.02.2023 on which date, the Tribunal passed the following order:
“The present two appeals are directed at the instance of assessee against the separate orders of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 22.09.2021 and 06.10.2021 passed in A.Y. 2018-19 & 2019-20 respectively. The solitary grievance of the assessee in both the years relates to non- given of TDS Credit admissible under section 199 read with section 205. The ld. Counsel for the assessee, at the very outset, contended that the assessee was an employee with M/s. AMW Motors Limited and during the course of such employment the employer has deducted TDS from his salary payment. Such TDS is amounting to Rs.10,07,770/- in A.Y. 2018- 19 and Rs.10,09,289/- in A.Y. 2019-20. It appears that the employer has not paid the whole TDS to the Government Exchequer and, therefore, credit of this TDS has not been given to the assessee. The ld. 1st Appellate Authority while disposing of appeal of the assessee has given following directions (for reference purposes, direction in A.Y. 2018-19 is extracted below) :- "I have considered the grounds of appeal, gone through the submissions of the appellant and seen the intimation of the A.O u/s 143 (1) of the Act dated 15.03.2019. On the facts and circumstances of the case, I deem it fit to refer the matter to the AO who will verify the claims of the appellant and allow necessary credit of taxes paid as per law. Charging of interest u/s 234B and 234C of the Act is consequential". For want of complete details, it is difficult for us to adjudicate this issue. Therefore, we adjourn the hearing to 14th March, 2023. Meanwhile we direct the ld. Assessing Officer to call for the employer, whose details will be submitted by the assessee and verify whether he has deducted the tax or not, if deducted paid or not. This exercise be completed by 28th February, 2023 and a report be submitted before the Tribunal before the next date of hearing. Copy of this order-sheet be supplied to the ld. Sr. D.R. for forwarding it to the ld. CIT (Admin) having territorial jurisdiction over the ld. Assessing Officer for compliance.”
&514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka The aforesaid orders passed by the Tribunal would show that the Tribunal believed the contentions raised by the assessee and directed the Assessing Officer to furnish the details of the employer and also a report to the effect that as to whether the employer had deducted the tax or not and if deducted, the same was deposited or not.
However, on the date of hearing, the ld. DR brought to my knowledge a very astonishing fact by inviting my attention to the copy of the letter dated March 10 2021, vide which the statement of salary of the assessee for the F.Y 2017-18 has been mentioned by the employer of the assessee namely “AMW Motors Ltd”. The contents of the said letter are reproduced as under:
AMW BUILT TO WIN March 10, 2021 To Mr. Anirudh Bhuwalka MD & CEO AMW Motors Ltd. Mumbai.
Dear Sir, Sub: Your salary for the Financial Year 2017-18 (Assessment year 2018-19)
This is to confirm that as per company records, the following salary is accrued to you for the financial year 2017-18 (A.Y 2018-19): Name of Company AMW Motors Ltd. PAN of Company AAKCA0327R &514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka TAN of Company MUMA436726 Name of Employee Anirudh Bhuwalka PAN of Employee AEGPB7445E Salary Details; Amount (Rs.) Gross Salary 39,00,000 Taxable income 38,78,300 Less: TDS Deducted 10,05,270 Net Salary Payable to you 28,92,230
As you are aware that the company is presently going through acute financial stress and the operations of the company has virtually stopped. As such, the company does not have sufficient cash flows to make the payment of your salary that is due to you as per the details given above. However, the company is hopeful of resolving the current situation and is in advanced discussions with the consortium of Lenders and proposed investors to settle the outstanding debts and revive the operations of the company. Upon successful resolution and revival of the company, the company will make the payment of the salary that is due to you and will also deposit the TDS deducted at the time of making the said payment of salary to you. We thank you for your kind understanding and support. For AMW Motors Ltd. Sd/- Authorised Signatory A perusal of the above letter would show that the assessee himself namely Anirudh Bhuwalka has been MD &CEO of the AMW Motors. The assessee was the overall in charge and final authority of the said company. In other words, to say that the affairs of the AMW Motors were managed by the assessee, himself, Mr. Anirudh Bhuwalka. The assessee himself was responsible for payment of salary to the staff as well as to himself and also for deduction of TDS, if any. On the one hand, the &514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka assessee himself acting as the MD and CEO of AMW Motors, did not deduct the TDS on the salary paid/payable to himself for working as MD and CEO of the company and on the other hand, the assessee is pleading that he is entitled to the adjustment of the TDS which in fact was never deposited by his company. The assessee is claiming exemption from taxation on his salary income stating that his employer i.e. AMW company was supposed to deposit the TDS, whereas the assessee, himself, being the principal officer and administrative head of the company was supposed to ensure the deposit of TDS, not only on this own salary but also in respect of salary of other employees.
The assessee in this case has put a claim against the department of set off of the TDS against tax demand which was never deposited by the assessee acting as employer of himself and thus cannot be allowed to take benefit of his own wrong or default. It is pertinent to note here that the assessee being the managing director of the company himself was liable to file and verify the income tax return on behalf of the company as per the provisions of section 140(c) of the Income Tax Act. Further, even if an action is brought against the company for non-deduction of TDS even then the assessee being the principal officer of the company is liable to be treated as assessee in default under the provisions of section 201(1) and 201(1a) read with section 204 of the Income Tax Act and even as per the provisions of section 271C, it would be Mr. Anirudh Bhuwalka (the assessee) being the managing director and the principal officer of the company who would be liable to be prosecuted u/s 271C of the Act for default in deduction of TDS or non-deposit of TDS. Therefore, even otherwise, if the taxes to be recovered from the company, it will be Mr. &514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka Anirudh Bhuwalka (the assessee) who will be liable on behalf of the company to pay the taxes and interest thereupon including liable to be tried under Penal provisions for non-deduction/non-deposit of tax on his own salary. In other words, Mr. Anirudh Bhuwalka (the assessee) being the managing director and chief executive officer of the company himself is the principal officer/person responsible for all acts of defaults in non- deduction/non-deposit of TDS and under such circumstances, he cannot be allowed to take benefit of his own wrong.
At this stage, the ld. counsel for the assessee has made another attempt to harp upon a wrongful claim of the assessee by stating that the employer of the assessee company namely AMW Motors was admitted into Corporate Insolvency Resolution Process before the National Company Law Tribunal, Ahmedabad and that affairs of the assessee company was managed by resolution professional appointed by NCLT. We find that the above contention of the ld. counsel is also misleading and does not depict true picture of the events. A perusal of the order of the Company Law Tribunal passed in IA No.425/AHM/2022 shows that in para 2 of the said order, it has been specifically mentioned that the assessee company was admitted into Corporate Insolvency Resolution Process vide order dated 01.09.2020 and Mr. Avil Menezes was appointed as Interim Resolution Professional (IRP) on the said date. The relevant para 2 of the order of the NCLT dated 21.12.2022 is reproduced as under:
“2. The facts in brief are that the Corporate Debtor was admitted into Corporate Insolvency Resolution Process (‘CIRP’) by this Adjudicating Authority vide order dated 01.09.2020, in an application filed by the financial creditor Indian Overseas Bank under section 7 of the Code &514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka triggering the moratorium and the Applicant herein Mr. Avil Menezes was appointed as Interim Resolution Professional (‘IRP’).”
Though the company was admitted into CIRP by the Adjudicating Authority on 01.09.2020 and Interim Resolution Professional was appointed on 01.09.2020, whereas, the financial years involved in the present appeals are F.Y 2017-18 relevant to A.Y 2018-19 and F.Y 2018- 19 relevant to A.Y 2019-20. Therefore, there is no merit in the above contention raised by the ld. counsel for the assessee. The assessee is not entitled to any claim of set off of TDS, which was never deposited by the company, the assessee being the principal officer and overall administrative head of the company, out of his own act and conduct. There is no merit in the appeal of the assessee and the same is accordingly dismissed.
Since the facts and issues involved are identical in both the appeals, therefore, the findings given above, will mutatis mutandis apply to for assessment year 2018-19.
In the result, both the appeals of the assessee stand dismissed. Kolkata, the 9th June, 2023. Sd/- [संजय गग� /Sanjay Garg] �या�यक सद�य /Judicial Member Dated: 09.06.2023. RS &514/Kol/2021 Assessment years: 2018-19 & 2019-20 Anirudh Bhuwalka Copy of the order forwarded to: 1. Anirudh Bhuwalka 2. DCIT, CPC 3. CIT(A)- 4. CIT- , 5. CIT(DR),