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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI BR BASKARAN & SHRI NARENDER KUMAR CHOUDHRY
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 19.11.2024, impugned herein, passed by the Ld. Addl/Joint Commissioner of Income Tax (Appeals) (in short “Ld. Addl./Joint Commissioner”) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2012-23.
In the instant case, the Assessee had declared its total income of Rs.70,36,750/- by filing his return of income on dated 30.07.2022 for the assessment year under consideration, claiming TDS of Rs.18,10,000/-. The return filed by the Assessee was processed by the CPC vide intimation/order dated 13.01.2023 u/s 143(1) of the Act, whereby the credit of TDS was allowed to the extent of Rs. 60,000/- only, as against the TDS claimed by the Assessee to the tune of Rs.18,10,000/-.
The Assessee, being aggrieved, challenged the said intimation/order dated 13.01.2023 of the CPC for not allowing the complete TDS claimed to the tune of Rs.18,10,000/-, by filling 1st appeal before the Ld. Commissioner, who by considering the claim of the Assessee, directed the Assessing Officer (AO) to grant the Assessee an opportunity of being heard in the light of the decision of the Hon’ble Delhi High Court on its own motion vs. Commissioner of Income Tax (Delhi HC) 352 ITR 273 and instruction of the CBDT New Delhi and to verify the TDS made in the Assessee’s case whether it is relatable to income offered for taxation in the year under consideration qua TDS claimed by the Assessee and Form 26AS and any other material relevant for verification of TDS credit and thereafter to grant the credit of TDS on finding the claim of the Assessee as correct.
The Assessee, being aggrieved, challenged the decision of the Ld. Commissioner before this Court and has claimed that his employer i.e. M/s. IMP Powers Limited had deducted the tax at source to the tune of Rs.17,50,000/- on the salary paid amounting to Rs.57,50,000/- and therefore the Assessee is entitled to get benefit of the TDS deducted.
On the contrary, the Ld. D.R. refuted the claim of the Assessee and submitted that admittedly the employer of the Assessee has not deposited the requisite TDS amount in the Government amount and therefore the Assessee is not entitled for the relief, as claimed for.
We have heard the parties and perused the material available on record. The Assessee has claimed that this employer namely M/s. IMP Powers Limited has paid the salary to the tune of Rs.57,50,000/- on which the TDS was deducted to the tune of Rs.17,50,000/- but the employer failed to deposit the same in the Government account and therefore liability cannot be fastened on the Assessee as the Assessee is entitled to get the benefit of the TDS deducted by his employer.
6.1 We observe that the Hon’ble Co-ordinate Bench of the Tribunal in the case of Mr. Aditya Deepak Nasta (ITA nos.3293/M/2024 & ors decided on 20.09.2024) has also dealt with identical issue/situation, wherein though the employer had deducted the TDS but not deposited in the Government account and therefore benefit of TDS was denied to the Assessee. The Hon’ble Co-ordinate Bench while analyzing the relevant provisions of law and the identical issue as involved in the instant case, ultimately granted relief to the Assessee, by observing and holding as under:
“6.2 Let us peruse the provisions of section 201 & 205 of the Act applicable to the instant case, which reads as under.
Section 201 in The Income Tax Act, 1961
Consequences of failure to deduct or pay.
(1) Where any person, including the principal officer of a company,—
(a)who is required to deduct any sum in accordance with the provisions of this Act; or (b)referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax:
Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee—
(i)has furnished his return of income under section 139;
(ii)has taken into account such sum for computing income in such return of income; and (iii)has paid the tax due on the income declared by him in such return of income,and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.
(1A) Without prejudice to the provisions of sub- section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,—
(i)at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii)at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid,and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200:Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee but is not deemed to be an assessee in default under the first proviso to sub-section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such payee:[Provided further that where an order is made by the Assessing Officer for the default under sub-section (1), the interest shall be paid by the person in accordance with such order.]
(2)Where the tax has not been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in sub-section (1).
(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given or two years from the end of the financial year in which the correction statement is delivered under the proviso to sub-section (3) of section 200, whichever is later.
(4)The provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 153 shall, so far as may, apply to the time limit prescribed in sub-section (3).Explanation.—For the purposes of this section, the expression "accountant" shall have the meaning assigned to it in the Explanation to sub-section (2) of section 288.
Section 205 in The Income Tax Act, 1961
Bar against direct demand on assessee. - Where tax is deductible at the source under [the foregoing provisions of this Chapter] [ Substituted by Act 23 of 2004, Section 48, for certain words (w.e.f. 1.10.2004).], the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.”
6.3 From the provisions of section 201 of the Act, it is clear that where any person including the Principal Officer of a Company, who is required to deduct any sum in accordance with the provisions of this Act; or being an employer does not deduct or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an Assessee in default in respect of such tax. Further as per the provisions of section 205, where the tax is deductible at the source, the Assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.
6.4 In cumulative effects, the provisions of section 201 & 205 clearly depict that any person who is required to deduct the TDS being an employer, if after deducting the tax, fails to pay the whole or any part of the tax then he may be deemed to be an Assessee in default in respect of such tax but not the other person like the Assessee in this case. Further, where the tax is deductable at source under the provisions of chapter XVII of the Act, then the Assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.
6.5 Coming to the reason given by the Ld. Addl/Joint Commissioner that the Assessee failed to provide even Form-16 from the employer and therefore there is no fault of the CPC in not granting the TDS. We observe that the Hon’ble Jurisdictional High Court in the case of Yashpal Sahni vs. ACIT (2007) 293 ITR 539 (Bom) decided on July 18, 2007 also considered the non-issuing Form No.16 and not depositing the TDS in the Government account. The Hon’ble Jurisdictional High Court has laid down the dictum that there will not be any cessation of liability of employer for not issuing the TDS certificate/Form-16 to the employee, the liability would be upon the employer but not on the employee and the Revenue on the ground that it is unable to recover the TDS deducted from the employer, that alone would not entitle Revenue to recover the amount once again from the Assessee.
6.6 We further observe that in the case of Kartik Vijaysinh Sonavane vs. DCIT 440 ITR 11 (Guj) the Hon’ble Gujarat High Court has also dealt with the identical issue as involved in the instant case to the effect that the same airline i.e. M/s. Kingfisher Airlines though deducted the TDS but not deposited in the Government account, which resulted into non-grant of credit of TDS to the Assessee. The Hon’ble High Court held that the Department is precluded from denying the benefit of tax deducted at source by the employer during the relevant financial year to the petitioner and the credit of the tax shall be given to the petitioner and if in the interregnum any recovery or adjustment is made by the Revenue Department, then the petitioner shall not be entitled for the refund of the same.
6.7 Coming to the merits of instant case, as the Assessee, by filing a specific affidavit as well as annexures such as salary slips and bank statements etc. and detailed chart containing total salary, TDS deducted and net salary received in particular months and corresponding bank entries depicting credit of actual salary amounts credited/received, demonstrated the genuineness of its case. It was a fault of the employer, as the employer though deducted the TDS but not deposited the same in the Government account, which resulted into mismatch in the Form-26AS and therefore the employer can only be considered as “deemed to be in default” in respect of such TDS deducted but not the Assessee, because as per section 205 of the Act, the Assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from his income. 5.7 On the aforesaid analyzations, we are of the considered view that the Assessee cannot be treated as Assessee in default as per the provisions of section 199 of the Act and the recovery can be effected from the employer but not from the Assessee herein and therefore the Assessee is entitled to get the benefit of the TDS deducted by his employer. Consequently, we direct the AO to grant the credit of TDS and re-compute the income of the Assessee accordingly.”
As the issue is covered in favour of the Assessee by the aforesaid decision, hence on the same footing/direction the Assessee is entitled to get the benefit of the TDS deducted by his employer but not deposited in Government account. Thus, the AO is directed to grant the credit of TDS and re-compute the income of the Assessee accordingly. We clarify that the Department is always at liberty and empowered to take appropriate action against the employer for recovery of TDS deducted, but not against the employee, for recovery of TDS amount deducted but not deposited by the employer, as per the provisions of law, as applicable.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 25.03.2025.