DHANANJAY SANJIV RAWAL ,MUMBAI vs. ITO, WARD, 17(2)(1), MUMBAI

There is a considerable delay of 583 days in filing the appeal before the Tribunal. The assessee has filed an affidavit in this regard stating that the assessee being not aware of the process appellate remedy, instead had approached the Pr. Commissioner of Income Tax by filing the letter seeking intervention in the matter. It is further stated by the assessee in the affidavit that the PCIT has clarified that he will not be in a position to resolve the issue and directed the assessee to approach the Tribunal against the order of the CIT(A). The assessee has accordingly submitted that substantial time has elapsed in pursuing this alternate course of remedy to get relief and that there is no wilful on the part of the assessee. Therefore the assessee prayed that the delay may be condoned.

Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST.Katiji & Ors., (167

The assessee submitted that the entire income received from the parties who have deducted the impugned tax has already been offered as income while filing the return and therefore, the assessee is entitled to claim credit for the tax deducted there from. The assessee further submitted that all the relevant documents evidencing that the payments have been received net of TDS have been submitted before the lower authorities which have not been considered. The assessee also submitted that he has sent repeated reminders to the parties who have deducted the tax seeking clarification as to why the TDS is not appearing in Form 26AS though the same is withheld in the payments to the assessee. The assessee submitted that no response has been received from the parties and that he cannot be held responsible for the non-compliance on the part of the deductor. The assessee further submitted that the he cannot be punished for a non-compliance on the part of the payer which is beyond the control of the assessee. Accordingly, the assessee prayed for a direction to the AO in this regard.

The ld DR on the other hand submitted that unless the TDS is reflected in the Form 26AS, there is no way in which the AO can allow the credit to the assessee. Accordingly the ld DR submitted that the CIT(A) has correctly given direction to allow credit as per Form 26AS.

We heard the assessee and the ld. DR. In assessee's case, the credit for TDS deducted by the following 3 parties has not been given to the assessee for the reason that the same is not reflecting in Form 26AS

We in this regard notice that the assessee has submitted the following documents during the appellate proceedings, to substantiate the claim that the amount received from the above parties is net of TDS and that the assessee has been writing to the parties as to why the tax deducted from his payments are not reflecting in Form 26AS due to which he is denied the credit

From the perusal of the above, it is clear that the assessee has submitted the sufficient documentary evidence with regard to tax having been deducted from the payments made and that the income has been offered on gross basis to tax while filing the return of income. We also notice that the assessee has take efforts to get the clarification from the payers as to why the amount deducted is not reflecting in Form 26AS. The revenue in this case has not recorded any adverse findings with 5 ITA No.39/Mum/2025 - Dhananjay Sanjiv Rawal regard to the documentary evidences submitted by the assessee. Further revenue has also not disputed the fact that the assessee has received only the net amount and that the relevant income on which tax is deducted has been offered to tax. The only reason for revenue to deny the credit is that the TDS is not reflected in the Form 26AS filed by the payer. The ld DR during the course of hearing could not substantiate whether any action has been taken against the payers for having deducted the tax and not paid the amount to government account which may be the reason as to why the TDS is not reflecting in Form 26AS. We also notice that other than denying the TDS credit quoting the technical reason of amount not reflecting 26AS, the revenue has not taken any further step to help the assessee who has made a genuine claim which is sufficiently evidenced.

We in this regard notice that a similar issue has been considered by the coordinate bench in the case of Kiran S. Patel vs ADIT CPC (I.T.A. No.233/Mum/2022 dated 13.07.2022) where it has been held that –

We have heard the parties and perused the record. We note that the assessee served as a captain in the Jet Airways during the relevant period and filed his return of income showing salary income of Rs.1,32,46,545/- inclusive of three (3) month salary from January 2019 to March 2019 to the tune of Rs.31,70,690/- which according to him has not been paid by Jet Airways. According to the assessee, though the said amount of Rs.31,70,690/- (salary from January to March 2019) was not paid, the employer Jet airways had reported that they had duly deducted the TDS on such salary due. According to him, though he did not receive the salary for this three (3) months, it was offered to tax in terms of Section 15 of the Act since the salary had fallen due and that employer had also reportedly recovered the corresponding TDS thereon. The assessee thus contended that he is entitled to the credit of the said TDS, which was also reflected in the salary slip issued to the assessee. The main grievance of the assessee is that by not giving him the credit of TDS to the tune of Rs.15,85,989/- which had already been deducted by the said employer, the AO/CPC was effectively collecting the said tax from him, which was actually payable by the employer who had unjustly withheld the said amount but did not deposit it to the Government. The Ld. CIT(A) had upheld

It is noted that the assessee had offered to tax his entire salary income which was due to him, in terms of Section 15 to 17 of the Act although he had not received three months salary from his employer. Based on the salary slips issued to him, which reflected the amount of TDS deducted by the employer, the assessee had claimed credit of TDS in the return of income. The employer however did not pay the full taxes withheld by them to the credit of the Government. Hence the question before us is whether the AO/CPC was right in denying the credit of the TDS to the employee to the extent not paid by the employer (which was deducted from the salary of the employee). In this regard, we note that Chapter XVII of the Act provides for collection and recovery of taxes via two modes viz., (a) directly from assessee (advance tax/ self assessment tax) or (b) indirectly be deduction/collection at source (TDS/TCS). Section 192 of the Act casts the responsibility on the employer for deducting and paying taxes on the salary paid to the employees. Section 200 of the Act provides that the TDS amount collected is required to be paid to the Government within the time limit prescribed. Section 199 of the Act provides that, any tax deducted at source under the provisions of Chapter XVII and paid to Central Government shall be treated as payment of tax on behalf of the person from whose income the deduction was made and the credit shall be given to him for the amount so deducted. Section 205 of the Act provides that where the tax is deductible at the source under Chapter XVII, the payee shall not be called upon to pay the tax himself to the extent to which tax has been deducted. The relevant extracts of the provision is as follows:

From the language employed in Section 205 of the Act, it is clear that once the payer has deducted tax at source, then the same tax cannot be levied and collected from the payee as it would amount payment of tax twice (as the payee has already suffered deduction). Hence, if the employer has defaulted in payment of tax which he has already deducted from the salary, then such tax cannot be recovered from the employee. This view finds support from the decision of the Hon’ble Bombay High Court in the case of Puskhar P.C. Jain Vs UOI (262 taxman 118). In the decided case also the payer had deducted tax from the sale consideration due to the payee which was not paid to the Central Government. The payee had filed the return of income wherein he had claimed credit for such taxes deducted at source by the payer. In the intimation issued

Facts on record are not seriously in dispute. As noted, the petitioner sold an immovable property for sale consideration of Rs.9 crores. The purchasers paid only Rs.8 crores 91 lakhs retaining Rs.9 lakhs towards TDS. The department does not argue that this amount of Rs.9 lakhs so deducted is not in tune with the statutory requirements. It appears undisputed that the deductors did not depositing such amount in the Government revenue. Under the circumstances, the petitioner is asked to pay the said sum again, since the department has not recognized this TDS credit in favour of the petitioner.

Section 205 of the Act carries the caption "Bar against direct demand on assessee". The section provides that where tax is deducted at the source under the provisions of Chapter XVII, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income. This provision came up for consideration before division bench of this Court in case of Yashpal Sahni v. Rekha Hajarnavis Asstt. CIT [2007] 165Taxman 144/293 ITR 539. It was a case where the employer while paying salary to the employee had deducted tax at source Rs.6.66 lakhs. Subsequently, disputes arose between the employer and employee due to which service of the employee was terminated. The employee filed the return of income claiming credit of TDS of Rs.6.66 lakhs. The Assessing Officer issued intimation under Section 143(1)(a) of the Act denying credit of TDS of Rs.6.66 lakhs on the ground that such amount was not deposited by the employer. This Court in such background after referring to Section 205 of the Act held and observed as under:—

In the present case, though the respondent No. 6 has deducted the tax at source from the salary income of the petitioner, the respondent No. 6 has not issued the TDS certificate in Form No. 16 to the petitioner. As a result, the petitioner is not entitled to avail credit of the tax deducted at source. However, once it is established that the tax has been deducted at source, the bar under Section 205 of the Act comes into operation and the revenue is barred from recovering the TDS amount once again from the employee from whose income, TDS amount has been deducted. It is pertinent to note that the purpose of issuing TDS certificate under Section 203 of the Act is to enable the assessee to avail credit of the tax deducted at source in the relevant assessment year. If the TDS certificate is not issued, then under Section 199 of the Act, the assessee from whose income, tax has been deducted at source will not be entitled to take credit of the said amount. In that event, on account of the non availability of the credit, the assessee would be liable to pay tax once again even though the tax was deducted at source. Thus, it would be a case of double taxation which is not permissible in law. To avoid such anomaly, Section 205 has been enacted, to the effect that, once the tax is deducted at source by the employer-company, then, the person from whose income, the tax has been deducted at source shall not be called to pay the said tax again. From the language of Section of 205 of the Act, it is clear that the bar operates as soon as it is established that the tax has been deducted at source and it is wholly irrelevant as to whether the tax deducted at source is paid to the credit of Central Government or not and whether TDS certificate in Form No. 16 has been issued or not. Also the mere fact that the employer may not issue TDS certificate to the employee does not mean that the liability of the employer ceases. The liability to pay income tax if deducted at source is upon the employer.

As stated earlier, in the present case the petitioner-assessee has established that from his salary income, tax has been deducted at source by the employer-respondent No. 6 and, therefore, the revenue has to recover the said TDS amount with interest and penalty from the respondent No. 6 alone and the revenue cannot seek to recover the said amount from the petitioner-assessee in view of the specific bar contained under Section 205 of the Act. The fact that the petitioner is not entitled to the credit of the tax deducted at source for the non issuance of the TDS certificate by the respondent No. 6, cannot be a ground to recover the amount of tax deducted at source from the petitioner. In other words, even if the credit of the TDS amount is not available to the petitioner assessee for want of TDS certificate, the fact that the tax has been deducted at source from salary income of the petitioner would be sufficient to hold that as per Section 205 of the Act, the revenue cannot recover the TDS amount with interest from the petitioner once again."

The situation arising in the present petition is similar. The department does not contend that the petitioner did not suffer deduction of tax at 10 ITA No.39/Mum/2025 - Dhananjay Sanjiv Rawal source at the hands of payer, but contends that the same has not been deposited with the Government revenue. As provided under Section 205 of the Act and as elaborated by this Court in case of Yashpal Sahni (supra) under such circumstances the petitioner cannot be asked to pay the same again. It is always open for the department and infact the Act contains sufficient provisions, to make coercive recovery of such unpaid tax from the payer whose primary responsibility is to deposit the same with the Government revenue scrupulously and promptly. If the payer after deducting the tax fails to deposit it in the Government revenue, measures can always be initiated against such payers [emphasis given]

Similar issue also came up for consideration before the Hon’ble Gujarat High Court in the case of Sumit D Rajani Vs ACIT (49 taxmann.com 31). In the instant case also, the employer had withheld tax on the salary but failed to deposit it with the Government. Consequently since the TDS did not appear in Form 26AS, the AO/CPC denied credit for the same and resultantly raised tax demand on the assessee. This order of the CPC was challenged in writ before the Hon’ble High Court, which directed the AO to grant credit of TDS based on the Form 16A produced by the assessee evidencing deduction of tax at source. The relevant extracts of the said judgment is as follows:

In the light of the above judicial precedents and the discussion (supra), the action of the lower authorities cannot be countenanced. We accordingly set aside the impugned order of the Ld. CIT(A) and direct the assessee to furnish relevant documents before the AO evidencing that the TDS of Rs.15,85,989/- had been deducted on his salary due for the period January 2019 to March 2019. After verification, the AO shall grant credit for the same. Needless to say, the AO shall allow sufficient opportunity to the assessee and pass a speaking order in this regard. It is further clarified that if the Department is of the opinion that the employer-deductor has not deposited the said amount of tax deducted at source from the salary of the assessee, then it will be open for the Department to recover the same from the deductor.

In the result, the appeal of the assessee is allowed for statistical purposes.

The ratio laid down in the above judicial precedence is that the once the tax is deducted at source then the same cannot be recovered from assessee and that the fact that the revenue is unable to recover the tax deducted at source from the person who has deducted such tax would not entitle the revenue to recover the said amount once again from the assessee. Further the provisions of Section 205, specifically bars such recovery directly from the assessee to the extent to which tax has been deducted from that income. In assessee's case, the revenue has not disputed the fact that tax has been deducted from the payments made to the assessee towards professional charges which has been offered to tax by the assessee and these facts are also evidenced by the supporting documents furnished by the assessee. Therefore in our considered view, the ratio laid down in the above

In result, the appeal of assessee is allowed.