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Facts
The assessee, a wholesale dealer of IMFL, was subjected to scrutiny assessment. The Assessing Officer disallowed sales promotion expenses and denied credit for Tax Collected at Source (TCS) of Rs. 74,14,161 on the grounds that the TCS was not reflected in Form 26AS. This led to a demand being raised.
Held
The Tribunal held that the assessee cannot be denied credit for TCS that was actually collected from them, even if the deductor failed to deposit it with the government. Relying on Section 205 of the IT Act and a coordinate bench decision, the Tribunal directed the Assessing Officer to grant credit for the TCS.
Key Issues
Whether the assessee is entitled to credit for TCS collected by the seller but not deposited with the government, despite it not appearing in Form 26AS.
Sections Cited
143(2), 143(3), 205
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
Assessment Year : 2013-14 Amit Ashok Chandwani, Vs. DCIT, Circle-14, Pune. Flat No.6, 4th Floor, Padumji Villa, Nishat Talkies Lane, 10251025, New Nana Peth, Pune- 411002. PAN : ADNPC2333G Appellant Respondent Assessee by : Shri Pramot S. Shingte Revenue by Shri Deepak Kumar Kedia (Virtual) : Date of hearing : 14.10.2025 Date of pronouncement : 12.12.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 26.05.2025 passed by Ld. CIT(A)/NFAC for the assessment year 2013-14.
2. The appellant has raised the following grounds of appeal :-
1. On the facts and circumstances of the case and in law the CIT(А), NFAC erred in confirming the action of the AO of NOT granting credit for TCS of Rs.74,14,161 by one Cromex Liquor Pvt. Ltd. (the Supplier) on the ground of it being not reflected in online Form 26AS, even though the appellant has paid such TCS to the supplier along with respective bill payments. The appellant prays that the AO be directed to grant credit for TCS.
2. On the facts and circumstances of the case and in law the CIT(А), NFAC erred in confirming the action of the AO of adhoc addition of Rs.3,60,000 out of sales promotion expenses even though the books of the appellant stand accepted by him. The appellant prays that the AO be directed to delete the addition. The appellant craves leave to add to, amend, alter, delete or modify all or any of the above ground of appeal or raise a new ground of appeal before or at the time of hearing.”
3. Facts of the case, in brief, are that the assessee is an individual engaged in the business of wholesale dealer of Indian Made Foreign Liquor (IMFL). The return of income for the year under consideration was filed on 29.09.2013 declaring total income of Rs.2,23,60,175/-. The case was selected for scrutiny under CASS and notice u/s 143(2) of the IT Act was issued to the assessee. During the course of assessment proceedings, the Assessing Officer found that the assessee debited sales promotion expenses of Rs.35,97,042/- under various heads which are supported by self-made vouchers and cannot be relied upon. Accordingly, the Assessing Officer disallowed an amount of Rs.3,60,000/- out of above expenses. The Assessing Officer also denied the credit of TCS of Rs.74,14,161/- which was collected from the assessee by the seller/supplier of IMFL. The assessment was completed u/s 143(3) of the IT Act by determining total income at Rs.2,27,20,180/- as against the income returned by the Rs.2,23,60,175/-. Accordingly, demand of Rs.93,35,000/- was raised instead of refund of Rs.9,73,610/- claimed by the assessee.
Being aggrieved with the above assessment order, an appeal was preferred before Ld. CIT(A)/NFAC. After considering the reply of the assessee Ld. CIT(A)/NFAC dismissed the appeal & confirmed the addition of Rs.3,60,000/- made by the Assessing Officer and also confirmed the disallowance of credit of Tax Collected at Sources i.e. TCS of Rs.74,14,161/-.
It is the above order against which the assessee is in appeal before this Tribunal.
6. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR submitted before us that an amount of Rs.74,14,161/- was collected from the assessee by the seller/supplier i.e. Cromex Liquor Pvt. Ltd., however he failed to report the same TCS in his TCS returns and consequently the TCS could not appear in Form 26AS of the assessee. Since the TCS was not appearing in Form 26AS the Assessing Officer as well as Ld. CIT(A)/NFAC disallowed the claim of above TCS and instead of refund, demand of Rs.93,35,000/- was raised. Ld. AR submitted that there is no Rs.74,14,161/- was collected from him as TCS. In support of claim of TCS the assessee furnished bank statement highlighting payment to Cromex Liquor Pvt. Ltd. and sample sale bills issued by Cromex Liquor Pv.t Ltd. wherein TCS amount was charged & the same was appearing separately. Ld. AR also referred section 205 of the IT Act. Further, in support of its contentions, Ld. AR relied on the coordinate bench decision of Walvekar Sons passed in order dated 13.12.2018 wherein benefit of TCS collected was allowed to the assessee even when it was not deposited by the supplier/collector in the Government Account.
7. Ld. DR appearing from side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assesse & case laws relied on by the assesse as well as by the revenue. In this regard, we find that in ground no.1 the assessee has requested to allow the credit of TCS of Rs.74,14,161/-.
In this regard, we find that admittedly an amount of Rs.74,14,161/- was collected from the assessee by one Cromex Liquor Pvt. Ltd. in the shape of TCS by separately charging the same in their sale bills while selling the Indian made foreign Liquor to the assesse. However the above TCS amount was not deposited by Cromex Liquor Pvt LTD in Government Treasury, consequently the same was not appearing in Form 26AS of the assessee and due to this reason, the Assessing Officer denied the claim of TCS of Rs.74,14,161/- made by the assessee, which consequently resulted in a demand of Rs.93,35,000/- instead of refund of Rs.9,73,610/-.
In this regard, we further find that the assessee has referred section 205 of the IT Act and Instruction No.275/29/2014-IT-(B) dated 01.06.2015 & office Memorandum dated 11-03-2016 wherein it was directed to all the Assessing Officers not to take any coercive action against the assessee to pay the demand which has resulted due to non-deposit of tax by the deductor/collector. Office Memorandum dated 11-03-2016 issued by CBDT reads as under:- “F.No. 275/29/2014-IT (B) Government of India Ministry of Finance Central Board of Direct Taxes (CBDT) New Delhi, Dated: 11th March, 2016 Office Memorandum Sub: Non-deposit of tax deducted at source by the deductor- Recovery of demand against the deductee assessee. Vide letter of even number dated 01.06.2015, the Board had issued directions to the field officers that in case of an assessee whose tax has been deducted at source but not deposited to the Government’s account by the deductor, the deductee assessee shall not be called upon to pay the demand to the extent tax has been deducted from his income. It was further specified that section 205 of the Income-tax Act, 1961 puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch in such situations cannot be enforced coercively.
However, instances have come to the notice of the Board that these directions are not being strictly followed by the field officers.
In view of the above, the Board hereby reiterates the instructions contained in its letter dated 01.06.2015 and directs the assessing officers not to enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor. These instructions may be brought to the notice of all assessing officers in your Region for compliance. This issues with the approval of Member (Revenue &TPS). (Sandeep Singh) Under Secretary (Budget)”
We also find that the assessee has relied on the coordinate bench decision passed in the case of Walvekar Sons (supra) wherein the Tribunal allowed the relief to the assessee by observing as under :- “5. I have heard both the parties and perused the relevant material available on record. It is an undisputed position that M/s. Cromex Liquors Pvt. Ltd. collected tax at source from the assessee amounting to Rs.6,37,931/- but did not deposit the same in the Government exchequer. The moot issue is as to whether the benefit of tax collected at source should be allowed to the assessee under such circumstances. In my view, the lower authorities erred in denying the benefit of tax collected at source from the assessee by M/s. Cromex Liquor Pvt. Ltd. to the extent of Rs.6,37,931/-. The Assessing Officer, in the remand report, has fairly admitted that tax of such a magnitude was in fact, collected against the supplies made to the assessee. The benefit of tax M/s. Cromex Liquor Pvt. Ltd. did not deposit the amount of tax collected at source in the Government account.
I fail to comprehend as to how the assessee can be called upon to pay the amount of such tax again, when it was lawfully collected at source by someone on behalf of Government of India. If the collector has not deposited the amount, after due deduction, it is such a tax collector who should be held responsible for his default. Under no circumstance, the Department can press the assessee to not take credit for the amount of tax legitimately collected tax at source from it. Section 205 of the Act clearly provides that “where tax is deductable at the source under the foregoing provisions of this Chapter, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.” It is, therefore, abundantly clear that the Income-tax Act itself carries a bar against recovery of any tax deducted/collected at source from the assessee where it has been actually deducted/collected at source. In view of the foregoing discussion, I am unable to sustain the view canvassed by the authorities below in not allowing credit for tax collected at source by M/s. Cromex Liquors Pvt. Ltd. from the assessee merely on the ground that such collected tax at source amount did not get deposited in the Government account. I, therefore, overturn the impugned order and direct the Assessing Officer to grant adjustment of such tax collected at source against the tax liability of the assessee.
In the result, appeal of the assessee is allowed.”
Respectfully following the above decision passed in the case of Walvekar Sons (supra), & also in the light of the CBDT Circular referred above we are of the considered opinion that section 205 of the IT Act carries a bar against recovery of any tax deducted/collected at source from the assessee where it has been actually deducted/collected at source. Accordingly, we deem it fit to set-aside the order passed by Ld. CIT(A) and direct the Assessing Officer to grant adjustment of such tax collected at source against the tax liability of the assessee, however we make it