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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: MS. SUSHMA CHOWLA
आदेश / ORDER
PER SUSHMA CHOWLA, VP The present appeal filed by assessee is against order of CIT(A)-I, Noida dated 28.09.2018 relating to assessment year 2009-10 against order passed under section 143(3)/147 of the Act.
The issue raised in the present appeal is against the non allowance of credit of TDS deducted by the payer.
Briefly in the facts of the case, the assessment in the case was completed under section 147/143(3) of the Act on the income declared by the assessee. Though the AO directs the grant credit of prepaid taxes, but the assessee is aggrieved by non allowance of credit of TDS of Rs. 12,36,240/-.
The CIT(A) dismissed the appeal of the assessee in limine on the ground that the Challan for fee under section 249(1)(a) was not available on record. The assessee before us had furnished the necessary evidence in this regard and there is no merit in the aforesaid dismissal of the appeal.
Now coming to the merits of the issue raised wherein the payer M/s Subhikshya Trading Service Ltd., TAN CHES05999A was the employer of the assessee and had deducted tax at source; but the same was not deposited in the Government account. The question which arises is whether in the absence of the deposit of tax at source by the employer. can the assessee employee get the benefit of tax deducted at source out of the salary income? It may be clarified herein itself that the assessee was employed by two different employers during the year, who had deducted tax at source out of the salary to the assessee and not deposited the same with Treasury.
The Tribunal in the case of Aricent Technologies Holdings Ltd. vs. ACIT in had decided similar issue of deductor deducting tax at source but not depositing the tax withheld by it and should the payee suffer. The Tribunal, vide paras 17 to 23 held as under:-
“17. Now, coming to the next stand of the assessee wherein it has been pointed out that in case deductor deducts tax at source i.e. withholds tax, out of payments due / paid to the assessee; but does not deposit the tax withheld by it, then why should the assessee suffer? 18. Under section 199(1) of the Act, it is provided that if tax has been deducted at source in accordance with the provisions of the Chapter XVII and paid to the Central Government, the same shall be treated as payment of tax on behalf of the person, from whose income, the deduction was made.
Further section 205 of the Act reads as under:- 205. Where tax is deductible 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.”
20. Under section 205 of the Act, it is further provided that where the tax had been deducted at source by the deductor out of payments due to the deductee, then such deductee cannot be held liable for payment of such tax which was deducted at source by the deductor. In other words, under the provisions of the Act, it is provided that there is liability upon the person making the payments, to deduct tax at source in line with the provisions of Chapter XVII of the Act. Once such tax had been deducted then the deductor is liable to deposit the same into the credit of the Central Government. Such amount which is withheld by the deductor out of the amount due to the deductee i.e. person to whom the payments are made, then the said deduction shall be treated as payment of tax on behalf of the person from whom such deductions was made, as per the provisions of section 199(1) of the Act. Further there are provisions under the Act dealing with the recovery of tax at source from the person who have withheld the same. In terms of section 205 of the Act, the assessee/deductee cannot be called upon to pay tax, to the extent to which tax had been deducted from the payments due. Consequently, it follows that credit for such tax deducted at source, which is deducted from the account of the deductee, by the deductor, is to be allowed as taxes paid in the hands of the deductee, irrespective of the fact whether the same has been deposited by the deductor to the credit of the Central Government or not. The deductee in such circumstances cannot be denied credit of tax deducted at source on its behalf. Under the Act, the provisions are enshrined under which recovery of tax from the account of the person, who had deducted the such tax, are provided. Accordingly, we hold that where the assessee is able to furnish the necessary details with regard to tax deduction at source out of the amounts due to it, then the action which follows is allowing the credit of such tax deducted at source to the account of the deductee. In case where the deductor deposits the tax deducted at source to the credit of the Central Government and the deduction reflects in Form No.26AS may be on a later date, then it is incumbent upon the assessee to produce the necessary evidence in this regard and it is also the duty of the Assessing Officer to allow such credit of tax deducted at source, as taxes paid in the hands of the deductee assessee.
21. We find support from the ratio laid down by the Hon’ble Bombay High Court in Yashpal Sahani vs. Rekha Hajarnavis, Assistant Commissioner of Income-tax [2007] 165 taxman 144 (Bom.) and Hon’ble Gujarat High Court in the case of Sumit Devendra Rajani vs. Assistant Commissioner of Income-tax [2014] 49 taxmann.com 31 (Gujarat).
22. The Hon’ble High Court in latest decision dated 30.01.2019 in Pushkar Prabhat Chandra Jain vs. Union of India [2019] 103 taxmann.com 106 (Bombay) has held as under:- 7. 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 Vs. Rekha Hajarnavis and ors. 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:”
From the language of Section 205, it is clear that once the tax is deducted at source, the same cannot be levied once again on the assessee who has suffered the deduction. Once it is established that the tax has been deducted at source from the salary of the employee, the bar under Section 205 of the Act comes into operation and it is immaterial as to whether the tax deducted at source has been paid to the Central Government or not, because elaborate provisions are made under the Act for recovery of tax deducted at source from the person who has deducted such tax.
In the present case, the petitioner assessee has furnished monthly pay slips and bank statements to show that from his salary tax was deducted at source by the employer respondent No. 6. Authenticity of the said pay slips and bank statements have not been disputed by the revenue. Thus, it is clear that the tax has been deducted at source by the respondent No. 6 from the salary paid to the petitioner. Therefore, the only question to be considered is, if the employer respondent No. 6 has failed to deposit the tax deducted at source from the salary income of the petitioner to the credit of the Central Government, whether the revenue can recover the TDS amount with interest once again from the petitioner?
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.
23. As held by the Gauhati High Court in the course of Omprakash Gattani (supra), once the mode of collecting tax by deduction at source is adopted, that mode alone is to be adopted for recovery of tax deducted at source. Although it is obligatory on the part of the person collecting tax at source to pay the said TDS amount to the credit of the Central Government within the stipulated time, if such person fails to pay the TDS amount within the stipulated time, then, Section 201 of the Act provides that such person shall be deemed to be an assessee in default and the revenue will be entitled to recover the TDS amount with interest at 12% p.a. and till the said TDS amount with interest is recovered there shall be a charge on all the assets of such person or the company. Penalty under Section 221 of the Act and rigorous imprisonment under Section 276B of the Act can also be imposed upon such defaulting person or the company. Thus, complete machinery is provided under the Act for recovery of tax deducted at source from the person who has deducted such tax at source and the revenue is barred from recovering the TDS amount from the person from whose income, tax has been deducted at source. Therefore, 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 employee assessee, in view of the specific bar contained in Section 205 of the Act.
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.”
8. The situation arising in the present petition is similar. The department does not contend that the petitioner did not suffer deduction of tax at source
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.”
Applying the same parity of reasoning, we direct the Assessing Officer to allow the credit of tax deducted at source in the hands of the assessee, where the assessee produces the primary evidence of same being deducted tax at source out of the amount due to it. The ground of appeal no. 6 is thus allowed.”
Following same parity of reasoning, we direct the assessee to produce the primary evidence of tax deducted at source out of salary
due to her and the AO is directed to allow the credit of the tax deducted at source by the employer, may be not deposited by it. The ground of appeal nos. 3 & 4 raised by the assessee are allowed.
The ground of appeal nos. 1 & 2 are not pressed hence
dismissed as not pressed. The ground of appeal nos. 5 to 8 are also not pressed hence dismissed as not pressed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 21st February, 2020.