SHRI PAWAN KUMAR RUIA. ,KOLKATA vs. DCIT,CIR- 30, KOLKATA. , KOLKATA

The sole issue involved in this appeal is relating non-credits of TDS of Rs.95,80,949/- out of total TDS claim of Rs.2,18,82,526/-.

The brief facts of the case are that the assessee is an individual and derived salary income and income from other sources. The assessee filed its return of income on 17.07.2014 declaring a total income of Rs.6,52,52,390/-. The assessment was completed u/s 143(3) vide order dated 17.12.2016 at a total income of Rs.6,86,66,708/-. The assessee in this appeal has not disputed the addition of Rs.49,776/- made by the Assessing Officer. The assessee had claimed credit of TDS of Rs.2,18,82,526/- in the return of income. The Assessing Officer, however, has allowed the credit of TDS of Rs.1,23,01,577/- only and the credit of balance amount of Rs.95,80,949/- has not been allowed on the ground that the employer “Falcon Tyres Limited” has not deposited the said amount in Govt. treasury as the said company went into liquidation.

Being aggrieved, the assessee preferred appeal before the CIT(A). The ld. CIT(A), however, dismissed the appeal of the assessee relying upon CBDT Circular No.5/2013 by directing that the Assessing Officer will verify whether the deductor has made payment of TDS in the Govt. account and if the payment has not been made by him, the Assessing Officer, if may also deem necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down.

The ld. counsel for the assessee in this respect has submitted that whether the Assessing Officer would compel the deductor to deposit TDS deducted out of the salary of the assessee in the Govt. treasury, does not affect the rights of the assessee to claim the credit of the TDS deducted by the employer. The ld. counsel has further relied upon the decision of the Coordinate Bench of the Tribunal in the case of Shri “Deepak Kumar Ruia vs. DCIT” in vide order dated 20.05.2024, wherein, under similar facts and circumstances and even in the case of same employer i.e. ‘Falcon Tyres Pvt. Ltd.’, the Coordinate Bench of the Tribunal has decided the appeal of the assessee by relying upon CBDT Circular No.F.No.275/29/2014-IT(B) dated 11.03.2016. Further, reliance has also been placed on another Coordinate Bench decision in the case of Vishal Pachisia vs. ITO in ITA No.746/Kol/2023 for A.Y 2016-17 dated 07.11.2023, which was also relating to non-deduction of TDS by the same employer ‘Falcon Tyres Pvt. Ltd.’ The relevant part of the Coordinate Bench of the Tribunal in the case of “Shri Deepak Kumar Ruia vs. DCIT” (supra) is reproduced as under:

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)."

The case of the assessee is also supported by a series of decisions namely Incredible Unique Buildcon Private Limited vs. ITO reported in No.-W.P.(C) 7797/2023 order dated 31.05.2023 and Coordinate Bench Pune in the case of Mukesh Padamchand Sogani vs. ACIT in order dated 30.01.2023.

In all the above decisions, the issue of non-deposit of TDS by the deductor has been allowed in favour of the assessee by holding that once the TDS is deducted then the liability resulting from the non-deposit of TDS by the deductor cannot be fasten on the deductee. For the sake of convenience, we are reproducing herein Page 4 of 7 I.T.A. No.: 764/KOL/2023 Assessment Year: 2016-17 Vishal Pachisia. the operative part of the decision in the case of Mukesh Padamchand Sogani (supra) wherein the Coordinate Bench under the similar circumstances has held as under: "6. Be that as it may, we are extantly concerned with the Intimation issued by the Central Processing unit u/s. 143(1) of the Act in which the credit for Rs.8,21,149/- was not allowed because the amount was not deposited by the employer. In this regard, it would be relevant to take note of the prescription of section 143(1) dealing with the processing of return. Clause (a) of section 143(1) provides for making certain adjustments to the income declared for determining the total income. Clause (b) states that the taxes, interest and fee, if any, shall be computed on the basis of the total income computed under clause (a). Clause (c), which is material for our purpose, runs as under : '(C) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax, interest and fee, if any, computed under (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under section 89, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax, interest or fee;' 7. On going through section 143(1) of the Act, it becomes ostensible that the total income as computed under its clause (a) is considered for computing the amount of tax etc. payable on it as per clause (b). Clause (c) then comes into operation, which provides for determining the amount payable or refundable to the assessee after adjusting the amount of any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable u/s.89 etc. from the amount of tax determined under clause (b). Essence of clause (c) of section 143(1) is to allow adjustment of tax deducted or collected at source or advance tax etc. against the tax liability on total income. Important thing to be borne in mind in this regard is that though the word paid' has been used after the words 'advance tax', but it is absent in the context of 'tax deducted at source'. The effect of this is that unlike advance tax, the credit for tax deducted at source is to be allowed only when it is deducted and there is no further stipulation of the same having been paid also as a condition precedent. As a sequitur, credit for the amount of tax deducted at source is not dependent upon its subsequent deposit by the deductor. Once there is deduction of tax at source, the benefit of such tax deduction has to be allowed in the hands of deductee u/s 143(1) of the Act irrespective of its subsequent deposit or non-deposit by the deductor.

Our view is fortified by section 234B dealing with interest for default in payment of advance tax. This section provides that where an assessee fails to pay due advance tax etc., he shall be liable to pay simple interest at the specified rate on the amount of 'assessed tax'. The term "assessed tax" has been defined in Explanation 1 to mean the tax on total income determined u/s. 143(1) or regular assessment as reduced by the amount of: '(i) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income'. Since section 234B has reference to advance tax. Computation of advance tax has been dealt with in section 209 of the Act. There are four clauses, (a) to (d) of section 209(1) of the Act, and clause (d) provides that : 'the income-tax calculated under clause (a) or clause (b) or clause (c) shall, in each case, be reduced by the amount of income-tax which would be deductible or collectible at source during the said financial year ....'. Effect of the above provision is that if there is an income on which tax is deductible at source, then such income will be reduced for determining the advance tax liability and the consequential interest liability u/s 234B of the Act, even if no tax was actually deducted at source. The Finance Act, 2012 inserted a proviso to section 209(1) nullifying the above position of deducting income on which tax is deductible but not actually deducted. Instantly, we are confronted with a situation in which the deductor has duly deducted tax at source but not paid the same to the exchequer. Albeit gap between 'tax which would be deductible' as per section 209(1)(d) and 'tax deducted at source' has been abridged by insertion of proviso to section 209(1), but the open space between the 'tax deducted at source' as per section 143(1)(c) and 'tax deducted at source and deposited' still persists.

Coming back to the context under consideration, we find that the requirement for allowing credit is only of the amount of tax deducted at source and not the amount eventually getting deposited with the Government after deduction. Since a sum of Rs.8,21,149/- was duly deducted at source by the employer from the salaries credited/paid to the assessee for the year under consideration, we hold that benefit of such tax deducted at source has to be allowed in Intimation u/s 143(1) of the Act notwithstanding the fact that it was not deposited. The impugned order is overturned pro tanto.

In the result, the appeal is allowed."

We therefore, respectfully following the decision of the Coordinate Bench and also other the Hon'ble Courts, set aside the order of Ld. CIT(A) and direct the AO to allow the credit of TDS deducted at source to the assessee.

In the result, the appeal filed by the assessee is allowed." 5.1. Since the facts of the case as discussed above are materially same as involved in the instant appeal, accordingly we hold that the assessee is entitled for TDS credit deducted from his salary by the employer M/S M/s Falcon Tyres Pvt. Ltd. We accordingly set aside the order of Ld. CIT(A) and direct the AO to allow the credit of TDS as claimed by the assessee.

In the result, the appeal of the assessee is allowed.”

In the result, the appeal of the assessee stands allowed.