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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH, AHMEDABAD
Per Pramod Kumar AM:
This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-4, Ahmedabad dated 27.05.2016 passed for Assessment Year 2011-12. 2. Grievance raised by the appellant is as follows:-
The Learned Commissioner of Income Tax (Appeals)-4, Ahmedabad has erred in law and on facts of the case by disallowing the credit for TDS of Rs.36,189/- claimed by the Appellant on the ground that the same does not match in the ITD system though the Appellant has furnished TDS certificate issued by the deductor. 3. There is no dispute that the assessee has duly produced the TDS certificate, in respect of which credit is claimed, but credit is declined as the TDS certificate is undated and the same does not match in the ITD system. The assessee did carry the matter in appeal before the CIT(A), but without any success. The assessee is now in second appeal before us.
ITA No. 1767/Ahd/2016 Shri Nareshkumar P Patel vs. ITo Assessment Year : 2011-12 Page 2 of 5
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.
As learned counsel for the assessee rightly points out, the issue in appeal is now squarely covered, in favour of the appellant, by Hon’ble jurisdictional High Court’s judgment in the case of Sumit Devendra Rajani vs. ACIT [(2014) 369 ITR 673 (Guj)] wherein Their Lordships have observed as follow:-
“7. The grievance which is voiced in the present petition by the assessee is that though the deductor-employer, Amar Remedies Ltd., had deducted the TDS for total Rs. 5,86,606 and for which Form 16A has been issued by it, the Department has not given credit of the said TDS to the petitioner- assessee- deductee and when the assessee has claimed the said deduction, the same has not been granted and demand is raised by issuing notice at annexure D. Therefore, the short question which is posed for consideration of this court is whether in case the deductor had deducted the TDS and for the same Form No. 16A has been issued by the deductor, the credit of the same can be denied to the assessee and the deductee solely on the ground that such credit does not appear on the ITD system of the Department and/ or the same does not match with the ITD system of the Department ?
At the outset, it is required to be noted that under Chapter XVII, more particularly, section 204 of the Act the liability to deduct the tax at source would be upon the employer/payer/deductor in the present case Amar Remedies Ltd. As per section 205 of the Act, whether tax is deductible at source under Chapter XVII, the assessee shall not be called upon to pay tax himself to the extent to which tax has been deducted from that income. That the deductor is required to issue Form No. 16A providing particulars with respect to the amount of tax deducted at source in the relevant assessment year. In the present case, it is the case on behalf of the petitioner and/ or as per the return of income filed the total sum of Rs. 5,86,606 has been deducted by the deductor, Amar Remedies Ltd., as TDA and for which M/s. Amar Remedies Ltd. deductor has issued Form No. 16A. It is also the case on behalf of the petitioner that out of the total salary of Rs. 21,60,000 to be received from M/s. Amar Remedies Ltd.-deductor he has received salary after deducting the amount of tax at source by the deductor for which Form No. 16A has been issued, i.e., he has received Rs. 5,86,606 and on account of the said amount deducted at source by M/s. Amar Remedies Ltd. Under the circumstances and considering sections 204 and 205, when the deductor who is liable to deduct the tax at source under Chapter XVII deducts the TDS and issued Form No. 16A the assessee-deductee shall be entitled to credit of the same. As stated above and as per section 205 of the Act, whether tax is deductible at source under Chapter XVII, the assessee shall not be called upon to pay the tax himself to the extent of which tax has been deducted from that income. Meaning thereby, the assessee- deductee is entitled to credit of such amount of TDS. Assuming that in a given case the deductor after
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deducting the TDS may not have deposited with the Department. However, in such situation, the Department is to recover the said amount from the deductor and the assessee-deductee cannot deny the credit of the same. Identical question came to be considered by the Bombay High Court in the case of Yashpal Sahni (supra) and considering section 205 of the Act in paragraph 15 of the Bombay High Court has observed as under :
"Chapter XVII of the Income-tax Act, 1961, provides for collection and recovery of tax by two modes. They are (one) directly from the assessee and (two) indirectly by deduction of tax at source. In the present case, we are concerned with the second mode of recovery, namely, recovery of tax by deduction at source."
In the said decision, the Bombay High Court has considered and relied upon the decision of the Om Prakash Gattani (supra). In the said decision, the Gauhati High Court, after considering the relevant provision under Chapter XVII, has observed and held that so far as the assessee is concerned, he is not supposed to do anything in the whole transaction except that he is to accept the payment of the reduced amount which is deducted Income-tax at source. It is observed that on the amount being deducted the assessee only gets a certificate to that effect by the person responsible to deduct the tax. In the said decision of the Gauhati High Court has quashed and set aside the notice issued under section 226(3) of the Act to the bankers of the assessee observing in paragraph 7 as under:
"7. So far the assessee is concerned, he is not supposed to do any thing in the whole transaction except that he is to accept the payment of the reduced amount from which is deducted Income-tax at source. The responsibility to deposit the amount deducted at source as tax is that of the person who is responsible to deduct the tax at source. On the amount being deducted the assessee only gets a certificate to that effect by the person responsible to deduct the tax. In a case where the amount has been deducted by the person responsible to deduct the amount under the statutory provisions, the assessee has no control over the matter. In case of default in making over the amount to the account of the Central Government, it is obviously the person responsible to deduct or the person who has made the deduction who is held responsible for the same. The responsibility of such person is to the extent that he has to be deemed to be an assessee in default in respect of the tax. He may be deemed to be an assessee in default not only in cases where after deduction he does not make over the amount to the Central Government but also in cases where there is failure on his part to deduct the amount at source. This responsibility has been fastened upon him under section 201 of the Income-tax Act. It is, of course, without prejudice to any other consequences which he or it may incur. Presently we are not concerned with the case where the person responsible to make the deductions has not deducted the
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amount at all. It may or may not fall in a different category from one where the amount has been deducted and not made over to the Central Government. We are concerned with the latter category of cases. As indicated earlier, on the facts it is nobody's case that the amount was actually not deducted at source by Chandra Agencies. What seems to be in dispute is the deposit of the said amount in the account of the Central Government. The Income-tax Department seems to have made enquiries about the exact date of payment to the Central Government which Chandra Agencies could not furnish on the ground that the papers were forwarded to the chairman of Vaibhavshali Bumper. In such a category of cases we feel that the amount of tax can be recovered by the Income-tax Department treating the person responsible to deduct tax at source as an assessee in default in respect of the tax. It would not be possible to proceed to recover the amount of tax from the assessee. The assessee cannot be doubly saddled with the tax liability. Deduction of tax at source is only one of the modes of recovery of tax. Once this mode is adopted and by virtue of the statutory provisions the person responsible to deduct the tax at source deducts the amount, only that mode should be pursued for the purpose of recovery of tax liability and the assessee should not be subjected to other modes of recovery of tax by recovering the amount once again to satisfy the tax liability. It is, therefore, provided under section 201 of the Income-tax Act that the person responsible to deduct the tax at source would be deemed to be an assessee in default in case he deducts the amount and fails to deposit it in the Government treasury. As observed earlier, the assessee has no control over such person who is responsible to deduct the income- tax at source, but fails to deposit the same in the Government treasury. In this light of the matter, in our view, the notices issued under section 226(3) of the Income-tax Act to the bankers of the petitioner respondent to satisfy the tax liability from the bank account of the petitioner respondent are illegal. It is not that the Income-tax Department was helpless in the matter. The person responsible to deduct the tax at source would move into the shoes of the assessee and he would be deemed to be an assessee in default. Whatever process or coercive measures are permissible under the law would only be taken against such person and not the assessee."
We are in complete agreement with the view taken by the Bombay High Court and Gauhati High Court. Applying the aforesaid two decisions of the Bombay High Court as well as the Gauhati High Court, the facts of the case on hand and even considering section 205 of the Act action of the respondent in not giving the credit of the tax deducted at source for which Form No. 16A have been produced by the assessee-deductee and, consequently, impugned demand notice issued under section 221(1) of the Act cannot be sustained. Concerned respondent, therefore, is required to be directed to give credit of tax deducted at source to the assessee-deductee of the amount for which Form No. 16A have been produced.”
ITA No. 1767/Ahd/2016 Shri Nareshkumar P Patel vs. ITo Assessment Year : 2011-12 Page 5 of 5
We, therefore, uphold the plea of the assessee and direct the Assessing Officer to grant credit in respect of the TDS in question.
In the result, appeal is allowed in the terms indicated above. Pronounced in the open Court on today on the 19th day of September, 2017.
Sd/- Sd/-
S S Godara Pramod Kumar (Judicial Member) (Accountant Member) *bt Ahmedabad, the 19th day of September, 2017
Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order