Where the Deductor has Deducted Tax at Source But Has Not Deposited the Tax with the Government, the Assessee Cannot be Made to Suffer: ITAT Delhi

Where the Deductor has Deducted Tax at Source But Has Not Deposited the Tax with the Government, the Assessee Cannot be Made to Suffer: ITAT Delhi

In the case of Aricent Technologies Holdings Ltd vs. ACIT, ITAT Delhi has held that:

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.”

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 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.”

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.

Now, coming to the next issue raised in Ground of appeal No.8 which is against the charging of interest u/s 234A of the Act.

The Ld.AR for the assessee pointed out that the assessee had filed the return of income on 30.11.2015 which was the prescribed due date for filing the return of income by the assessee u/s 139(1) of the Act.

We find merit in the plea of the assessee that where the due date of filing return of income was 30.11.2015 and since the assessee had filed return of income on 30.11.2015, then there was no merit in charging of interest u/s 234A of the Act. The ground of appeal no. 8 is thus allowed.

The Ground of appeal No.9 is raised against charging of interest u/s 234B and 234C of the Act.

The Ld.AR pointed out that the interest levied u/s 234B of the Act is consequential. Hence this part of Ground of appeal is dismissed.

Now coming to charging of interest u/s 234C of the Act then the said interest is to be computed on the returned income of the assessee and not the income assessed by the Assessing Officer. The Assessing Officer may verify the stand of the assessee in this regard and re-compute the interest chargeable u/s 234C of the Act. Thus, Ground of appeal No.9 is partly allowed.

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

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Dhanraj Sharma

Dhanraj Sharma is CEO of Tax Concept. He is on a Mission to Educate and Empower 10,000+ Professionals across the Country.

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