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2014 (8) TMI 418 - HC - Income TaxTDS not credited by Department - Whether in case the deductor had deducted the TDS and for the same Form no.16A has been issued by deductor, the credit of the same can be denied to the assessee and deductee solely on the ground that credit does not appear on ITD system of the department and/or same does not match with the ITD system of the department Held that - Assessee 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 - on the amount being deducted the assessee only gets a certificate to that effect by the person responsible to deduct the tax Relying upon Yashpal Sahni vs. ACIT 2007 (7) TMI 7 - HIGH COURT , BOMBAY action of the revenue in not giving the credit of the tax deducted at source for which form no.16 A have been produced by the assessee deductee and the demand notice issued u/s 221(1) of the Act cannot be sustained assessee is entitled to credit of the tax deducted at source with respect to amount of TDS for which Form No.16A issued by the employer deductor M/s. Amar Remedies Limited has been produced revenue is directed to give credit of tax deducted at source to the assessee to the extent form no.16 A issued by the deductor have been issued Decided in favour of Assessee.
Issues Involved:
1. Legality of the recovery notice under Section 221(1) of the Income Tax Act, 1961. 2. Entitlement of the petitioner to credit for tax deducted at source (TDS) by the employer. 3. Responsibility of the deductor versus the deductee in cases where TDS is deducted but not credited by the department. Detailed Analysis: 1. Legality of the Recovery Notice: The petitioner challenged the recovery notice dated 06.01.2012, which demanded a payment of Rs. 6,82,148/- under Section 143(1) of the Income Tax Act, 1961. The petitioner argued that this demand was raised without giving credit for the TDS of Rs. 5,86,606/- deducted by the employer, M/s. Amar Remedies Limited. The court considered whether the department's action of issuing the recovery notice without crediting the TDS was lawful. 2. Entitlement to TDS Credit: The petitioner filed a return for AY 2010-11, declaring a net taxable income of Rs. 29,54,982/- and claimed TDS credits totaling Rs. 5,86,606/- deducted by the employer. The petitioner received Form 16 and 16A from the employer, confirming the TDS deductions. However, the department did not give credit for the TDS in the Form 26AS, reflecting only Rs. 2,40,000/-. The court examined whether the petitioner was entitled to the TDS credit based on the certificates provided by the employer. 3. Responsibility of Deductor vs. Deductee: The court reviewed the legal provisions under Chapter XVII of the Income Tax Act, particularly Sections 204 and 205, which place the responsibility of TDS deduction and deposit on the employer (deductor). The court noted that as per Section 205, once the TDS is deducted, the deductee (petitioner) cannot be held liable to pay the tax again. The court referenced several judgments, including those from the Gauhati High Court and Bombay High Court, which supported the view that the department should recover the tax from the deductor if it was not deposited, rather than penalizing the deductee. Court's Findings: The court held that the petitioner was entitled to the credit of TDS as evidenced by Form 16 and 16A issued by the employer. The court found the department's action of not giving TDS credit and issuing a recovery notice to be unjustified. The court quashed the impugned demand notice dated 06.01.2012 and directed the department to give credit for the TDS amount mentioned in the certificates. The court clarified that the department could recover the TDS amount from the deductor if it was not deposited. Conclusion: The petition was allowed, and the court ruled that the petitioner was entitled to the TDS credit based on the certificates provided by the employer. The recovery notice was set aside, and the department was directed to adjust the TDS credit accordingly. The court emphasized that the responsibility to deposit TDS lies with the deductor, and any failure should be addressed by recovering the amount from the deductor, not the deductee.
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