2021 (7) TMI 1390 - AT - Income Tax

Non deposit of TDS - Employer had deducted TDS from salary but the same has not been deposited in the Government account - HELD THAT - As per the learned counsel the TDS has been deducted from the salary of the employee but the same has not been remitted back to the account of Central Government by the employer. Therefore there is an outstanding demand on the employee (including interest). We note that assessee has not explained these facts before CIT(A). We make it clear that if TDS has actually been deducted then assessee (deductee) cannot be called upon to pay tax in terms of provisions of Section 205 of the Income Tax Act. We direct the assessee to produce before the learned CIT(A) the salary slip copy of income tax return and the proof that the TDS has been deducted by the employer company but not deposited to the account of the Central Government. Therefore we set aside the order of the learned CIT(A) and remit the issue back to the file of the learned CIT(A) with the direction to examine the salary slip amount deducted as TDS from the salary but not deposited to the Government account and examine the income tax return filed by the assessee and thereafter credit for TDS may be allowed to the assessee in accordance with law. Statistical purposes the appeal of the assessee is treated to be allowed.

Summary

Issues:
1. Non-deposit of TDS by the employer leading to a demand on the assessee.
2. Appeal against the order passed by the Commissioner of Income Tax (Appeals).
3. Request for deletion of demand or allowance of credit for TDS.

Analysis:
The appeal before the ITAT Surat pertained to the Assessment Year 2017-18 and was directed against the order of the Commissioner of Income Tax (Appeals) dated 24.03.2021, which stemmed from the assessment order by the Assessing Officer dated 18.06.2018. The primary contention raised by the assessee was that the employer had deducted TDS amounting to Rs.39,510 from the salary but failed to deposit it in the Government account, resulting in a demand of Rs.50,590 (inclusive of interest). The assessee sought either the deletion of the demand or the allowance of credit for the TDS amount deducted by the employer.

During the proceedings, the Revenue argued that the assessee did not appear before the CIT(A) during the appellate process. Consequently, the Revenue proposed that the matter be remitted back to the CIT(A) for a re-examination of the facts presented by the assessee to determine the appropriate credit in compliance with the law.

Upon hearing both parties and reviewing the available evidence, the ITAT noted that the employer, ABG Shipyard Ltd., had become bankrupt and failed to deposit the TDS of Rs.39,510 deducted from the assessee's salary. Despite the Revenue raising a demand of Rs.52,000 (inclusive of interest) on the assessee, the ITAT acknowledged the deduction of TDS by the employer. The ITAT emphasized that if TDS had indeed been deducted, the assessee should not be liable to pay tax as per Section 205 of the Income Tax Act. Consequently, the ITAT directed the assessee to provide necessary documents, including the salary slip, income tax return copy, and proof of TDS deduction by the employer but not deposited with the Government. The ITAT set aside the CIT(A) order and remitted the issue back to the CIT(A) for a detailed examination of the relevant documents and subsequent allowance of credit for TDS in accordance with the law. The appeal of the assessee was treated as allowed for statistical purposes.

In conclusion, the ITAT Surat allowed the appeal of the assessee for statistical purposes, emphasizing the importance of verifying TDS deductions and ensuring compliance with legal provisions for tax credits.