2023 (4) TMI 1102 - AT - Income Tax

Credit of tds denied - Demand order of the AO without considering the provision of section 205 - Discharge of onus - whether the deductor actually deducted tax from payments made to the appellant or if deducted whether it was deposited into Government Account? - second round of litigation before us - HELD THAT - ITAT on earlier occasion while setting aside the file to the AO casted obligation on him (the AO) to cross verify the evidences furnished by the assessee and find out the fact that tax was deducted or not by the party M/s Jain Infraproject Ltd. AO in the set aside proceedings failed to comply with the directions of the ITAT in its true sense. As such, the AO after receiving report from DDIT(Inv.) Unit-6 Kolkata that the party has not responded to the notices issued did not try to adopt any other means to verify and determine the fact whether tax at source was deducted or not against the invoices issued by the assessee. Assessee has discharged her onus by furnishing the necessary details to justify that the party i.e. M/s Jain Infraproject Ltd has deducted the TDS. Even on consideration of the circumstantial evidences, the difference between the amount of the invoices raised and the amount received by the assessee from the party is exactly matching with the amount of TDS. Once, the assessee has discharged the onus imposed on her, the onus shifted upon the revenue to disprove the contention of the assessee based on the documentary evidence. However, we find that the Revenue despite of having enough powers under the statute failed to disprove the contention of the assessee as wrong based on the cogent information. Revenue cannot absolve from its duty merely on the reasoning that the other party i.e. M/s Jain Infraproject Ltd. is not responding to the notices issued upon it. In view of the above, we hold that the assessee is entitled for the benefit of the provisions specified under section 205 of the Act. Hence, the ground of appeal of the assessee is allowed.

Summary

Issues Involved:
1. Whether the CIT(A) erred in confirming the demand order of the AO without considering the provision of section 205 of the Income Tax Act.
2. Whether the AO and CIT(A) failed to verify the deduction and deposit of TDS by the payer, M/s Jain Infraproject Ltd.
3. Whether the assessee is entitled to the credit of TDS despite the payer not depositing the deducted tax to the Government Treasury.

Summary of Judgment:

Issue 1: Confirmation of Demand Order Without Considering Section 205
The Tribunal noted that the CIT(A) confirmed the AO's demand order without considering the provision of section 205 of the Income Tax Act. The Tribunal emphasized that as per section 205, if the payer deducts tax at source, no tax demand can be raised against the assessee to the extent of the tax deducted. The Tribunal had previously directed the AO to verify whether the payer deducted the tax and, if so, not to enforce the demand against the assessee. However, the AO and CIT(A) failed to comply with these directions properly.

Issue 2: Verification of TDS Deduction and Deposit
The Tribunal found that the AO did not adequately verify the deduction and deposit of TDS by M/s Jain Infraproject Ltd. Despite the assessee providing evidence such as email correspondence and a letter from the payer indicating the deduction of TDS, the AO relied on the lack of response from the payer to notices issued under section 131. The Tribunal held that the AO should have adopted other means to verify the deduction of TDS instead of merely relying on the non-response from the payer.

Issue 3: Entitlement to Credit of TDS
The Tribunal observed that the assessee had discharged her onus by providing necessary details to justify the deduction of TDS by the payer. The circumstantial evidence, such as the difference between the invoice amounts and the payments received, supported the assessee's claim that TDS was deducted. The Tribunal held that the revenue authorities failed to disprove the assessee's contention based on the documentary evidence provided. Consequently, the Tribunal ruled that the assessee is entitled to the benefit of the provisions specified under section 205 of the Act and allowed the appeal.

Combined Result:
Both appeals filed by the assessee for the assessment years 2012-13 and 2013-14 were allowed, with the Tribunal's findings for AY 2012-13 being applied to AY 2013-14 as well. The Tribunal pronounced the order in favor of the assessee on 29/03/2023 at Ahmedabad.