2023 (8) TMI 586 - AT - Income Tax

Set-off of the TDS against tax demand which was never deposited by the assessee acting as employer of himself - HELD THAT - It is pertinent to note here that the assessee being the managing director of the company himself was liable to file and verify the income tax return on behalf of the company as per the provisions of section 140(c) of the Income Tax Act. Even if an action is brought against the company for non-deduction of TDS even then the assessee being the principal officer of the company is liable to be treated as assessee in default under the provisions of section 201(1) and 201(1a) read with section 204 of the Income Tax Act and even as per the provisions of section 271C, it would be assessee being the managing director and the principal officer of the company who would be liable to be prosecuted u/s 271C of the Act for default in deduction of TDS or non-deposit of TDS. Therefore, even otherwise, if the taxes to be recovered from the company, it will be the assessee who will be liable on behalf of the company to pay the taxes and interest thereupon including liable to be tried under Penal provisions for non-deduction/non-deposit of tax on his own salary. I Assessee being the managing director and chief executive officer of the company himself is the principal officer/person responsible for all acts of defaults in non-deduction/non-deposit of TDS and under such circumstances, he cannot be allowed to take benefit of his own wrong. Assessee has made another attempt to harp upon a wrongful claim of the assessee by stating that the employer of the assessee company namely AMW Motors was admitted into Corporate Insolvency Resolution Process before the National Company Law Tribunal, Ahmedabad and that affairs of the assessee company was managed by resolution professional appointed by NCLT. We find that the above contention of the ld. counsel is also misleading and does not depict true picture of the events. Though the company was admitted into CIRP by the Adjudicating Authority on 01.09.2020 and Interim Resolution Professional was appointed on 01.09.2020, whereas, the financial years involved in the present appeals are F.Y 2017-18 relevant to A.Y 2018-19 and F.Y 201819 relevant to A.Y 2019-20. Therefore, there is no merit in the above contention raised by assessee. The assessee is not entitled to any claim of set-off of TDS, which was never deposited by the company, the assessee being the principal officer and overall administrative head of the company, out of his own act and conduct. Decided against assessee.

Summary

Issues Involved:
1. Non-adjudication of the issue by CIT(A)
2. Denial of opportunity of hearing by CIT(A)
3. Unauthorized adjustment in computing tax liability and denial of TDS credit

Summary:

Non-adjudication of the issue by CIT(A):
The appellant claimed that once tax was deducted at source by the payer, the credit for the same should be given to the payee irrespective of whether the deducted tax was deposited by the payer with the Government. The appellant cited Section 205 of the Income Tax Act and Instruction No. 275/29/2014-IT-(B) dated 01.06.2015 to support this claim. The CIT(A) directed the AO to verify the claims and allow necessary relief, but the appellant was not satisfied and appealed further.

Denial of opportunity of hearing by CIT(A):
The appellant argued that the CIT(A) passed the order without giving an opportunity of hearing, violating the principles of natural justice. The Tribunal initially dismissed the appeal, noting that the CIT(A) had already directed the AO to verify and allow the necessary credit. However, the High Court of Calcutta restored the matter to the Tribunal for a fresh decision.

Unauthorized adjustment in computing tax liability and denial of TDS credit:
The appellant filed a return declaring a total income of Rs. 37,87,390/- and claimed a refund of Rs. 36,360/-. The return included details of TDS of Rs. 10,09,289/-, which was not reflected in Form 26AS. The CPC, Bengaluru, did not allow the TDS claim and charged interest under Sections 234B and 234C, resulting in a total demand of Rs. 11,58,260/-. The appellant contended that the department should recover the amount from the deductor and not levy it again on the assessee.

Tribunal's Final Decision:
The Tribunal noted that the appellant, being the MD and CEO of AMW Motors Ltd., was responsible for the deduction and deposit of TDS. The appellant cannot claim credit for TDS that was never deposited. The Tribunal dismissed the appeals, stating that the appellant cannot benefit from his own wrong or default. The Tribunal also dismissed the contention that the company's insolvency proceedings affected the TDS deposit, as the relevant financial years were before the insolvency process began. Both appeals for assessment years 2018-19 and 2019-20 were dismissed.