2022 (3) TMI 304 - HC - Income Tax

Giving credit to the TDS deducted by the tenants - HELD THAT - The respondent no. 2 to decide the Rectification application at Annexure-'R' and 'R1' taking note of the discussion made above in light of settled position of law. Noticing that rectification applications are still pending before the respondent, this court relegates the matter to the respondent no. 2 to dispose off the rectification application, taking note of the discussion as made above. The authority may take note of the material to be submitted by the petitioner to evidence deduction of tax at source by the respondent nos. 3 and 4. Senior Counsel appearing for the petitioner has also produced along with the memo dated 11.01.2022, the letter dated 02.12.2009 whereby the tenant has acknowledged the remittance of TDS which the learned counsel for petitioner would indicate the factum of deduction of TDS by the tenants and if read along with Annexure-'C1' to 'C13' and 'D1' to 'D16' would indicate that tenants have in fact deducted the amount and failed to remit as remittance is not found in the records of the revenue. Insofar as prayer at (iii) is concerned, it is open to the Department to take appropriate action against respondent nos. 3 and 4 as per law to recover sums deducted by the respondents and not remitted to the Department and other penal action.

Summary

Issues:
1. Non-credit of TDS deducted by tenants in assessment orders.
2. Demand notice raised for assessment years 2009-10 and 2010-11.
3. Disposal of rectification application under Section 154 of the Income Tax Act.
4. Entitlement of the Department to recover amounts demanded from the petitioner.
5. Legal position regarding tax deduction at source and liabilities of Deductor and Department.

Analysis:
1. The petitioner, the property owner, claimed that tenants deducted TDS but the Department did not credit it in assessment orders. The petitioner sought to quash demand notices for the years 2009-10 and 2010-11. The court acknowledged the deduction of TDS by tenants and ruled that the Department should not demand tax from the petitioner if TDS has been deducted, as per Section 205 of the Income Tax Act. The court clarified that the Department's remedy is to proceed against the Deductor for non-remitting TDS to the Government.

2. The court set aside the demand notices against the petitioner and directed the Department to decide on the rectification application filed by the petitioner. The court emphasized that the Department should consider the evidence submitted by the petitioner regarding TDS deduction by tenants. The court instructed the Department to dispose of the rectification application promptly, within eight weeks from the date of the order.

3. The petitioner provided letters acknowledging TDS remittance by tenants, indicating non-receipt of the remitted amount by the Department. The court allowed the Department to take legal action against the tenants for not remitting the deducted TDS and for any penal consequences. The court reiterated the Department's authority to recover the sums deducted by tenants and not remitted to the Government.

4. In conclusion, the court upheld the petitioner's claim regarding TDS deduction by tenants and directed the Department to handle the rectification application promptly. The court emphasized the Department's responsibility to pursue the Deductor for TDS non-remittance and to take necessary legal actions against the tenants.