2023 (4) TMI 1102 - AT - Income Tax

Tribunal rules in favor of assessee citing Income Tax Act, emphasizes section 205

Smt. Paulomi Iyer Versus D.C.I.T, Circle-4 (2), Ahmedabad

Smt. Paulomi Iyer Versus D.C.I.T, Circle-4 (2), Ahmedabad - TMI 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 205The 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 DepositThe 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 TDSThe 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.