2024 (5) TMI 154 - AT - Income Tax

Employee gets TDS credit despite employer's failure to deposit deducted tax with authorities

Krishna Hari Gaddam, Hyderabad Versus Income Tax Officer, Ward-12 (1), Hyderabad

Krishna Hari Gaddam, Hyderabad Versus Income Tax Officer, Ward-12 (1), Hyderabad - TMI Issues Involved:1. Non-credit of TDS by CPC due to non-reflection in Form 26AS.2. Assessee's appeal against the First Appellate Authority's decision.3. Jurisdictional AO's treatment of the assessee as not in default.4. Legal precedents and their applicability.Summary:1. Non-credit of TDS by CPC due to non-reflection in Form 26AS:The CPC Bengaluru, in the intimation u/s 143(1) of the Income Tax Act, 1961, dated 08/05/2021, did not give credit of Rs. 13,50,000/- out of total TDS of Rs. 14,75,000/- deducted by M/s. Karvy Stock Broking Limited u/s 192 of the Act, contending that Form 26AS does not contain the details of TDS of Rs. 13,50,000/-, and finally raised a demand of Rs. 14,17,500/-.2. Assessee's appeal against the First Appellate Authority's decision:Aggrieved, the assessee preferred an appeal before the First Appellate Authority. The Ld. CIT(A) dismissed the appeal but directed the jurisdictional AO to treat the assessee as not in default of taxes for the entire sum covered under TDS non-remittance, in accordance with CBDT instruction No. 05/2013 and CBDT Press release dated 11/03/2016.3. Jurisdictional AO's treatment of the assessee as not in default:At the time of hearing, the learned AR submitted that the entire tax demand arose due to the employer's failure to deposit TDS, which was deducted from the salary paid to the assessee. The AR contended that the Ld. CIT(A) erred in holding that the CPC's action cannot be faulted at since it is system-driven and unless the credit of TDS appears in Form 26AS, extending credit is impossible. The AR pleaded that the substantial benefit granted as per the law cannot be taken away by technology and hence credit of TDS deducted by the employer should be granted to the assessee.4. Legal precedents and their applicability:Learned AR also drew attention to the decision of the Hon'ble Delhi High Court in the case of Harshdip Singh Dhillon vs. Union of India [2024] 470 ITR 355 (Del) and the decision of the Co-ordinate Bench of the Tribunal in the case of Shri Rajesh Dadu vs. DCIT, in ITA No. 34/Hyd/2023 (AY. 2019-20), dt. 31/03/2023. The Tribunal, after hearing both parties and perusing the material on record, found that the issue in this appeal is similar to the issue decided by the Hon'ble Delhi High Court in the case of Harshdip Singh Dhillon vs. Union of India.The Tribunal concluded that since the petitioner accepted the salary after deduction of Income-tax at source, it is his employer who is liable to deposit the same with the Revenue authorities, and on this count, the petitioner cannot be burdened. Respectfully following the decision of the Hon'ble High Court, the Tribunal allowed the grounds raised by the assessee.Conclusion:In the result, the appeal of the assessee is allowed.Order Pronounced:Order pronounced in the open court on 30th day of April, 2024.