2024 (5) TMI 446 - HC - Income Tax

Assessee entitled to TDS credit despite mismatch between Section 192 deductions and Form 26AS entries

AFR Malay Kar Versus Union of India & Ors.

The HC ruled that an assessee cannot be denied TDS credit due to mismatch between employer-deducted tax under Section 192 and Form 26AS entries. The court ... Credit of the tax deducted at source (TDS) as TDS deducted by the employer - mis-match of tax deducted u/s 192 - difference in between the tax deducted by opposite party no.6 and the amount reflected in Form 26AS - what step has been initiated against the employer for non-depositing of the tax collected and deducted at source from the salary of the petitioner? - HELD THAT:- Section 205 of the I.T. Act read with CBDT circular, being statutory one, the said provision has to be adhered to in letter and spirit and to give effect to such provision, CBDT circular was issued on 01.06.2015 and the office memorandum was issued on 11.03.2016. Therefore, for tax credit mismatch cannot be enforced coercively against the petitioner/assessee. Assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income. As in view of the provisions contained in Section 205 of the I.T. Act, which provides that where tax is deductible at the source the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income and its applicability is not depending upon the credit for tax being given under Section 199 of the I.T. Act. Thereby, the department shall not deny the benefit of tax deducted at source by the employer during the relevant financial years to the petitioner. The credit of the tax shall be given to the petitioner and if in the interregnum, any recovery or adjustment is made by the department, the petitioner shall be entitled to the refund, with the statutory interest, within eight weeks from the date of receipt of the copy of this judgment. Issues involved:1. Inaction in granting credit of tax deducted at source (TDS).2. Mismatch between tax deducted by the employer and the amount reflected in Form 26AS.3. Legal obligation of the Income Tax Department to account for TDS.4. Bar against direct demand on the assessee u/s 205 of the Income Tax Act.5. Steps taken against the employer for non-depositing TDS.Summary:The petitioner challenges the inaction of opposite party no.4 in granting credit for TDS amounting to Rs.2,68,733/- u/s 143(1)(c) of the Income Tax Act, 1961 for the assessment year 2013-14. The petitioner, a salaried employee, had filed his return of income electronically. During the period April 2012 to October 2012, the petitioner was employed under opposite party no.6 and received a gross salary of Rs.25,39,766/-, out of which Rs.5,90,112/- was deducted as tax at source u/s 192 of the I.T. Act. However, Form 26AS reflected only Rs.3,21,379/- deposited by opposite party no.6, leading to a mismatch of Rs.2,68,733/-.Upon processing the return, opposite party no.4 issued an intimation u/s 143(1) of the I.T. Act on 26.07.2014 without accounting for the TDS of Rs.2,68,733/-, and charged interest u/s 234B and 234C amounting to Rs.55,417/-. The petitioner sent letters to the employer and the Commissioner of Income Tax (TDS), Patna, but received no communication regarding the steps taken. The petitioner contended that the obligation to transmit the deducted tax lies with the deductor and not the assessee, and cited Section 205 of the I.T. Act and CBDT circulars dated 01.06.2015 and 11.03.2016 to support his claim.Mr. S.C. Mohanty, representing the Income Tax Department, argued that the mismatch occurred due to the employer's failure to deposit the full TDS amount. He stated that the responsibility to deposit the tax lies with the deductor and that the jurisdictional Assessing Officer (TDS) at Ranchi should address the issue. Despite the court's direction, the Department did not file an affidavit detailing the steps taken against the employer.The court noted that Section 205 of the I.T. Act bars direct demand on the assessee to the extent tax has been deducted from their income. The CBDT circular and office memorandum reiterated that demands due to TDS mismatch cannot be enforced coercively against the assessee. The court cited various judgments, including Rakesh Kumar Gupta v. Union of India and Kartik Vijaysinh Sonavane v. Deputy Commissioner of Income Tax, which supported the petitioner's claim for TDS credit.The court concluded that the department should not deny the benefit of TDS to the petitioner and directed that the credit of the tax be given. If any recovery or adjustment had been made, the petitioner is entitled to a refund with statutory interest within eight weeks from the date of receipt of the judgment.The writ petition was allowed, with no order as to costs.(DR. B.R. SARANGI) JUDGEG. SATAPATHY, J. I agree.