2024 (11) TMI 687 - AT - Income Tax

Assessee cannot be proceeded against for tax recovery when deductor deducted TDS but failed to deposit with government

Subaida Abdurahiman Versus The Income Tax Officer, Ward 1 (3), Calicut.

ITAT Cochin allowed the appeal for statistical purposes where assessee claimed tenant deducted TDS but failed to deposit with Central Government. The ... Deductor had deducted the tax but not paid to the Central Government -mismatch between tax credits claimed and allowed and the reasons for the said mismatch was mentioned as form 26AS does not contain amount of TDS /TCS with respect to the TAN mentioned in Schedule TDS-1/TDS – 2 /TCS - HELD THAT:- Assessee cannot be proceeded for the recovery of the tax dues when the deductor had deducted the tax but not paid to the Central Government. [2023 (6) TMI 1135 - DELHI HIGH COURT]. In the present case, we find from the documents submitted by the assessee, the tenant had deducted the tax while making the rental payments but failed to deposit the same into the Central Government. Before the Ld.CIT(A) as well as before this Tribunal, the assessee had given the details of the deductor but the Ld.CIT(A) had not taken any steps to ascertain the facts based on the details furnished by the assessee. We are of the view that the CIT(A) could have sought for a remand report from the AO through which the genuineness of the claim of the assessee could have been verified. On the other hand, the CIT(A) could have remitted the issue to the AO to verify the genuineness of the claim and if the claim of the assessee is found correct, then the AO could have desisted from collecting the tax due from the assessee. On the face of the documents submitted by the assessee, we are able to visualise that there is some reasonables in the submissions made by the assessee. Therefore the matter requires further verification. In the event of verification, if the AO found that the claim made by the assessee is genuine, then naturally, the judgments relied on by the Ld.AR would apply to the facts of the case and in that event, the assessee is not liable to pay the tax as demanded by the authorities. Appeal filed by the assessee stands allowed for statistical purposes. Issues:Appeal against order of NFAC for A.Y. 2023-24 regarding TDS mismatch.Analysis:The assessee, owner of a property, rented it out with TDS deducted by tenant at 10%. However, tenant did not remit TDS to the government, leading to a demand notice of Rs. 1,20,000. Assessee challenged before Ld.CIT(A) citing Section 205 and Delhi HC judgment. Ld.CIT(A) rejected claim, stating deductor did not remit tax. Assessee appealed to ITAT with various grounds, including reliance on Delhi HC judgments. ITAT noted receipts issued by assessee mentioning TDS deduction, which were also submitted to Ld.CIT(A). Delhi HC judgments cited by assessee emphasized that credit cannot be denied if tax was deducted but not deposited by deductor. ITAT found Ld.CIT(A) did not consider these judgments properly.ITAT reviewed Delhi HC judgments cited by assessee. The judgments clarified that recovery of tax dues from assessee is impermissible when deductor fails to deposit TDS. ITAT observed that in the present case, tenant deducted TDS but did not remit to government. ITAT criticized Ld.CIT(A) for not verifying details provided by assessee and not seeking a remand report from AO. ITAT concluded that further verification was necessary to ascertain genuineness of claim. Therefore, ITAT set aside lower authorities' orders and remitted the issue to AO for proper enquiry. ITAT directed AO to determine if tenant deducted tax but did not remit to government. If verified, appropriate action should be taken against tenant, and assessee should be allowed to credit the TDS amount, relieving them from the tax liability demanded by authorities.In the final verdict, ITAT allowed the appeal for statistical purposes, emphasizing the need for thorough verification of the facts and the genuineness of the claim. The decision highlighted the importance of ensuring that TDS deductions made by tenants are properly remitted to the government to avoid unnecessary tax liabilities on the assessee.