The Central Board of Direct Taxes (CBDT) had issued directions to the field offices that taxpayers whose tax has been deducted at source but not deposited to the Government’s account by the deductor, will not be asked to pay the demand to the extent tax has been deducted from his income. A letter to this effect was issued on 01.06.2015. Through this letter an embargo had been put on the direct demand against the assessees in cases where the tax demand is on account of tax-credit mismatch due to non-payment of TDS to the Government account by the deductor.    

Instances have come to the notice of the Board that these directions are not being strictly followed in the field offices. An Office Memorandum(OM) has therefore been issued yesterday reiterating the contents of the letter.  It has been re-emphasized that the assessing officers shall not enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor.   

The Office Memorandum dated 11.03.2016 is available on the website of the Department www.incometaxindia.gov.in.

Non-enforcement of recovery where tax was deducted but not deposited prevents assessing officers from demanding payment from the taxpayer. Assessing officers are instructed not to pursue recovery from taxpayers for demands arising from a TDS credit mismatch where tax was deducted but not deposited by the deductor; an Office Memorandum reiterates that such demands created on account of deductor non-deposit must not be enforced against the assessee, directing field offices to comply with the embargo on direct demands in these cases.