PANKAJ RASTOGI, JAIPUR V. CIT (A) NFAC, JAIPUR

ITA 4/JPR/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3212 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Appeal Filed On: 04-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Recovery proceedings; Salary income; TDS
• Section: 234B; 143(1); 205; 201; 208; 192

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’SMC’ JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM deys’k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 04/JP/2022 fu/kZkj.k o"kZ@Assessment Year :2020-21 Pankaj Rastogi H-17, Madhuban Colony Tonk Road, Jaipur cuke Vs. CIT(A) NFAC Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AELPR 1487 D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Sandeep Manik (CA) jktLo dh vksj ls@ Revenue by : Smt. Monisha Choudhary (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 14/07/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 26/07/2022 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, A.M. This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 17/11/2021 [here in after (NFAC)] for assessment year 2020-21 which in turn arise from the order of the Assistant Commissioner of Income tax, CPC, Bangalore dated 15.02.2021. 2. The assessee has taken following grounds in this appeal; “1. Ld. CIT(A), NFAC has erred on facts and in law by upholding the denial of credit by the Assessing Officer (CPC) of Tax Deducted at ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 2 Source of Rs. 346220/- claimed by the appellant and deducted by employer u/s 192 of the Income Tax Act 1961 but not remitted to Govt/Income Tax Department. 2. Ld. CIT(A), NFAC has erred by ignoring the provisions of the Section 205 of the Income Tax Act, 1961 which puts bar on raising the direct demand upon the assessee where tax has been deducted at source. 3. The appellant craves to add amend alter delete or modify any or all the grounds of appeal before or at the time of hearing.” 3. The fact as culled out from the records is that the assessee is an individual employed with Regen Infrastructure and Services Private Limited, Chennai. During the relevant period, the employer deducted tax at source on salary paid to the assessee for 11 months, however the tax deducted at source has been deposited only for three months. The assessee has claimed a sum of Rs. 5,03,836/- as tax deducted at source. But the CPC based on the payment allowed TDS of Rs. 1,57,616/- and demand for unpaid amount of Rs. 3,46,220/- was raised as the balance amount payable by the assessee including interest on it. The assessee contended that as, the employer did not deposit such tax with the credit of Central Government, Department cannot deny the benefit of tax credit the assessee for the respective years which has deducted at source by the employer of the assessee. 4. Being aggrieved from the order of the CPC, the assessee carried the matter in appeal before the ld CIT(A)/NFAC and did not find the favour marched appeal before us. ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 3 5. Before us, the ld. AR appearing on behalf of the assessee argued that there is no fault of the assessee. The department is raising demand along with the interest. Assessee has already substantiated his claim that the TDS has been deducted which has not been disputed by the CIT(A). The ld. AR further argued that considering the provision of section 205 of Income Tax Act. when it has been not disputed that the tax has been deducted there can not be a direct demand on the assessee and therefore, requested that the demand raised be reduced to the extent of TDS made. 6. Per Contra, the ld. DR relied on the order of lower authorities and also admitted that there is no fault of the assessee as employer has not deducted tax but not paid to the credit of the Government and in accordance with the provisions of section 205 no recovery be made on the assessee. The credit should be allowed when the tax has been duly deposited by employer, however, till then the tax credit cannot be allowed and at the same time recovery cannot be enforced upon the assessee. 7. We have heard the rival contentions and perused the material placed on record. It is seen that while processing u/s 143(1) is based on information available in the return credits are allowed as prescribed in the Act. It is not disputed that the assessee is a salary person and ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 4 the tax has already been deducted from the salary. While dealing with the appeal of the assessee vide ground no. 1 the ld. CIT(A) has decided on merits and the relevant findings of ld. CIT(A) is extracted here in below for the sake brevity: 6. While section 205 provides that in case of an assessee where tax has already been deducted at source, the assessee cannot be asked to pay the tax himself to the extent of tax deduction, it does not laid down that while computing the demand, credit for the tax deduction should be allowed. 6.2 Credit for tax deduction is allowed as per provisions of Section 199 read with Rule 37BA. It is provided that credit for tax deduction will be allowed to a person on after tax deductor has met with certain pre- conditions. These pre-conditions include payment to the Central Government by the tax deductor and uploading the said information along with the Permanent Account Number of the deductee in the prescribed form as per the prescribed procedure. In case of the appellant, these pre conditions are not met. The deductor has not made full payment of tax deducted and Form No. 26AS of the appellant also shows only the credit of Rs 1,57,616/- which has been rightly allowed as provided in Rule 37BA r.w.s 199. 6.3 It is to be further seen that processing u/s. 143(1) is based on information available in the return and credits are allowed as prescribed in the Act. In the instant case, the relevant section for allowance of credit is Section 199. Considering this position, I do not find any fault with the intimation issued u/s. 143(1) related to grant of tax credit and hence, ground No. 1 of the appeal is dismissed. We have seen that there is no error on the findings given by the ld. CIT(A)/NFAC on facts and in law and ld. AR failed to point out andy fault in the aforesaid finding of the ld. CIT(A). Therefore, we find no ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 5 reason to deviate from the findings of the ld. CIT(A)/NFAC. In the result the ground no. 1 raised by the assessee is dismissed. 8. As regards the ground no. 2 raised by the assessee ld. AR of the assessee drawn our attention to provision of section 205 of the Act where in the law mandate that when the assessee shows that tax is deductible at source under the provisions of the Act then assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income. He further draws our attention to following findings of the ld. CIT(A) 7. Ground No. 2 relates to charging of interest u/s. 234B and 234C of the I.T. Act. These interests are charged for various defaults made for payment of advance tax as provided under Sections 207, 208 and 209 of the I.T. Act. It is seen that u/s. 209(1)(d), if the income on which tax was deductible and the same was deducted, the said income has to be excluded from computation of advance tax u/s. 207. In view of the above, for computing liability of advance tax, the entire credit of tax deduction of Rs. 5,03,836/- is to be granted to the appellant and the Assessing Officer may recompute the liability u/s. 234B and also u/s. 234C considering actual liability of advance tax, if any. 7.1 The A.O should also keep in view the provisions of Section 205 while making recovery of demand from the appellant provided the appellant is able to bring before the Assessing Officer the facts regarding actual deduction of tax from his salary income.” The ld. AR stated that though the ld. CIT(A)/NFAC has agreed that there cannot be direct demand u/s. 205 on the assessee but ld. ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 6 CIT(A)/NFAC has not given clear direction with respect to the ground of the assessee in the appeal before him. 9. To support the contention in respect of Ground no. 2 the ld. AR of the assessee has filed a detailed written submission, relied upon the various judicial pronouncements having similar set of facts and also relied upon the circular issued by the CBDT bearing no. F.NO.275/29/2014-IT(B) dated 11.03.2016. The sum and substance of this argument is that the assessee cannot be made liable to suffer and cannot be called upon to pay the tax in view of the specific provision of law, supported by CBDT circular and case law irrespective of the fact whether the same has been deposited by the deductor to the credit of the central government or not. He further submitted that the deductee in such circumstances cannot be denied credit of tax deducted at source on its behalf. The ld. AR of the assessee heavily relied upon the recent decision of Honourable Gujarat High Court in the case of Kartik Vijaysinh Sonavane Vs. DCIT in 132 taxmann.com 293 (Gujarat). The relevant finding is extracted here in below : 8. In case of Om Prakash Gattani (supra) Gauhati High Court was dealing with the TDS not deposited of prize money payable to the petitioner. It held and observed thus:- ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 7 "13. From a perusal of the provisions quoted above relating to the deduction of tax at source in the matters relating to prize money of lotteries, it is evident that the person responsible to make the payment to the assessee is under the statutory obligation to deduct the amount at source. After deduction of the amount he is required to deposit the same to the credit of the Central Government and to issue a certificate of deduction. So far as credit for the amount deducted is concerned, it is to be given on the deposit being made to the credit of the Central Government on production of a certificate furnished under section 203 of the Income-tax Act. On payment of the amount to the credit of the Central Government, it would be treated as payment of tax. 14. So far the assessee is concerned, he is not supposed to do anything in the whole transaction except that he is to accept the payment of the reduced amount from which is deducted income-tax at source. The responsibility to deposit the amount deducted at source as tax is that of the person who is responsible to deduct the tax at source. On the amount being deducted the assessee only gets a certificate to that effect by the person responsible to deduct the tax. In a case where the amount has been deducted by the person responsible to deduct the amount under the statutory provisions, the assessee has no control over the matter. In case of default in making over the amount to the account of the Central Government, it is obviously the person responsible to deduct or the person who has made the deduction who is held responsible for the same. The responsibility of such person is to the extent that he has to be deemed to be an assessee in default in respect of the tax. He may be deemed to be an asses see in default not only in cases where after deduction he does not make over the amount to the Central Government but also in cases where there is failure on his part to deduct the amount at source. This responsibility has been fastened upon him under section 201 of the Income-tax Act. It is, of course, without prejudice to any other consequences which he or it may incur. Presently we are not concerned with the case where the person responsible to make the deductions has not deducted the amount at all. It may or may not fall in a different category from one where the amount has been deducted and not made over to the Central Government. We are concerned with the latter category of cases. As indicated earlier, on the facts it is nobody's case that the amount was actually not deducted at source by Chandra Agencies. What seems to be in dispute is the deposit of the said amount in the account of the ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 8 Central Government. The Income-tax Department seems to have made enquiries about the exact date of payment to the Central Government which Chandra Agencies could not furnish on the ground that the papers were forwarded to the chairman of Vaibhavshali Bumper. In such a category of cases we feel that the amount of tax can be recovered by the Income-tax Department treating the person responsible to deduct tax at source as an assessee in default in respect of the tax. It would not be possible to proceed to recover the amount of tax from the assessee. The assessee cannot be doubly saddled with the tax liability. Deduction of tax at source is only one of the modes of recovery of tax.. Once this mode is adopted and by virtue of the statutory provisions the person responsible to deduct the tax at source deducts the amount, only that mode should be pursued for the purpose of recovery of tax liability and the assessee should not be subjected to other modes of recovery of tax by recovering the amount once again to satisfy the tax liability. It is, therefore, provided under section 201 of the Income-tax Act that the person responsible to deduct the tax at source would be deemed to be an assessee in default in case he deducts the amount and fails to deposit it in the Government treasury. As observed earlier, the assessee has no control over such person who is responsible to deduct the income-tax at source, but fails to deposit the same in the Government treasury. In this light of the matter, in our view, the notices issued under section 226(3) of the Income-tax Act to the bankers of the petitioner-respondent to satisfy the tax liability from the bank account of the petitioner-respondent are illegal. It is not that the Income-tax Department was helpless in the matter. The person responsible to deduct the tax at source would move into the shoes of the assessee and he would be deemed to be an assessee in default. Whatever process or coercive measures are permissible under the law would only be taken against such person and not the assessee. 15. However, the position as indicated above would not mean that mere deduction of the tax amount at source would amount to total discharge of the tax liability so long as the amount deducted is not deposited in the coffers of the Central Government. It is for this reason Section 199 of the Income-tax Act makes it clear that credit for tax deducted would be given when the amount is deducted and paid to the Central Government and a certificate of deduction is produced as furnished under section 203 of the Income-tax Act. It is obvious that unless the amount is paid to the Central Government, the tax liability is not discharged, nor can it be said that the assessee ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 9 has made the payment of the tax amount payable to the Government. We find no force in the submission made on behalf of the petitioner- respondent that on mere deduction of the amount at source, credit for tax deducted must be given and it cannot be withheld even though the person responsible to deduct the tax at source has not made it over to the Central Government. In our view, if that contention is accepted that credit for tax deducted has to be given on mere deduction of the amount at source, in that event, perhaps, there would be no legal justification to treat the person responsible to deduct the amount at source as an assessee in default in respect of the tax. Once credit on account of payment of tax is given, the tax liability will stand discharged. Any step to recover the amount of tax can be taken only in case the tax liability is not discharged and it still subsists. In this view of the matter, Shri K. P. Sarma, learned counsel appearing for the Revenue, has rightly defended the note appended by the Assessing Officer in the order of assessment making it clear that credit for the amount deducted was not being given and that will be given only when evidence as to actual payment of the amount to the Central Government is furnished. But this position would not legally justify initiation of recovery proceedings against the assessee from whose income tax has been deducted at source, but the person responsible to deduct the tax fails to deposit the same in the Government treasury. The statutory scheme evolved to employ this mode of recovery of tax at source also points to the same position and in our view rightly. Otherwise a taxpayer from whose income tax is liable to be deducted at source would be exposed to a great vulnerable position. If some unscrupulous persons responsible to deduct the tax at source, after deducting the amount do not deposit the amount in the Government treasury, such persons should be saddled with the tax liability. Therefore, under section 201 of the Income-tax Act it has been aptly provided that the person responsible to deduct the tax would be deemed to be an assessee in default so that he can be proceeded against for recovery of the amount instead of the assessee who has already parted with the amount, but due to some commission or omission on the part of the person responsible to deduct the amount at source over whose activity he has no control, he may not be subjected to double payment of tax and brunt of arduous recovery proceeding. The provisions as contained in Section 201 of the Act provide a kind of protection to the assessee where tax liability as standing against him is not yet discharged and credit for ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 10 the amount deducted cannot be given in terms of Section 199 of the Income-tax Act. 16. A perusal of Section 205 of the Income-tax Act clarifies the position where it provides that where tax is deductible at 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. What is noticeable in this provision is that its applicability is not dependent upon the credit for tax deducted being given under section 199 of the Income- tax Act. What is necessary for applicability of this provision is that the amount has been deducted from the income. In case where the amount has been deducted but not paid to the Central Government that eventuality is taken care of by Section 201 of the Income-tax Act. Learned counsel for the appellant could not show that under the law it may be permissible to proceed against the assessee even after deduction of the tax at source, nor learned counsel for the petitioner- respondent could persuade us to hold that merely by deduction of tax at source, credit for deduction of tax at source has to be given even though the amount may not have been made over to the Government treasury. The reason for this has already been explained by us in the discussion held in the earlier part of this judgment as the mere deduction of tax at source would not close the chapter of tax liability unless it is deposited in the Government treasury." 9. The facts being almost identical, no separate reasoning are desirable and the petition is being ALLOWED. The department is precluded from denying the benefit of the tax deducted at source by the employer during the relevant financial years to the petitioner. 10. As the facts of the case on hand and relied upon by the ld. AR of the assessee is similar, we respectfully following the said decision department is directed not to make recover of the amount from the assessee as the alternative remedy for recovery of the tax due is upon his employer and not on the assessee. In terms of ITA No. 04/JP/2022 Pankaj Rastogi, Jaipur vs. CIT(A) NFAC 11 these observation the ground no. 2 raised by the assessee is allowed. 11. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 26/07/2022. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 26/07/2022 *Ganesh Kr. vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Pankaj Rastogi, Jaipur 2. izR;FkhZ@ The Respondent- CIT(A) NFAC, Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File {ITA No.04/JP/2022} vkns'kkuqlkj@ By order, lgk;d iathdkj@ Asst. Registrar