Kolkata ITAT: Deductor Can Never Be Held Liable for Non-Deposits of TDS Once Tax Has Been Deducted

Once Tax Deducted at Source (TDS) is deducted then liability for non-deposit of TDS by deductor cannot be fastened on the deductee the Kolkata bench of the Income Tax Appellate Tribunal (ITAT) ruled.

The taxpayer is a salaried employee employed with M/s. Falcon Tyres Ltd. at its Kolkata office and in the year received a salary of Rs. 17,40,264. The employer deducted the TDS from the salaries of the taxpayers of Rs. 3,96,700. But it was not deposited in the treasury of the Government.

The assessee filed the return of income dated 30.03.2018 and availed for the credit for TDS deducted at the source of Rs. 4,10,292. The Assessing Officer (AO), Centralised Processing Centre (CPC) authorized the credit to the tune of Rs. 13,592/- in respect of TDS deducted at source thereby refusing the credit of Rs. 3,96,700/- to the taxpayer on the foundation that it was not deposited via the employer M/s. Falcon Tyres Ltd. in the Government treasury.

The Commissioner of Income Tax (Appeal) affirmed the AO, CPC’s decision because the employer hadn’t deposited Rs. 3,96,700/- of TDS deducted at the source into the Government treasury. This withholding led to the denial of the assessee’s right to claim credit, thereby justifying the AO and CPC’s ruling.

The Two-member bench Rajesh Kumar (Accountant member) and Sonjoy Sarma (Judicial member) ruled that as the TDS deducted at source has not been deposited in the Government treasury via the employer, the taxpayer was not qualified to claim the credit thereof.

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From the salary TDS deducted at source which has not been deposited with the treasury of the Government, the taxpayer could not asked to deposit the demand that emerged out of non-credit of the stated TDS by the Revenue.

In the closure, it mentions that the problem of non-deposit of the TDS via the deductor has been permitted in the taxpayer’s favour by maintaining that once the TDS was deducted, the obligation that comes from the non-deposit of the TDS via the deductor could not be fastened on the deductee. Hence the taxpayer’s petition was permitted.