Pune ITAT: Benefit Will Not Be Permitted Due to Non-deposit of TDS U/S 143(1)

According to a recent decision by the Pune bench of the Income Tax Appellate Tribunal (ITAT), if the tax was not deposited, the advantage of tax deduction at source shall not be granted in the intimation under section 143(1) of the Income Tax Act of 1961.

According to Section 143(1) of the Income Tax Act of 1961, the income tax department is required to transmit a notification of which return is being submitted within a year of the end of the financial year.

Mukesh Padamchand Sogani, the assessee, served as Chief Operating Officer at Earth Water Limited (hence, “EWL”). In addition to submitting a return of income under the heading “Salaries,” the assessee also claimed credit for tax deductions made on such salary income.

The return was handled in accordance with section 143(1) of the Income Tax Act of 1961, which only allowed for a credit of Rs. 83,483 for tax withheld at source from pay. The assessing officer also discovered certain discrepancies in the assessee’s remaining balance. The sum was thus not permitted. Assessee filed an appeal with ITAT against the ruling.

Dinesh Ramesh Gulabani, the assessee’s attorney, claims that from May 2018 onward, the employer Has failed to deposit the tax that was withheld at source from the employee’s income. Furthermore, it was claimed that starting in October 2018, the employer had stopped paying salaries.

The Revenue’s Ramnath P. Murkunde Counsel issued an Intimation pursuant to Section 143(1) of the Income Tax Act of 1961 not granting credit for Rs. 8, 21,149 since Form No. 26AS did not reflect the same.

The ITAT division bench made up of R.S. Syal, vice president, and Partha Sarathi Chaudhury, judicial member, accepted the arguments made by both parties and allowed the assessee’s appeal, noting that “the requirement for allowing credit was only the amount of tax deducted at source and not the amount ultimately getting deposited with the Government after deduction.”

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Since Rs. 8,21,149 was duly deducted at source through the employer from the salaries credited or paid to the taxpayer for the year in question, the benefit of the withheld tax must be allowed in the notification pursuant to Section 143(1) of the Income Tax Act of 1961, even though it was not deposited.