Case Law Details
Sanjay Gupta Vs ITO (ITAT Delhi)
ITAT Delhi held that it is an admitted fact that TDS is deducted from the salary and the same is not deposited, Government’s claim of TDS stands satisfied under CRP. Hence, non-payment of deducted tax by the employer cannot be ground for rejection of TDS credit to the employee.
Facts-
The issue involved in the present case is that out of total credit of INR 12,74,469 claimed, credit for TDS of INR 12,24,376 deducted by Era Infra Engineering Ltd (EIEL) was not allowed to the assessee despite being duly claimed in the return of income. The same was not allowed to the assessee for the reason that such TDS was not reflected in Form 26AS.
Conclusion-
Even otherwise Section 205 of the Act is very crystal clear in its intention and clarifies that where tax stands deducted at source the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from the income. In the case in hand as noticed above, the deduction of tax from the salary of assessee is not disputed and Government’s claim of TDS stands satisfied under CRP and cannot be said to be still outstanding so as to deny its credit to the assessee.
Held that the Appellant was for all purposes merely an employee who was being paid salary by the company which has a distinct and independent identity to its employees. Ld. Counsel appearing for the assessee has also established by an admitted pay slip for the December, 2015 available on page no. 62 of the paper book that in fact the assessee had left the services working for 30 days in December, 2015. Thus, at the time of end of relevant FY, the assessee was not even in position of any nature qua responsibility to deposit the TDS on behalf of the assessee in default.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal has been filed by the Assessee against order dated 16.03.2022 in appeal no. CIT(A), Delhi-27/10010/2020-21 in assessment year 2016-17 passed by Commissioner of Income Tax (Appeals)-27, New Delhi (hereinafter referred to as the First Appellate Authority or in short ‘Ld. F.A.A.’) in regard to the assessment order u/s 143(1) of the Income Tax Act, 1961 dated 20.02.2019 passed by ACIT/DCIT, CPC, Bengaluru/ Central Circle-17, New Delhi (hereinafter referred to as the Assessing Officer or in short ‘AO’).
2. The facts of the case are that the appellant filed his return of income for the A.Y. 2016-17 on 30/03/2018. That in the said return of income, total income of INR 46,11,620 was declared on which tax liability of INR 12,44,961 was computed. Against the same, the assessee had claimed credit of TDS of INR 12,74,469. Hence, tax refund of INR 29,508 was claimed in the return of income. That in the intimation order dated 20/02/2019 issued u/s 143(1) of the Income-tax Act (“the Act”) by the Central Processing Center available at paper book page 3-5, tax demand of INR 18,95,878 was raised against refund claimed of INR 29,508. On perusal of the aforesaid intimation u/s 143(1), it can be observed that out of total credit of INR 12,74,469 claimed, credit for TDS of INR 12,24,376 deducted by Era Infra Engineering Ltd (EIEL) was not allowed to the assessee despite being duly claimed in the return of income. The same was not allowed to the assessee for the reason that such TDS was not reflected in Form 26AS available at paper book page 2.
2.1 The case of assessee is that during the year under consideration, the appellant was employed with M/s. Era Infra Engineering Limited (EIEL) at designation of Senior Vice President (Finance) [Sr. VP (Finance)]. TDS on salary paid to the appellant was deducted by EIEL. In the month of April-2015 TDS amounting to Rs. 1,26,186/- was deducted by EIEL which increased in subsequent months. The appellant claimed total TDS amounting to Rs. 12,24,376/- deducted by EIEL. These deducted TDS were not deposited with Central Government’s account (Govt.’s A/c) by EIEL. As the TDS entries were not reflected in Form-26AS, claim of TDS was not granted by the CPC while processing the return of income u/s 143(1) of the Act.
3. Ld. CIT(A) in its impugned order observed;
“As seen from above table, EIEL defaulted for deposition of total IDS of Rs, 66,91,62,328/-. This IDS amount of Rs. 66,91,62,328/- included TDS on salary of employees of EIEL, payment made to contractors and other persons etc. Non-deposition of TDS resulted in unnecessary demand and undue harassment, specially to salary persons of EIEL and contactors, who might be facing recovery proceedings for demand and non-issuance of refunds. This case is not covered, under case-laws relied, by the appellant and differentiable in. view of following discussion:
5.4.1 The appellant was posted at designation of Sr. VP (Finance) in EIEL Being at post of Sr. VP (Finance), the appellant was among one of persons of top management of EIEL, who were responsible for financial transactions, decisions and financial system of EIEL Including deduction of TDS and deposition of TDS to the Govt’s A/c well within time. The appellant was always and fully aware of fact that EIEL is not depositing deducted TDS to Govt A/c. But the appellant in the capacity of Sr. VP (Finance) did not make any efforts for deposition of even his own TDS deducted by EIEL.
5.4.2 The appellant claimed that non-deposition of TDS was failure at the end of EIEL and appellant could not do anything in this matter. This contention of the appellant is not correct Appellant’s position is different from other persons whose TDS was deducted by EIEL. These other persons were not having any control over financial system of EIEL. These persons could not know, manage, involve, affect, take or influence financial decision of EIEL’s management. However, being Sr. VP (Finance), the appellant always had control over financial system and financial decisions & transactions of EIEL.
5.4.3 Vide notice dated 12.01.2022, the appellant was asked to show documentary evidence of efforts made by the appellant in terms of follow up with EIEL in respect of depositing the tax to Govt.’s A/c. But appellant has not provided any details as well as any documentary evidence of efforts made by him.
5.4.4 It was not a bonafide mistake where TDS was deducted but not deposited to Govt’s A/c due to unforeseen reasons or circumstances. The appellant stated that EIEL was not to a good position and facing severe liquidity crunch. Still the EIEL was deducting TDS on salary and other payments nude to contractors etc. It was a deliberate act as EIEL was already aware that these TDS deduction would not be deposited by the company to the Govt’s A/c. The appellant has failed to provide documentary evidence that TDS deduction was bonafide. The appellant has produced salary slips which has figures of TDS deducted, chart of salary break up, bank statements, chart of TDS & PF deducted. But no Form-16/TDS Certificate issued by employer has been produced.
5.5 In view of above discussion, it is observed that the appellant was at post of Sr. Vice President (Finance) in EIEL. The appellant was among one of persons who were in totality responsible for financial system and financial transactions of EIEL, including deduction of TDS and deposition of TDS to Govt.’s A/c. The EIEL had deducted TDS of employees from top to lower management, contractors etc. which was not deposited by EIEL to the Govt.’s A/c. Such act would have caused harassment to all employees, contractors etc. whose TDS was deducted but not deposited. This resulted into unnecessary demand and undue harassment to the employees of EIEL, contractors etc. It was not bonafide but a deliberate act of not depositing TDS to the Govt.’s A/c, which crated undue harassment for the persons/ tax payers. EIEL deliberately deducted TDS and not deposited to the Govt.’s A/c. The appellant is trying to claim to be a victim of this larger game. The appellant was fully aware about this larger game of deduction of TDS and not deposition of TDS to Govt.’s A/c. The appellant himself did not made any efforts for deposition of his own deducted TDS to Govt.’s A/c. Therefore, the appellant should not be considered as victim as the appellant was in totality and equally responsible for non deposition of TDS to the govt.’s A/c. by EIEL being Senior Vice President (Finance) in EIEL as he had knowledge and control over financial system of EIEL.”
4. Heard and perused the record.
5. Counsel representing the assessee submitted that Section 205 of the Act lays down a bar against direct demand of TDS from the assessee and the CBDT Circular dated 11.03.2016 has also been relied. It was submitted that Ld. CIT(A) has fallen in error in not considering the fact that assessee had tendered relevant documents like monthly salary slip reflecting tax deducted at source, bank statement showing the amount of salary received net of tax, certificate issued by the employer EIEL providing the detail of salary and deducting TDS. It was submitted the Ld. CIT(A) erred in observing that as Form 16 was not issued so TDS credit cannot be given. It was submitted that Ld. CIT(A) failed to consider that Form 16 can be issued/ generated only once the TDS is deposited. Ld. Counsel also submitted that Ld. CIT(A) has fallen in error to take into consideration the fact that the employer is under insolvency resolution plan where the revenue has already made a claim in regard to outstanding TDS and in regard to relevant financial year order u/s 201(1A) of the Act dated 28.03.2017 for recovery of demand of 16.59 crores have been issued. Thus, it was submitted that as assessee has already suffered TDS denying its credit will lead to double taxation.
6. On the other hand, Ld. Sr. DR defended the order of Ld. Tax Authorities below and submitted that there is no illegality in the findings of Ld. CIT(A).
7. Giving thoughtful consideration to the matter on record it can be observed from the para 5.3 of the impugned order that Ld. CIT(A) was aware of the fact that EIEL is under Corporate Insolvency Process w.e.f. 08.05.2018 and the list of operational creditors include a claim of Rs. 42,12,17,000/- of Commissioner of Income Tax (TDS) Noida of which the claim to the extent of Rs. 37,27,31,819/- stood admitted Corporate Insolvency process as on 07.03.2022 and Rs.24,79,45,328/- was the claim amount for ACIT/DCIT (TDS), New Delhi and claim to the extent of Rs. 24,79,45,328/- stood admitted under the Corporate Insolvency process as on 07.03.2022. The both were exclusively on account of TDS defaults.
7.1 Section 31(1) of the Insolvency and Bankruptcy Code ( hereinafter referred as IBC) after the amendment of 2019, makes the Resolution plan binding on Central Government in respect of payment of dues arising under any law for the time being enforce. Further section 238 of the IBC specifically provides that the IBC overrides the provisions of any law that is inconsistent with the IBC.
8. In the case in hand EIEL was an assessee in default u/s 201 of the Act and sub-section 2 of Section 201 provides that such tax along with interest thereupon as recoverable under sub-section (1A), shall be a charge upon all the assets of the assessee in default.
8.1 It is admitted fact that order u/s 201/ 201(1A) of the Act for the relevant financial year stands passed against the assessee in default EIEL who was employer of the appellant. That being so, having taken recourse under law by raising a demand for non-deposition of TDS u/s 201 and interest u/s 201(1A) of the Act and which stands further determined and admitted under the Corporate Insolvency Resolution Process then there could have been no justification under law to deny the credit to the assessee because as such the Government’s claim of TDS stands satisfied and cannot be said to be still outstanding.
9. Even otherwise Section 205 of the Act is very crystal clear in its intention and clarifies that where tax stands deducted at source the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from the income. In the case in hand as noticed above, the deduction of tax from the salary of assessee is not disputed and Government’s claim of TDS stands satisfied under CRP and cannot be said to be still outstanding so as to deny its credit to the assessee.
10. It appears that Ld. CIT(A) has been carried away by irrelevant facts of assessee himself occupying the position of Vice President (Finance) of the assessee in default company. Ld. CIT(A) failed to appreciate that there is no provision under law for creating such a liability upon any individual by attributing malice upon him for being party to the default in deposit of TDS. Appellant was for all purposes merely an employee who was being paid salary by the company which has a distinct and independent identity to its employees. Ld. Counsel appearing for the assessee has also established by an admitted pay slip for the December, 2015 available on page no. 62 of the paper book that in fact the assessee had left the services working for 30 days in December, 2015. Thus, at the time of end of relevant FY, the assessee was not even in position of any nature qua responsibility to deposit the TDS on behalf of the assessee in default.
11. Thus, there was no justification with Ld. CIT(A) to merely create a tax liability on grounds of propriety involved when otherwise there was no legal foundation. Thus substantial ground raised along with ancillary grounds no. 1 to 6 stand decided in favour of the assessee/appellant. The appeal of the assessee is allowed and the Ld. AO is directed to give credit of the TDS of Rs. 12,74,469/- to the assessee.
Order pronounced in the open court on 19th October, 2022.
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