Case Law Details
Paulomi Iyer Vs DCIT (ITAT Ahmedabad)
At the outset, we note that this is second round of litigation before us. The background of case is that the assessee is an individual and engaged in the profession of service provider. During the year under consideration, the assessee provided services of SAP implementation to one of her client namely M/s Jain Infraproject Ltd a Kolkata based public company. The assessee raised 3 invoices of Rs. 1,10,30,000/- each against the services provided. As per the assessee the impugned client deducted tax at source for Rs. 33,09,000/- under the provision of section 194J of the Act. Accordingly, she claimed credit of such tax deduction in the return of income filed for the year under consideration.
The AO during the assessment proceedings found that no such tax was deposited by the impugned client. Therefore, the AO denied the benefit of tax credit of Rs. 33,09,000/- and accordingly, the demand against the assessee was raised. On appeal by the assessee, the learned CIT(A) also confirmed the same by holding that there is no proof that the party has deducted tax at sources and deposited the same in Government Treasury.
It is the second round of litigation before us. The ITAT in first round of litigation observed that as per the provision of section 205 of the Act, if the payer deducts tax at source on the amount of income paid to the assessee, then no tax demand can be raised against the assessee to the extent of tax deducted on such income. However, the correspondence with regard to deduction of tax at source between assessee and impugned party M/s Jain Infra project Ltd on the basis of which assessee is claiming the credit of TDS has nowhere been cross verified by the Revenue authorities. On the other hand, the revenue without having any cogent evidence held that tax was not deducted at source. Therefore, the Hon’ble bench was pleased to set aside the issue to the file of the AO with direction to verify whether on the alleged payment received by the assessee was subjected to the deduction of tax, if yes then verify whether the payer has deducted the tax or not. If it is established that payer has deducted the tax, then the ld. Assessing Officer shall follow the procedures laid down in Section 205 of the Income-tax Act.
However, we find that the AO in the set aside proceedings wrote a letter to ld. Pr. DIT (Inv) Kolkata to make inquiry from M/s Jain Infraproject Ltd with regard to deduction of tax on the transaction discussed above. In response to the same, the ld. DDIT(Inv.), Unit-6 Kolkata replied that the party i.e. M/s Jain Infraproject Ltd did not respond to the notices issued under section 131 of the Act. The AO merely on the reasoning that the party did not respond to the notice issued by the DDIT(Inv.), Unit-6 Kolkata and DCIT, Circle-2 TDS Kolkata rejected the evidences furnished by the assessee in the form of e-mail correspondence, letter issued by the party i.e. M/s Jain Infraproject Ltd. stating that the tax has been deducted, the ledger copy showing payment received after deduction of tax. The ITAT on earlier occasion while setting aside the file to the AO casted obligation on him (the AO) to cross verify the evidences furnished by the assessee and find out the fact that tax was deducted or not by the party M/s Jain Infraproject Ltd. In our considered opinion, the AO in the set aside proceedings failed to comply with the directions of the ITAT in its true sense. As such, the AO after receiving report from DDIT(Inv.) Unit-6 Kolkata that the party has not responded to the notices issued did not try to adopt any other means to verify and determine the fact whether tax at source was deducted or not against the invoices issued by the assessee. On the contrary, the assessee has discharged her onus by furnishing the necessary details to justify that the party i.e. M/s Jain Infraproject Ltd has deducted the TDS. Even on consideration of the circumstantial evidences, the difference between the amount of the invoices raised and the amount received by the assessee from the party is exactly matching with the amount of TDS. Thus, the circumstantial evidences suggest that the assessee has received the payment after the deduction of TDS by the party i.e. M/s Jain Infraproject Ltd.
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