Case Law Details
Jignesh Panchal VS DCIT (ITAT Delhi)
Introduction: The case of Jignesh Panchal versus DCIT at the ITAT Delhi revolves around the intriguing scenario of withheld tax, not deposited by the employer, and how this affects an employee’s tax refund under Section 205 of the Income Tax Act.
Analysis: The foundation of the appeal rests on the delay in filing, with the assessee claiming that a significant portion of this delay fell within the extension granted by the Hon’ble Supreme Court due to the Covid-19 pandemic. Moreover, the assessee was not initially served the first appellate order, which was subsequently downloaded from the department’s portal.
At the core of the controversy is the TDS of Rs. 24,75,000/- deducted by the employer, M/s. Texl Exports Pvt. Ltd. The AO, and later the CIT(A), rejected the appellant’s claims surrounding this TDS. The key point of contention is the non-deposition of TDS by the employer to the government account. The counsel, leaning on past judgments and Section 205 of the Act, argued against any adjustments in withheld tax not deposited by the employer against the refund due to the employee.
Conclusion: Aligning with a similar case of the Hon’ble Delhi High Court, ITAT Delhi upheld the rights of the assessee. It ruled that the revenue cannot adjust the withheld tax, which the employer hasn’t deposited in the Central Government account, against refunds owed to the employee. As a result, the AO has been directed to honor the claim of the assessee concerning the TDS amount deducted by the employer. The ruling underscores the importance of safeguarding employee rights in tax matters, even if there’s a lapse on the employer’s part.
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