Revenue Cannot Adjust Withheld Tax not Deposited by Employer in Central Govt account, against Refund Due and Payable to Employee u/s 205 of Income Tax Act: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the revenue could not adjust the withheld tax not deposited by the employer in a central Government account against the refund due and payable to the employee under Section 205 of the Income Tax Act 1961.

The assessee, Jignesh Panchal has filed appeal in respect of TDS deducted by the employer Texl Exports Pvt. The AO ought not to have rejected the application under Section 154 of the Income Tax Act thereby disregarding the claim of appellant in respect of TDS amount deducted by the employer Texl Exports Pvt. Ltd despite the fact that such employer had duly mentioned in TDS certificate of form No. 16 that there was mistake apparent from the record which could be rectified in the order under Section 154 of the Income Tax Act, 1961.

M. P. Rastogi,on behalf of the assessee submitted that the assessee could not be blamed on the omission and default of the deductor employee on the ground that the TDS deducted by the employer was not deposited by the deductor to the Govt account.

He further referred to the decision in Sanjay Sudan Vs. ACIT which held that the revenue could not adjust withheld tax which had not been deposited by the deductor/ employer in Central Govt account, against refund due and payable to the assessee-employee.

Anuj Garg,on behalf of the revenue placed reliance on the orders of the authorities below and submitted only submitting Form 16, TDS certificate was not sufficient when the revenue had not received TDS amount from the deductee.

The two-memeber Bench of C.M. Garg, (Judicial Member) and M Balaganesh, (Accountant Member) allowed the appeal filed by the assessee referring Section 205 of the Income Tax Act and CBDT instruction dated 01.06.2015 holding that the revenue could not adjust withheld tax which had not been deposited by the deductor/ employer in the Central Govt account, against refund due and payable to the assessee-employee.

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