Withholding of TDS ‘Not the Right Way’ for Income Tax Dept to Collect Tax when Statute provides Sufficient Mechanism to Recover from Defaulter: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the withholding of TDS of the assessee who has already suffered tax is not the right way to collect tax as the Income Tax Act, 1961 already provides for a sufficient mechanism for the same.

The assessee, Walvekar Brothers & Co is a partnership firm engaged in the business of IMFL products including wines and beers for many liquor and beer manufacturing companies. The firm supplies stock to retail wine and beer shops, permit rooms and clubs. The assessee filed return of income electronically for A.Y. 2013-14 on 30-09-2013 declaring total income of Rs. 1,63,34,305/- and claimed TDS credit. The Assessing Officer denied this tax credit since it was not reflected in the 26AS statement. The A.O had examined the record of the assessee and had reported that M/s. Cromex Liquors Pvt. Ltd., has deducted TCS of Rs. 6,09,322/- but tax collected at source was not deposited into the Government account and the same was not reflected in Form 26AS.

Shri ParthaSarathi Chaudhury (JM) And Dr. Dipak P. Ripote(AM)relied on Omprakash Gattani Vs. ACITand observed that “Examining the provisions of section 205, the Hon’ble High Court has held that once it is established that tax has been deducted at source, the bar in section 205 of the Act comes into operation and it is immaterial as to whether tax deducted at source has been paid to Central Government or not because provisions are made under the Act for recovery of tax deducted at source from the person who has deducted such tax.”

Concluding the order in favour of the assessee, the Tribunal held that “We have examined the facts of the case and the detailed perusal of the records demonstrates the fact that admittedly tax was deducted at source by M/s. Cromex Liquors Pvt. Ltd. to deposit that amount in the government account, which they failed to do so. The Revenue has sufficient machinery to recover such amount of TDS deducted from the defaulting assessee but this is not the right way for the revenue to collect the tax again or debar genuine refund to the assessee who has already suffered taxation at source. Considering the judicial precedents, we set aside the order of the ld. CIT(A) andallow the appeal of the assessee. We direct the A.O to immediately refund the eligible refund amount to the assessee.”

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