ITAT Directs AO to Allow Credit of Tax Deducted on Property Sale Despite Buyer not Depositing it with Govt.

Case Details: Rajesh Dadu v. Deputy Commissioner of Income-tax - [2023] 152 taxmann.com 224 (Hyderabad-Trib.)

Judiciary and Counsel Details

• • R.K. Panda, Accountant Member & K. Narasimha Chary, Judicial Member
  • B. Radha Krishna, CA for the Appellant.
  • K.P.R.R. Murthy, CIT (DR) for the Respondent.

Facts of the Case

During the year under consideration, the assessee-individual sold a property for a consideration exceeding Rs. 50 Lakhs. The purchaser deducted tax under section 194-IA at the rate of 1 percent of the sale consideration amount and paid the balance amount to the assessee.

However, the purchaser failed to deposit the tax, so deducted from Government’s account and had not given the assessee the required Form 16B for deduction of tax at source. The assessee furnished its return of income and claimed credit of said TDS amount.

Subsequently, the same was disallowed by Centralized Processing Centre (CPC), stating that the tax deducted was not deposited to the credit of the Government.

On appeal, CIT(A) upheld the order of CPC. Aggrieved by the order, an instant appeal was filed to the Delhi Tribunal.

ITAT Held

The Tribunal held that perusing the agreement of sale cum GPA shows that the purchaser deducted the amount as TDS and surcharge at the rate of 1 per cent of the total sale consideration.

Under these circumstances, it is to be seen whether the assessee is liable for deposit/payment of the tax already deducted by the purchaser but not deposited or given credit.

Once the deductor has deducted the tax at source, withholds tax out of payments due/paid to the assessee, but does not deposit the tax withheld by it, the assessee should not suffer for the same and due credit of the tax is to be given to the assessee. The action under the provisions of the Income-tax Act can be taken against the deductor who, after deducting the tax, has not deposited the same to the credit of the Central Government.

The tax credit benefit to the assessee cannot be denied, and the only option left for the department is to proceed against the deductor by holding him as an assessee-in-default. Therefore, the order of the Commissioner (Appeals) was set aside, and the CPC was directed to give due credit to the assessee.

List of Cases Reviewed

• • Smt. Anusuya Alva v. Dy. CIT [2005] 147 Taxman 152/278 ITR 206 (Kar.) (para 13) followed.

List of Cases Referred to

• • Yaspal Sahni v. Rekha Hajarnavis, Asstt. CIT [2007] 165 Taxman 144/293 ITR 539 (Bom.) (para 7)
  • Smt. Anusuya Alva v. Dy. CIT [2005] 147 Taxman 152/278 ITR 206 (Kar.) (para 7)
  • Asstt. CIT v. Om Prakash Gattani [2001] 117 Taxman 549/[2000] 242 ITR 638 (Guj.) (para 7)
  • Aricent Technologies Holding Ltd. v. Addl. CIT [IT Appeal No. 5708 (Delhi) of 2019, dated 23-12-2019] (para 7).