WHEN somebody deducts TDS from you but does not deposit it with the Government, what is your remedy? You will get deduction for TDS only if it figures in the Form 26AS Statement. All your pleas and proof that TDS has been deducted will not cut ice with the Department.
CBDT has received grievances from many taxpayers that in their cases the deductor has deducted tax at source from payments made to them in accordance with the provisions of Chapter-XVII of the Income-tax Act, 1961 but has failed to deposit the same into the Government account leading to denial of credit of such deduction of tax to these taxpayers and consequent raising of demand.
As per Section 199 of the Act credit of Tax Deducted at Source is given to the person only if it is paid to the Central Government Account. However, as per Section 205 of the Act the assessee shall not be called upon to pay the tax to the extent tax has been deducted from his income where the tax is deductible at source under the provisions of Chapter-XVII. Thus the Act puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch cannot be enforced coercively.
Section 205 reads as: Bar against direct demand on assessee. Where tax is deductible at the source under the foregoing provisions of this Chapter, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.
The CBDT wants this to be brought to the notice of all assessing officers so that if the facts of the case so justify, the assessees are not put at any inconvenience on account of default of deposit of tax into the Government account by the deductor.
CBDT Letter No. 275/29/2014-IT-(B)., Dated: June 01 2015
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