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2016 (1) TMI 990 - AT - Income TaxShort deduction of tds - demand under sec. 201(1) and 201(1A) - Held that:- The assessee being a public sector undertaking has deducted TDS at the rates prescribed under the Act and filed the necessary eTDS returns. The CPC –TDS, processed the return and computed the short deduction of tax by applying the 20% flat rate specified under sec. 206AA, merely based on the statements filed by the assessee, without being applying the higher of the three rates prescribed under sec. 206AA. It is settled position of law that a short deduction of tax at source, by itself does not result in a legally sustainable demand under sec. 201(1) and 201(1A). The taxes cannot be recovered once again from the assessee in a situation where the recipient of income has already paid the due taxes on such income. Unless, the A.O. verified himself that the recipient of income has not paid the tax on such income and also demonstrate that the rate applied by him was in accordance with the provisions of sec. 206AA, the assessee cannot be hold as assessee in default under sec. 201(1) and 201(1A). Therefore, we are of the opinion that the A.O./TDS officer was not correct in computing the short deduction of tax and interest, by applying flat rate of 20% tax. The CIT(A), without appreciating the facts, simply upheld the action of A.O./TDS officer. Therefore, we deem it appropriate to remit the issue back to the file of the A.O./TDS officer and direct the A.O. to examine the issue in the light of the discussions above, after affording an opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purpose.
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