TDS Deductor cannot be held liable as ‘assessee in default’
if department has not proved that tax could not be recovered from the recipient
of income.
Assesse, a public sector bank could not deduct tax on interest on deposit made thus held assessee in default u/s 201/210(IA), however ITAT Agra held that Assessee cannot be held liable unless department has discharged that tax could not be recovered from recipient of income or recipient has also failed to pay tax directly.
A
short deduction of tax at source, by itself does not result in a legally
sustainable demand u/s 201(1) and u/s 201(1A) because S.
201(1) seeks to make good any loss to revenue on account of lapse by the
assessee tax deductor. However, the question of making good the loss of revenue
arises only when there is indeed a loss of revenue and the loss of revenue can
be there only when recipient had a liability to pay the tax and he has not paid
tax
Thus onus is on the revenue to demonstrate that the taxes have not been recovered
from the person who had the primarily liability to pay tax, and it is only when
the primary liability is not discharged that vicarious recovery liability can
be invoked.
Once all the details of the persons to whom payments have been made
are on record, it is for the Assessing Officer, who has all the powers to requisition the
information from such payers and from the income tax authorities, to ascertain
whether or not taxes have been paid by the persons in receipt of the amounts
from which taxes have not been withheld.
Case-
Allahabad Bank vs. ITO (ITAT Agra)