Recently in January 2023, the Hon’ble Pune Tribunal in the case of Chandrashekhar Sadashiv Potphode v. The CBDT has also issued OFFICE MEMORANDUM F.NO.2-IT(B), DATED 11-3-2016 directing the Income Tax officers not to recover tax when TDS is deducted on a particular Income.
There are various judgements issued by Income Tax Authorities, wherein, the tax officers were directed to collect the Income Tax from the TDS deductor rather than collecting the Tax from an employee or Income recipient (who earned the income after the TDS deduction). For instance – salary slips and claim the remedy under section 205 of the Income Tax Act. During the course of litigation, the taxpayer will have to submit conclusive evidence that TDS is deducted from the Income sought to be taxed.
The case will go to litigation before the tax authorities. In such a scenario, the employee may receive a notice from CPC, for a “mismatch in TDS credit".
The employee will face a double whammy of tax first at the time of TDS deduction and second at the time of filing ITR.Ģ) Claim the TDS Credit even if not reflected in 26AS: - Now, let’s say while filing the ITR, the employee claims the TDS credit manually even though it is not reflected in 26AS, AIS or TIS. 1) Pay the Income tax again: - If the employee doesn’t claim the TDS credit while filing the ITR, then he will have to pay the Income Tax again on the Salary Income.
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