Circular on claiming Tax Credit against non-deposit of TDS

A circular has been issued by CBDT regarding non-deposit of Tax Deducted at Source.  CBDT has mentioned in the circular that 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. 

The issued circular has been given below: 

No. 275/29/2014-IT-(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes 

Dated New Delhi, the 1st June, 2015 

To,

The CCsIT (CCA)

Subject: Non-deposit of Tax Deducted at Source-regarding.

Sir/Madam,

1. Grievances have been received by the Board 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 (hereafter the Act) 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.

2. 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.

3. This may be brought to the notice of all the assessing officers in your region 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.

4. This issues with the approval of Chairperson, CBDT.

Yours faithfully

(Sandeep Singh)
Under Secretary to the Govt. of India