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CS Executive · Tax Laws and Practice · Direct Tax at a Glance

A deductor failed to deduct tax at source from a payment to a contractor, and the contractor also did not pay that tax directly. Under the Income-tax Act, 2025, what is the position of the deductor?

The deductor is deemed to be an assessee in default for that tax, in addition to any other consequences. This applies when tax was not deducted or not paid and the payee also failed to pay the tax directly.

  1. AThe deductor is deemed to be an assessee in default in respect of that tax, apart from other consequencesCorrect
  2. BThe deductor faces no liability because the contractor is the taxpayer
  3. CThe deductor becomes liable only if the contractor is a company
  4. DThe deductor is liable only if the Assessing Officer has first passed an advance tax order

Explanation

Section 391(3) states that where a person required to deduct does not deduct, or deducts and fails to pay, and the assessee has also failed to pay the tax directly, that person is deemed an assessee in default for that tax, besides other consequences. The contractor's status and advance tax orders are irrelevant.

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