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

Mehta Traders Ltd paid Rs 8,00,000 to a contractor, Rahul, on which tax was required to be deducted at source, but the company did not deduct it, and Rahul also did not pay the tax directly. Under the Income-tax Act, 2025, what is the position of the company?

Mehta Traders Ltd is deemed to be an assessee in default in respect of the tax, in addition to other consequences. This arises because it was required to deduct tax but did not, and the payee also failed to pay the tax directly.

  1. AIt is deemed to be an assessee in default in respect of such tax, apart from other consequencesCorrect
  2. BIt is not liable, because the primary liability is only that of Rahul
  3. CIt is liable only if Rahul fails to file his return of income
  4. DIt becomes liable only after the Board issues a notification

Explanation

Where a person required to deduct tax does not deduct it and the assessee has also failed to pay the tax directly, the person is deemed to be an assessee in default for that tax, in addition to any other consequences. The payee's primary liability does not remove this, and no Board notification is needed.

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