Arrears under section 220(2) of income tax for interest.

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Querist : Anonymous

Querist : Anonymous (Querist)

26 December 2013 My friends's father, a central government employee, took voluntary retirement from his employer(public limited company) in 2004. After many years i.e.in 2012 my friend received a letter from the income tax department demanding arrears under section 220(2) of the Income Tax Act of his father who had left long ago. The following were the arrears:-

2001-02 under section 143(3)-RS.5,420.
2001-02 under section 143(1)-Rs.12,587.

The ex-employee took VRS in 2004 and received the lumpsum amount of 7 lakhs. He had no other income except his salary on the date of his retirement under VRS.And he left his family.

My question is:

1. Are the above arrears deductible from lumpsum payments to the employee under VRS who has no other source of income except salary. If yes, should the employer company not deduct the arrears under 143(1)&(3) on behalf of the government before paying the VRS lumpsum amount to its ex-employee so that the ex-employee can claim exemption u/s 10(10C) from the net receipts under VRS.

2. Can the Revenue department demand the arrears under 143(1)&(3)prior to VRS from such employee after his retirement.

3. Moreover the employee had left his wife and family about 4 years ago and have no contacts from either side.How far is the family responsible for such demand on his arrears on salary who had left them.

Please reply as my friend's family (comprising of his mother,un married sisters) have no other financial support from his father long even before he left the family. They are not the beneficiaries any income of this ex-employee who parted with the family long ago.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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26 December 2013 The employer was responsible for deducting tax on salary in case any tax liability existed on the date of payment of salary or benefits.
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143(1) and 143(3) demands might have been due to non deduction of TDS.
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Department can demand.
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A suitable reply can be drafted by a tax consultant by going through assessee's old tax records.
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In a case when the assessee is not available, the department personnels may take a sympathetic view and assist you.
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