Tax deducted at source cannot be recovered again from the employee when the employer fails to deposit it.

Where salary income was subjected to tax deduction at source, direct demand or coercive recovery from the assessee to the extent of that deduction was barred, even though the employer failed to deposit the tax with the revenue. The Delhi HC held that a tax credit mismatch could not be enforced against the employee, because the statutory protection prevents the revenue from recovering the deducted amount from the assessee indirectly. The proper remedy lies against the deductor who withheld but did not remit the tax. The demand and consequential recovery action against the assessee were therefore not sustainable.

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Issues: Whether demand of income tax could be recovered from the assessee where tax had been deducted from salary at source but not deposited by the employer.

Analysis: The assessee had received salary after deduction of tax at source, and the dispute arose only because the employer failed to deposit the deducted tax with the revenue. The governing principle applied was that once tax is deductible at source from the assessee's income, the assessee cannot be called upon to pay that tax himself to the extent of the deduction. A demand raised merely because of tax credit mismatch cannot be enforced coercively, and the revenue cannot achieve indirectly by recovery or adjustment what is barred directly by the statutory protection. The proper course is for the revenue to proceed against the employer who failed to deposit the deducted amount in accordance with law.

Conclusion: The demand and consequential recovery action against the assessee were not sustainable, and relief was granted in his favour.

Ratio Decidendi: Where tax has been deducted at source from an assessee's income, direct demand or coercive recovery from the assessee is barred to that extent, even if the deductor fails to deposit the deducted tax with the revenue.

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