TaxTMI 
TaxTMI 
2026 (10) TMI 689
X X X X Extracts X X X X
X X X X Extracts X X X X
....Identification No.2014201337018415426T) against the petitioner-assessee assigned with PAN No. ACMPN2024R, invoking provisions under Articles 226 and 227 of the Constitution of India this writ petition has been filed with the prayer to grant following relief(s): "Under the circumstances stated above, the petitioner therefore most humbly prays that the Hon'ble Court be pleased to admit the writ application, issue notice to the parties and after hearing from the Advocates of the parties, issue a writ in the nature of certiorari or any other suitable writ quashing the demand notice vide Annexures-3 and 6 and further issue a writ in the nature of mandamus directing the opposite parties to file the TDS return, furnish the documents required by the Income Tax Department and settle the issue within a stipulated period. And/or pass any other order/orders, direction/directions as this Hon'ble Court deems fit and proper for the ends of justice. And for the said act of kindness, the petitioner as in duty bound shall ever pray." Facts: 2. Facts as adumbrated in the writ petition reveals that after completing her post-graduation course and M.Phil., the petitioner....
X X X X Extracts X X X X
X X X X Extracts X X X X
....taken into consideration. 3.1. It is vehemently contended by Sri Kshirod Kumar Rout, learned Advocate that given a chance, the petitioner would demonstrate before the authority concerned that the demand of tax shown as outstanding would be reduced to NIL. 4. Sri Avinash Kedia, learned Junior Standing Counsel stemming on the provisions of Section 199 of the Income Tax Act, 1961 read with Rule 37BA of the Income Tax Rules, submitted that credit for tax deducted at source can only be granted where the corresponding amount deducted at source is deposited with the Central Government and reflected in the system-generated Annual Tax Statement/Form 26AS. Having reference to the stand taken in the counter affidavit filed by the Income Tax Officer-opposite party No.5, he submitted that the Demand Management Facilitation Centre (DFC), Centralized Processing Centre (CPC), Bengaluru found mismatch between the amounts claimed as deduction under the heading "TDS" by the petitioner-assessee and the amount(s) of TDS as reflected in Form-26AS. 4.1. To justify the demands as depicted by the Income Tax Department, he has pressed into service the facts asserted at Paragraphs 15 and 16 of the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2013 2014201337018415426T 17600.0 26-Jul-2014 CPC 7.1. This Court, thus, finds that the only consideration is left to be decided is regarding difficulty faced by the assesse (tax payer) relating to the credit of tax deducted at source by the employer-deductor. It is evident from the counter affidavit that there is mismatch between TDS claimed and TDS reflected in Form 26AS. Documents enclosed with the writ petition have been relied upon by the petitioner to demonstrate that the amount of TDS being not shown by the employer(s) in its returns, the outstanding amount is directed to be deposited by the Income Tax Department. This Court perceives that if the claim of the petitioner turns out to be true, and directing the petitioner to deposit the amount shown to be outstanding would cause prejudice as it would tantamount to double taxation. At the same time it is also to be noted that the factual dispute is required to be reconciled by the Income Tax Department. As the request made by way of applications for rectification, copies of which formed part of writ petition at Annexure-4 series, is yet to be taken care of by the concerned authority, the petitioner-asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t obligatory for the employer to deduct tax at source and deposit. Sub-section (2C) of Section 192 further specifies that a person responsible for paying any income chargeable under the head "Salaries" shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as may be prescribed. Sub-section (2D) thereof provides that the person responsible for making the payment referred to in sub-section (1) shall, for the purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed. Therefore, if the amount of TDS is not reflected in the employer's tax records, the petitioner (employee), having not received credit for it in course of assessment, liability ought not to be fastened on the latter on account of resulting shortfall unless steps are taken for recovery from the employee-deductor. 7.4. To support su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ires every person deducting tax under Chapter XVII, dealing with COLLECTION AND RECOVERY OF TAX, to "furnish to the person to whose account such credit is given or to whom such payment is made or the cheque or warrant is issued, a certificate to the effect that tax has been deducted, and specifying the amount so deducted, the rate at which the tax has been deducted and such other particulars as may be prescribed". 7.7. A reference to Kartik Vijaysinh Sonavane Vs. CIT, (2022) 440 ITR 11 (Guj) may be relevant in the present context. In the said case it has been observed as follows: "7. The factual matrix presented before this court has not been disputed. It is also not being disputed that the case is no longer res integra and is covered by the decision of this very court rendered in case of Devarsh Pravinbhai Patel Vs. Asst. CIT (S.C.A. No. 12965 of 2018 with S.C.A. No. 12966 of 2018, decided on September 24, 2018) where too, the petitioner was an employee of the Kingfisher Airlines and worked as a pilot. In his case also the tax deducted at source on the salary made to the petitioner had not been deposited. It is only when the Department raised the tax demand with intere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....umstances of the case, there shall be no order as to costs.' 5. The facts in both cases are very similar. Under the circumstances, by allowing these petitions we hold that the Department cannot deny the benefit of tax deducted at source by the employer of the petitioner during the relevant financial years. Credit of such tax would be given to the petitioner for the respective years. If there has been any recovery or adjustment out of the refunds of the later years, the same shall be returned to the petitioner with statutory interest.' 8. In the case of Om Prakash Gattani (supra) the Gauhati High Court was dealing with the tax deducted at source not deposited of prize money payable to the petitioner. It held and observed thus (pages 643 to 646 of 242 ITR): 'From a perusal of the provisions quoted above relating to the deduction of tax at source in the matters relating to prize money of lotteries, it is evident that the person responsible to make the payment to the assessee is under the statutory obligation to deduct the amount at source. After deduction of the amount he is required to deposit the same to the credit of the Central Government and to issue a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Government which Chandra Agencies could not furnish on the ground that the papers were forwarded to the chairman of Vaibhavshali Bumper. In such a category of cases we feel that the amount of tax can be recovered by the Income-tax Department treating the person responsible to deduct tax at source as an assessee-in-default in respect of the tax. It would not be possible to proceed to recover the amount of tax from the assessee. The assessee cannot be doubly saddled with the tax liability. Deduction of tax at source is only one of the modes of recovery of tax. Once this mode is adopted and by virtue of the statutory provisions the person responsible to deduct the tax at source deducts the amount, only that mode should be pursued for the purpose of recovery of tax liability and the assessee should not be subjected to other modes of recovery of tax by recovering the amount once again to satisfy the tax liability. It is, therefore, provided under Section 201 of the Income-tax Act that the person responsible to deduct the tax at source would be deemed to be an assessee-in-default in case he deducts the amount and fails to deposit it in the Government treasury. As observed earlier, the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....htly defended the note appended by the Assessing Officer in the order of assessment making it clear that credit for the amount deducted was not being given and that will be given only when evidence as to actual payment of the amount to the Central Government is furnished. But this position would not legally justify initiation of recovery proceedings against the assessee from whose Income-tax has been deducted at source, but the person responsible to deduct the tax fails to deposit the same in the Government treasury. The statutory scheme evolved to employ this mode of recovery of tax at source also points to the same position and in our view rightly. Otherwise a taxpayer from whose Income-tax is liable to be deducted at source would be exposed to a great vulnerable position. If some unscrupulous persons responsible to deduct the tax at source, after deducting the amount do not deposit the amount in the Government treasury, such persons should be saddled with the tax liability. Therefore, under Section 201 of the Income-tax Act it has been aptly provided that the person responsible to deduct the tax would be deemed to be an assessee-in-default so that he can be proceeded ag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....after deduction of income tax at source had no further control over it in the sense that thereafter it was the duty of his employer acting as tax collecting agent of the Revenue under Chapter XVII of the Act to pay the deducted tax amount to the Central Government in accordance with law. The employer of the petitioner having failed to perform his duty to deposit the deducted tax with the Revenue, the petitioner cannot be penalized. It would always be open for the Revenue to proceed against the employer of the petitioner for recovery of the deducted tax." 7.9. There is no material on record to suggest that the authority exercised such powers to enforce the payment of tax deducted at source or the issuance of the certificate, despite the petitioner filed response seeking rectification of demands by giving credit for the TDS withheld by the employer(s). Consequently, the petitioner cannot be held liable for consequences that were entirely beyond her control. Once the petitioner furnishes the requisite certificate(s) obtained from the employer, the onus is discharged and the burden to prove otherwise lies with the employer. 7.10. It is a well settled principle of interpretation o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....act-situation that is portrayed herein, held in Malay Kar Vs. Union of India, 2024 (II) ILR-CUT 796 as follows: "3. *** It is contended that even if tax has been deducted at source by the deductor and a part of the amount has not been transmitted to the Income Tax Department, the petitioner is not held responsible for that. For inaction of the deductor in transmitting the amount, the assessee has been put to difficulty by not giving credit of tax deducted amounting to Rs. 2,68,733/- which also carries interest of Rs. 55,417/- under Section 234B and 234C of the I.T. Act for shortfall of prepaid taxes. It is further contended that Section 205 of the I.T. Act specifically provides bar against direct demand on assessee and the same has been clarified by the Central Board of Direct Taxes (CBDT), vide circular dated 01.06.2015, and in the office memorandum issued on 11.03.2015. Therefore, necessary compliance has to be made thereof and without doing so, demand raised under Annexure-4 amounting to Rs.3,24,149 for the assessment year 2013-14 cannot be sustained in the eye of law. To substantiate his contentions, he has relied upon Rakesh Kumar Gupta Vs. Union of India, (2015) 276 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n to pay the tax himself to the extent to which tax has been deducted from that income.' In view of the aforementioned provision, it is made clear that the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income. 9. There is no dispute before this Court that tax has not been deducted by the deductor at source of the assessee. To mitigate such situation, the CBDT, vide clause-2 of its circular dated 01.06.2015, envisaged as follows: '2. As per Section 199 of the Act credit of Tax Deducted at Source given to the person only if it is paid to the Central Government Account. However, as 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 provision 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.' 10. Referring to such circular dated 01.06.2015, the CBDT also issued office memorandum on 11.03.2016, paragraph-3 whereof reads as follows: '3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....27 = 2021 (Supp.) OLR 674; and Raj Kishor Deo Vs. State of Odisha, 2022 (II) OLR 415. 12. Section 205 of the IT Act read with CBDT circular, referred to above, being statutory one, the said provision has to be adhered to in letter and spirit and to give effect to such provision, CBDT circular was issued on 01.06.2015 and the office memorandum was issued on 11.03.2016. Therefore, for tax credit mismatch cannot be enforced coercively against the petitioner-assessee. *** 15. The facts and law, as discussed above, are directly applicable to the present case and in view of the provisions contained in Section 205 of the I.T. Act, which provides that where tax is deductible at the source the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income and its applicability is not depending upon the credit for tax being given under Section 199 of the I.T. Act. Thereby, the department shall not deny the benefit of tax deducted at source by the employer during the relevant financial years to the petitioner. The credit of the tax shall be given to the petitioner and if in the interregnum, any recovery or adju....