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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
Shri Chintan Bindra - Appellant
Versus
Deputy Commissioner of Income Tax & Ors. - Respondents
W.P.(C) 2164 of 2022 & CM APPL. 6192 of 2022
Decided On : 29-11-2023
TDS - Income Tax - Section 143(1), Section 154, Section 199, Section 205 - The court discussed the demands of tax and interest reflected on the income tax portal for the AYs 2009-10, 2011-12, 2012-13 on account of TDS deducted by the employer. The court referred to the provisions of Section 205 of the Income Tax Act, which states 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. The court also highlighted the instruction dated 01.06.2015, which provides that the demand on account of tax credit mismatch cannot be enforced coercively. The court held that the petitioner cannot be penalized for the failure of the employer to deposit the deducted tax with the revenue, and allowed the petition, setting aside the demands of tax and interest against the petitioner and directing the respondents to refund the wrongly adjusted amount.
Fact of the Case:
The petitioner, an airline pilot, sought relief from the demands of tax and interest reflected on the income tax portal for the AYs 2009-10, 2011-12, 2012-13 on account of TDS deducted by the employer. The employer failed to deposit the deducted tax with the revenue, leading to repeated demands from the respondents. The petitioner approached the court through a writ petition.
Finding of the Court:
The court held that the petitioner cannot be penalized for the failure of the employer to deposit the deducted tax with the revenue. The court set aside the demands of tax and interest against the petitioner and directed the respondents to refund the wrongly adjusted amount.
Issues: The core issue was whether any recovery towards the outstanding tax demand can be effected against the petitioner, given that the tax payable on the petitioner's salary was regularly deducted at source by the employer who did not deposit the deducted tax with the revenue.
Ratio Decidendi: The court relied on the provisions of Section 205 of the Income Tax Act, which states 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. The court also referred to the instruction dated 01.06.2015, which provides that the demand on account of tax credit mismatch cannot be enforced coercively. The court held that the petitioner cannot be penalized for the failure of the employer to deposit the deducted tax with the revenue.
Final Decision: The petition and the interim relief application were allowed, setting aside the demands of tax and interest against the petitioner and directing the respondents to refund the wrongly adjusted amount. The court also clarified that if the petitioner obtains any amount of money towards tax deducted from his income at source from his employer, the same shall be deposited by him with the revenue forthwith.
JUDGMENT
[Physical Hearing/Hybrid Hearing (as per request)]
Girish Kathpalia, J.
1. By way of this writ petition under Articles 226 and 227 of the Constitution of India, petitioner has sought the following reliefs:
i. To declare that the demand of tax and interest reflected on the income tax portal for the AYs 2009-10, 2011-12, 2012-13 on account of TDS admittedly deducted by the Company (Employer), do not lie against the Petitioner, and to direct the Respondents to delete the impugned demand from the Portal and their records; and/or
ii. To issue an appropriate writ, order, or direction to Respondents to release the refund amount Rs. 3,88,209/-, due for various AYs and which has been illegally adjusted against the illegal and erroneous demand; and/or
iii. Issue an appropriate writ, order, or direction to the Respondents to grant statutory interest on the illegally adjusted refund amount of Rs. 3,88,209/-; and/or
iv. Issue an appropriate writ, order, or direction to the Respondents to grant compensatory interest on the illegally adjusted refund amount of Rs. 3,88,209/-; and/or
v. To issue a writ of certiorari or a writ in the nature of certiorari or any other writ, order or direction, to quash the impugned intimation dated 03.03.2021 (Annexure P/41); and/or
vi. To issue a writ of certiorari or a writ in the nature of certiorari or any other writ, order or direction, to quash the impugned intimations dated 02.07.2016 & 12.08.2016(Annexure P/21) for the AY 2016-17, and impugned intimation dated 19.10.2017 (Annexure P/26) for the AY 2017-18, issued under Section 245 of the Act; and/or
vii. To issue a writ of certiorari or a writ in the nature of certiorari or any other writ, order or direction, to quash the impugned intimations/orders dated 21.03.2011 (Annexure P/6); dated 23.10.2012 (Annexure P/10); dated 16.01.2014 (Annexure P/14); dated 24.09.2016 (Annexure P/22); dated 24.09.2018 (Annexure P/34); dated 18.09.2019 (Annexure P/36); and dated 23.01.2021 (Annexure P/39) under Section 143(1) of the Act for the adjustments of refunds, and for raising of demand on account of "Unmatched Tax Deducted at Source"; and/or
viii. To declare that the Respondents Authorities abide strictly by the instruction No. 275 dated 01.06.2015 and the further Office Memorandum dated 11.03.2016 and Press Release dated 11.03.2016 issued by the CBDT; and/or
ix. Issue an appropriate writ, order, or direction to Respondents to act on the provisions of the statute, in a manner, that the express rights so conferred upon the assessees do not get frustrated for non-action on the part of the Respondents; and/or
x. Issue an appropriate writ, order, or direction to Respondents to not to take any coercive action till the pendency of this Writ Petition; and/or
xi. Issue any other writ, order or direction in favour of the Petitioner, as this Hon'ble Court may deem fit and proper in the present facts and circumstances of the case, so as to ensure the ends of justice, or else the Petitioner shall suffer irreparably; and/or
xii. to grant costs of this Petition; and/or
xiii. to award such further and other reliefs as the nature and circumstances of the case may require. On issuance of notice, the respondents/revenue entered appearance through counsel and filed a counter affidavit which followed a rejoinder affidavit on behalf of petitioner. We heard learned counsel for both sides.
2. Briefly stated, facts relevant for present purposes are as follows.
2.1. Since 16.04.2008, the petitioner was employed with Kingfisher Airlines Limited as an airlines pilot at the rank of Captain.
2.2. For the Assessment Year 2009-10, the income tax payable against salary of the petitioner was deducted at source by his employer but the same was not reflected in his Form 26AS. On 31.03.2010, petitioner filed his return of income for AY 2009-10 declaring gross total income of Rs.39,60,051/- and claimed TDS of Rs.12,10,276/- and refund of Rs.2,340/-. On 21.03.2011, the respondents issued intimation under Section 1
Section 205 of the Income Tax Act bars the recovery of tax withheld by the employer from the employee, and emphasizes the duty of the employer to deposit the deducted tax with the revenue in accordan....
Point of law: Where it provides that where tax is deductible at 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.
The court affirmed that an employee is entitled to TDS credit despite the employer's failure to deposit it, preventing unjust tax liability on the employee.
Tax demands cannot be enforced against deductees if TDS has been deducted but not deposited by the deductor, as per Section 205 of the Income Tax Act.
The taxpayer is entitled to TDS credit despite the deductor's failure to remit the deducted taxes, ensuring no coercive demand is imposed on the taxpayer according to statutory provisions and directi....
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