The deductee cannot be held liable for tax payments when TDS has been deducted from their income by their employer.

GIRISH KATHPALIA, J.:

1. By way of this petition brought under Article 226 of the Constitution of India, the petitioner has prayed for setting aside demand letter dated 04.02.2019 qua outstanding tax liability pertaining to the Assessment Year 2013-14 and for allowing credit to the petitioner against the Tax Deducted at Source (TDS) for the assessment year 2013-14 by his employer. On notice of the petition, respondent entered appearance through counsel and filed counter affidavit. We heard learned counsel for both sides.

2. Briefly stated, circumstances relevant for present purposes are as follows. The petitioner was employed with Tulip Telecom Ltd. (hereinafter referred to as “the employer”) as Associate Vice-President during the period from November 2011 to May 2013 and resigned from service on 07.05.2013 with effect from 09.05.2013. For assessment years 2011-12 and 2012-13, the employer of the petitioner deducted Tax at Source (TAS) on the salaries paid to petitioner but the deducted tax pertaining to the assessment year 2012-13 was not deposited by the employer with the Income Tax authorities. The employer of petitioner also failed to issue the requisite TDS certificate, so the petitioner informed the concerned Income Tax Officials about the default, but no action was taken. The petitioner filed a petition seeking winding up of the employer company by way of Company Petition No. 192/2014 under Section 433(e)&(f) read with Section 434 of the Companies Act, in which liquidator was appointed. Instead of granting credit of the TDS pertaining to the assessment year 2012-13, the respondent/revenue issued intimation dated 03.12.2015, thereby raising demand of Rs.15,77,240/- against the petitioner towards outstanding tax liability. In response, the petitioner made various representations to the respondent/revenue informing them about the defaults on the part of his employer. Ultimately, the respondent/revenue issued the impugned demand notice dated 04.02.2019, thereby again raising a tax demand of Rs.15,36,220/- against the petitioner. Since the respondent/revenue did not clarify the situation despite being approached by the petitioner, the present petition was filed.

3. The respondent/revenue in its counter affidavit did not dispute that the petitioner had received salary after deduction of tax. But the stand taken by the respondent/revenue in the counter affidavit is that the amount due to the petitioner towards salary for the months of December 2012, January 2013 and March 2013 was not actually paid to the petitioner by his employer, so the employer had no obligation to deduct tax at source and consequently the respondent/revenue is under no obligation to allow credit of the same.

4. During arguments, both sides took us through their respective stand as mentioned above. However, in view of Annexure P2 and Annexure P6(colly), it was not disputed on behalf of the respondent/revenue that the salary for the month of December 2012 and the full and final settlement amount which included salaries for the months of March 2013 to May 2013 was paid to the petitioner after deduction of tax at source.

5. The core issue to be considered by us is as to whether any recovery towards the outstanding tax demand can be effected against the petitioner in view of the admitted position that the tax payable on his salary was being regularly deducted at source by his employer who did not deposit the same with the authorities.

6. The said issue stands covered by the judgment of this court in the case of Sanjay Sudan vs Assistant Commissioner of Income Tax , [2023] 148 taxmann.com 329 (Delhi). The relevant observations made in the said judgment are set forth hereafte