Income tax appellants not liable for unremitted TDS; penalties arise only post employer's non-compliance.

Dr. A.K.Jayasankaran Nambiar, J.

These Writ Appeals impugn the judgment dated 03.04.2025 of a learned Single Judge in WP(C) Nos.26492, 26493, 26520, 39367, and 39376 of 2024. The brief facts necessary for the disposal of these Writ Appeals are as follows:

2. The Writ Petitions aforementioned were filed by employees of an entity known as “Attinad Software Pvt. Ltd”, who were aggrieved by the demand of income tax equivalent to the amount of Tax Deducted at Source (TDS) by the employer entity from out of the salaries paid to them. It was the contention of the appellants/writ petitioners that their employer, having deducted amounts towards tax at source from the salaries paid to them, did not remit the said deducted amounts to the Income Tax Department and consequently, they were asked to pay the said tax amounts at the time of finalisation of their individual assessment under the Income Tax Act (for short 'the IT Act').

3. The appellants contend that in view of the specific provision of Section 205 of the IT Act, which prohibits a direct demand of tax deductible at source from an assessee, they could not have been made liable to income tax to the extent of the amount that had already been deducted by their employer at the time of payment of the salaries to them. Reliance was placed by the WA NO. 2148 OF 2025 &

WA NO. 2149 OF 2025 appellants on the following judgments of the Supreme Court in support of their contention inCIT v. Eli Lilly & Company (India) (P) Ltd. [(2009) 15 SCC 1],Sanjay Sudan v. Asst. CIT [(2023) 452 ITR 107 (Delhi)],CIT v. Om Praksh Gattani [(2000) 242 ITR 638] andChintan Bindra v. CIT [(2023 SCC OnLine Del 7539] and the unreported judgment of the Bombay High Court in Aslam Checkar v. Income Tax Officer (Judgment dated 10.09.2024 in Writ Petition (L) No.2442 of 2024 and connected cases).

4. The learned Single Judge, who considered the Writ Petitions took note of the provisions of Section 199 and Section 205 of the IT Act and found that on a joint reading of the two provisions, the prohibition under would operate only if there had been a tax deduction at source by the employer in the manner contemplated under of the IT Act. The learned Judge reasoned that in view of the fact that there was no payment by the employer to the central government/Income Tax department of the Tax deducted from the salaries paid to the employee, the Income Tax Department could not have been asked to grant credit of the TDS to the appellants at the time of completion of their individual assessments under the IT Act. While arriving at the said finding, the learned Single Judge placed reliance on a Division Bench judgment of the Gauhati High Court inCIT v. Om Praksh Gattani [(2000) 242 ITR 638] as also the Judgment dated 10.09.2024 of the Bombay High Court in Aslam Checkar v. Income Tax Officer in Writ Petition (L) No.2442 of 2024 and connected cases to find that since the amounts deducted as TDS from the salaries paid to them had not been remitted by the employer to the Central Government/Income Tax Department, WA NO. 2148 OF 2025 &

WA NO. 2149 OF 2025 the appellants could not be granted the relief of a direction to the Income Tax Department to grant credit to the extent of tax deducted from their salaries by the employer concerned.

5. On going through the reasoning of the learned Single Judge in the impugned judgment, we find ourselves in complete agreement with the same. A reading of Section 199 and Section 205 of the IT Act would clearly suggest that the prohibition under is only against calling upon an assessee to pay the TDS amount directly to the Department. The said provision, however, begins with the words "where tax is deductible at source under the forgo