Taxes not payable by the Assessee where tax is already deducted

Facts of the case:

• The Assessee is a pilot by profession and was an employee of M/s. Kingfisher Airlines and the TDS has been deducted by the employer. The amount of TDS deducted by the employer was not deposited with the treasury of the Central Government. Hence, the credit of TDS, when claimed by the Assessee, was denied by the department and demands were raised accordingly.
• The Assessee filed various applications with the department for cancellation of demand and consequent release of refund. The applications were ignored and recovery notice was issued to the Assessee by Income-Tax Department. Aggrieved with the same, the Assessee filed the writ petition with the Hon’ble High Court of Gujarat.

Contention of the Department:

• In the absence of any TDS reflected in the system of the department, which is averred to have been deducted by the deductor, and his failure to submit even Form-16, the Assessee should not be allowed to get the credit of TDS.
• Hence, the department contented that in the present case, the system of Income Tax Department would not allow such credit in the absence of any actual payment of TDS by the deductor, and hence the demand notice had been issued.

Contention of the Assessee:

• The Assessee contended that the obligation of the employer cannot be thrust upon him as the TDS has been deducted from his income but the same has not been deposited by the employer.
• The Assessee also plead to drop the recovery proceedings and cancel the demands raised against him.

Decision of the Court:

• In view of the clear provisions of section 205 of the Act, which gets triggered on mere deduction of TDS with nothing more and relying on the judgement of various courts on similar grounds the writ petition stands ALLOWED.
• The Department is precluded from denying the benefit of the tax deducted at source by the employer during the relevant financial years to the Assessee.
• The credit of the tax shall be given to the Assessee and if in the interregnum any recovery or adjustment is made by the department, the Assessee shall be entitled to the refund of the same, with the statutory interest.

Case Law: Kartik Vijaysinh Sonavane v Deputy Commissioner of Income-tax, Circle-8

Virendra Vikram, Associate, SW India