The Gujarat High Court ruled that the tax when is deductible at source, assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted form that income.
Facts
The petitioner is an individual, seeking to challenge the action under Article 226 of the Constitution of India of cancelling the outstanding demand as reflected on income tax portal for the Assessment Year 2010-11, 2011-12 and 2012-13 and to quash the recovery notices for the respectively assessment years, for recovering the unpaid TDS amount of the employer of the petitioner i.e. Kingfisher Airlines as well as seeking the refund of an amount which is adjusted against the outstanding demand.
According to the petitioner, the promoter of Kingfisher Airlines – Mr. Vijay Malya got bankrupt, on 11.03.2016, the Government of India – Ministry of Finance circulated office memorandum amongst all the Income Tax Departmental Officers directing them not to raise any demand of taxes on account of mismatch of credit of TDS due to non-payment of TDS by the Kingfisher Airlines.
Decision
The division bench of the Acting Chief Justice Sonia Gokani and Sandeep N. Bhatt noted that the Office Memorandum shows the non-deposit of tax deducted at source by the deductor – recovery of demand against the deductee assessee.
The court said that reference of Section 205 of the I.T. Act is to the effect where it provides that the tax when is deductible at source, assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted form that income. Its applicability is not dependent upon the credit for tax deducted being given under Section 199 of the I.T. Act.
The bench ordered that the department shall not be denying the benefit of tax deducted at source by the employer during the relevant financial years to the petitioner.
The court held that the credit of the tax shall be given to the petitioner and if in the interregnum, any recovery or adjustment is made by the department, the petitioner shall be entitled to the refund, with the statutory interest.
Case title: Milan Arvindbhai Patel V/S Assistant Commissioner of Income Tax
Citation: R/Special Civil Application No. 13863 Of 2022
