Case: Yashpal Sahni Vs. Rekha Hajarnavis, Assistant Commissioner of Income-Tax &amp; Others

2. The relevant facts are that on 28th March, 1996 the respondent No.6 Company appointed the petitioner as "ManagingTechnology" with effect from 1/4/1996 on a basic salary of Rs.1,20,000/plus other permissible benefits.During the period from April to December, 1996 the respondent No.6 paid salary to the petitioner after deducting TDS totalling to Rs.Thereafter, disputes arose between the parties and ultimately the respondent No.6 terminated the services of the petitioner in March, 1997.4. On 30th September, 1997 the petitioner filed return of income for A.Y.The return of income was processed and on 29th March, 2000 the assessing officer issued an intimation under section 143(1) (a) of the the Income Tax Act, 1961Act for short) denying credit of the TDS amount of Rs.6,66,000/The petitioner made an application under section 154 of the Act on 6/4/2000 seeking rectification of the intimation issued under section 143(1)(a) of the Act inter alia on the ground that the credit of the TDS amount of Rs.6,66,000/cannot be denied to the petitioner and in any event the TDS amount with interest cannot be recovered from the petitioner in view of the bar contained in section 205 of the Act. However, no order was passed on the said application. The petitioner addressed several letters to various authorities including a letter addressed to the Income Tax Officer, TDS Circle, Hyderabad calling upon them to initiate necessary action against theNo.6 so as to recover the TDS amount collected and to compel the respondent No.6 to issue TDS certificate in favour of the petitioner.Instead of recovering the TDS amount with interest from the respondent No.6, the income tax authorities, in furtherance of the intimation issued under section 143(1) (a) of the Act initiated penalty proceedings against the petitioner under section 221(1) of the Act and by attaching the bank account of the petitioner recovered a sum of Rs.17,89,587/from the petitioner. Challenging the above action, the present petition is filed.

Court's reasoning:
21. In the present case, the petitionerassessee has furnished monthly pay slips and bank statements to show that from his salary tax was deducted at source by the employerrespondent No.6. Authenticity of the said pay slips and bank statements have not been disputed by the revenue. Thus, it is clear that the tax has been deducted at source by the respondent No.6 from the salary paid to the petitioner.In the present case, though the respondent No.6 has deducted the tax at source from the salary income of the petitioner, the respondent No.6 has not issued the TDS certificate in Form No.16 to thethe language of section of 205 of the Act, it is clear that the bar operates as soon as it is established that the tax has been deducted at source and it is wholly irrelevant as to whether the tax deducted at source is paid to the credit of Central Government or not and whether TDS certificate in Form No.16 has been issued or not. Also the mere fact that the employer may not issue TDS certificate to the employee does not mean that the liability of the employer ceases. The liabilty to pay income tax if deducted at source is upon thethe fact that the revenue is unable to recover the tax deducted at source from the person who has deducted such tax would not entitle the revenue to recover the said amount once again from thein view of the specific bar contained in section 205 of the Act.24. As stated earlier, in the present case thehas established that from his salary income, tax has been deducted at source by theNo.6 and, therefore, the revenue has to recover the said TDS amount with interest and penalty from the respondent No.6 alone and the revenue cannot seek to recover the said amount from thein view of the specific bar contained under section 205 of the Act. The fact that the petitioner is not entitled to the credit of the tax deducted at source for the non issuance of the TDS certificate by the respondent No.6, cannot be a ground to recover the amount of tax deducted at source from the petitioner. In other words, even if the credit of the TDS amount is not available to the petitionerassessee for want of TDS certificate, the fact that the tax has been deducted at source from salary income of the petitioner would be sufficient to hold that as per section 205 of the Act, the revenue cannot recover the TDS amount with interest from the petitioner once again.