IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 2349 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE M.R. SHAH and
HONOURABLE MR.JUSTICE K.J.THAKER
SUMIT DEVENDRA RAJANI....Petitioner(s)
Versus
ASSISTANT COMMISSIONER OF INCOME TAX OSD&1....Respondent(s)
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Appearance:
MR KETAN H SHAH, ADVOCATE for the Petitioner(s) No. 1
MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1
NOTICE UNSERVED for the Respondent(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE K.J.THAKER
Date : 23/06/2014
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE M.R. SHAH)
1.0. Rule. Ms. Mauna Bhatt, learned advocate waives service
notice of Rule on behalf of respondent. In the facts and circumstances of
the case and with the consent of the learned advocates for the respective
parties, the present Special Civil Application is taken up for final
hearing today.
2.0. By way of this petition under Article 226 of the Constitution
of India, the petitioner has prayed for an appropriate writ, direction and
order quashing and setting aside the recovery notice dated 06.01.2012
(Annexure D), by which, the petitioner – assessee has called upon to pay
demand of Rs.6,82,148/raised under Section 143(1) of the Income Tax
Act, 1961 (hereinafter referred to as the “Act”) for the AY 201011.
3.0. The facts leading to the present petition in nutshell are as
under:
3.1. That the petitioner is an individual and assessed to tax under the Act, therefore, for the AY 201011 the petitioner filed his return of income dated 30.12.2010 declaring net taxable income of Rs.29,54,982/.
In the return of income, the petitioner also claimed the credit of tax deducted at source of total Rs.5,86,606/TDS deducted by his employer M/s. Amar Remedies Limited. However, without givingcredit of the TDS deducted by his employer M/s. Amar Remedies Limited on the salary income as well as on the amount received towards professional and technical fees received from the said M/s. Amar Remedies Limited, the department has raised the demand of Rs.6,82,148/by impugned notice issued under Section 221(1) of the Act.
3.2. It is the case of the petitioner that the petitioner was received salary income of Rs.21,50,400/from M/s. Amar Remedies Limited, Mumbai and out of the said salary income, TDS is deducted of Rs.5,86,606/by the said M/s. Amar Remedies Limited. It is the case of the petitioner that the petitioner was also receiving the professional and technical fees from the said M/s. Amar Remedies Limited of
Rs.24,00,000/and TDS deducted by the said M/s. Amar Remedies
Limited is of Rs. 2,40,000/.
It is the case of the petitioner that the petitioner received both TDS certificate i.e. in respect of salary income in Form No.16 on 22.09.2010 and in respect of professional and technical fees in the form of 16A dated 22.08.2010 from his employerM/s. Amar Remedies Limited mentioning PANAAACA3774G
and TAN of the deductor as MUMA21298E. It is the case of the petitioner that Form No.16 dated 22.09.2010, it is found that they have furnished that they
have furnished TDS statement also of various quarters i.e. quarter nos. I,
II, III and IV as per the acknowledgment number mentioned therein.
According to the petitioner, TDS was made on two occasions i.e. Rs.1,58,486/and
Rs.4,28,120/vide cheque no. 0076, BSR Code No.0261632 of the Bank, which was deposited by the employer on 02.08.2010 and 02.09.2010 vide challans No.54601 and 83046 respectively. It is the case on behalf of the petitioner that as such the aforesaid Form No.16 dated 22.09.2010 regarding TDS under the head
salaries was duly signed by one Srinivas D. Samudra, Accounts Manager
of Amar Remedies Limited, Mumbai. It is also the case on behalf of the petitioners that petitioner has also received Form No.16 A dated 22.08.2010 under Section 194J for TDS of Rs.24,00,000/in reference to professional charges of Rs.24,00,000/from M/s. Amar Remedies Limited wherein the details regarding TDS return filed by the deductor and the PAN and TAN number were also mentioned by them. It is submitted that the said TDS of Rs.2,40,000/was deposited by cheque
no.776 on 24.07.2010 vide challan no.47008 and BSR Code No.261632 of the Bank.
3.3. It is the case on behalf of the petitioner that despite the
above and without giving credit of the tax deducted at source at Rs.5,86,606/,
demand of Rs.6,82,148/has
been raised.
3.4. It is the case on behalf of the petitioner that immediately on
receipt of impugned notice under Section 221(1) of the Act, the
petitioner addressed a letter dated 13.1.2012 drawing the attention of
the authority submitting that so called demand raised may be pertaining
to non giving of proper credit of TDS claimed from M/s. Amar Remedies
Limited. It is the case on behalf of the petitioner that even the petitioner
also submitted the application under Section 154 of the Act in reference
to notice under Section 221(1) of the Act, which has not been disposed
of. It is also the case on behalf of the petitioner that petitioner's advocate
addressed letter dated 30.10.2013 enclosing therewith Form No.26AS
also to respondent no.1 and requested to dispose of application dated
13.1.2012 and to serve socalled
intimation under Section 143(1) of the
Act. It is the case on behalf of the petitioner that thereafter and despite
the above, respondent no.2 has issued intimation under Section 245
dated 22.11.2013 starting recovery of demand and adjusted the refund
of AY 201314
of Rs.1290/against
the outstanding demand of AY 201011.
Hence, petitioner has preferred the present Special Civil Application
under Article 226 of the Constitution of India.
4.0. Shri Ketan Shah, learned advocate for the petitioner has
vehemently submitted that impugned demand / recovery notice of
Rs.6,82,148/subject
to penalty under Section 221(1) of the Act without
giving any credit of the tax deducted at source of total Rs.5,86,606/is
absolutely illegal and most arbitrary. It is submitted that as per Form
No.16 and 16 A deductorM/
s. Amar Remedies Limited as such TDS of
Rs. 5,86,606/,
particulars of which are given in Form no. 16 and 16A
and as such petitioner assessee
has received the less amount i.e. amount
after deducting TDS. It is submitted that even in the Form no. 26AS
there is mentioned that the amount of TDS deducted however in the
Form No.26AS credit of Rs.2,40,000/only
has been given and as such
no credit of Rs.5,86,606/has
been given. Relying upon Section 205 of
the Act, it is submitted by Shri Shah, learned advocate for the petitioner
that even in a case where deductor may not have deposited the amount
of TDS, where tax is deductible at the source under Chapter XVII,
assessee shall not be called upon to pay the tax himself to the extent to
which tax has been deducted from that income. It is submitted that in
such case the department is required to recover amount from the
deductor and no such recovery can be made from assessee. It is
submitted that, therefore, once the amount is deducted by the deductor,
in the present case by the employerM/
s. Amar Remedies Limited and
for which form under Section 16 and 16A has been issued by the
deductor, the department bound to give the credit to the tax deducted
at source of Rs.5,86,606/.
It is submitted that therefore, the impugned
demand / recovery notice without giving credit of TDS of Rs.5,86,606/is
absolutely illegal and most arbitrary which deserves to be quashed and
set aside.
4.1. Shri Shah, learned advocate for the petitioner has heavily
relied upon the decision of the Gauhati High Court in the case of ACIT
vs. Om Prakas Gattani reported in (2000) 242 ITR 638 and the decision
of the Bombay High Court in the case of Yashpal Sahni vs. ACIT
reported in (2007) 293 ITR 539. Shri Shah, learned advocate for the
petitioner has also relied upon the another decision of the Bombay High
Court in the case of Director of Income Tax (International Taxation)
vs. NGC Network Asia Lic reported in (2009) 313 ITR 187(Bom) as
well as decision of the Karnataka High Court in the case of Smt.
Anusuya Alva vs. Deputy Commissioner of Income Tax and Others
reported in (2005) 278 ITR 206 (Karn) as well as decision of the
Division Bench of this Court in the case of Commissioner of Income Tax
vs. Ranoli Investment P. Ltd. and others reported in 1999 (235) ITR
433 (Guj), in support of his above submissions and in support of his
prayer to allow the present Special Civil Application and to direct the
department to give credit of TDS of total Rs.5,86,606/.
4.2. Making above submissions and relying upon the above
decisions, it is requested to allow present Special Civil Application and
grant the relief as prayed for.
5.0. Ms. Mauna Bhatt, learned advocate has appeared on behalf
of the respondentrevenue.
An affidavit in reply is filed by the Assessing
Officer. It was submitted that as such no TDS credit of Rs.5,86,606/on
account of Form No.16A by M/s. Amar Remedies Limited appeared on
the ITD system of department and therefore, no credit of the TDS was
given to the assessee. It was further submitted that even in 26AS
statement of the assessee, no such TDS deduction of Rs.5,86,606/was
reflected. It is submitted that the only the amount of Rs.24,000/deposited
by Amar Remedies Limited against form No.16A and
Rs.4333/by
Union Bank against form no.16A were reflected in the
system, which were given credit to the assessee at the time of processing
of return. It was further submitted that however as the credit of TDS of
Rs.5,86,606/was
not given, as no such credit of TDS is available with
the department.
5.1. Today, when the present petition was taken up for final
hearing, Ms. Bhatt, learned advocate for the revenue has placed on
record one communication dated 12.06.2014 by the Assistant
Commissioner of Income Tax (OSD), Circle10,
Ahmedabad, by which, it
is reported that aforesaid efforts were made from Mumbai office
(Income Tax Department) to gather the information from deducto i.e.
Amar Remedies Limited vide letter dated 06.05.2014 and / or direct to
supply the details of TDS deducted and deposited in the case of assessee
for the AY 201011.
It is submitted that in response, the deductor vide
his letter dated 12.5.2014 has requested some time for verify all data
and necessary documents and enclosed a copy of TDS challan and court
order. It is submitted that on perusal of the aforesaid letter, it is found
that the amount of Rs.5,77,333/was
deposited by the deductor on
14.7.2010, TDS amount allocated against Rs.2,40,000/for
F.Y 200910
and the balance amount of Rs.3,37,333/allocated
against
Rs.5,86,606/.
It is submitted that however no evidence regarding
claimed of Rs.3,37,333/has
been provided by the deductor till date. It
is further stated in the said communication that after availability of ITD
and BCP, deductee details in the case of ARL have been uploaded from
ITD systems by the Mumbai office and found that in quarter 4 of 24Q Rs.
1,58,486/and
in quarter 4 of 26Q Rs.2,40,000/deposited
on
31.3.2010 in the name of Shri Devendra Rajani. It appears that assessee
mentioned wrong PAN AAHPR3027C instead of PAN: AAHPR3027P for
the quarter 4 of 24Q. It is stated that the deductor has been asked to
submit the details in the case of assessee vide letter dated 22.5.2014 and
30.5.2014, however no reply has been received till date. It is further
stated that in absence of details / evidence from the deductor side, the
Department may give the credit of TDS amounting to Rs.2,40,000/and
further of Rs.1,58,486/only
as available with the ITD systems. It is
further stated that in future if the details of so claimed TDS provided by
the deductor the department may give the credit of the same after due
verification. The said communication dated 12.06.2014 is directed to be
taken on record. Considering the aforesaid factual background, present
petition is required to be considered.
6.0. Heard Shri Ketan Shah, learned advocate for the petitionerassessee
and Ms. Mauna Bhatt, learned advocate for the Income Tax
Department.
7.0. The grievance which is voiced in the present petition by the
assessee is that though deductor employer
Amar
Remedies Limited
had deducted TDS for total Rs.5,86,606/and
for which Form 16 A has
been issued by it, department has not given credit of the said TDS to the
petitionerassessee
deductee
and when the assessee has claimed the
said deduction, the same has not been granted and demand is raised by
issuing notice at Annexure D. Therefore, short question which is posed
for consideration of this Court is whether in case the deductor had
deducted the TDS and for the same Form no.16 A has been issued by
deductor, the credit of the same can be denied to the assessee and
deductee solely on the ground that such credit does not appear on ITD
system of the department and / or same does not match with the ITD
system of the department ?
8.0. At the outset, it is required to be noted that under Chapter
XVII, more particularly, Section 204 of the Act the liability to deduct the
tax at source would be upon the employer / payer / deductorin
the
present case Amar Remedies Limited. As per Section 205 of the Act
whether tax is deductible at source under Chapter XVII, the assessee
shall not be called upon to pay tax himself to the extent to which tax has
been deducted from that income. That the deductor is required to issue
Form no.16 A providing particulars with respect to the amount of tax
deducted at source in the relevant assessment year. In the present case,
it is the case on behalf of the petitioner and / or as per the return of
income filed the total sum of Rs.5,86,606/has been deducted by the deductor Amar Remedies Limited as TDS and for which M/s. Amar Remedies Limited deductor has issued Form no. 16 A. It is also the case on behalf of the petitioner that out of total salary of Rs.21,60,000/to be received from M/s. Amar Remedies Limited – deductor he has received salary after deducting the amount of tax at source by the deductor for which form no.16 A has been issued i.e. he has received Rs. 5,86,606/and on account of said amount deducted at source by the M/s. Amar Remedies Limited. Under the circumstances and considering Sections
204 and 205 when the deductor who is liable to deduct the tax at source
under Chapter XVII deducts the TDS and issued form no.16A the
assessee – deductee shall be entitled to credit of the same. As stated
above and as per Section 205 of the Act whether tax is deductible at the
source under Chapter XVII, the assessee shall not be called upon to pay
the tax himself to the extent of which tax has been deducted from that
income. Meaning thereby, the assessee / deductee is entitled to credit of
such amount of TDS. Assuming that in a given case the deductor after
deducting the TDS may not have deposited with the department.
However, in such situation, the department is to recover the said amount
from the deductor and assesseedeductee
cannot deny the credit of the
same. Identical question came to be considered by the Bombay High
Court in the case of Yashpal Sahni (supra) and considering Section 205
of the Act in para 15 of the Bombay High Court has observed as under:
“15.Chapter XVII of the IT Act, 1961 provides for collection
and recovery of tax by two modes. They are (one) directly
from the assessee and (two) indirectly by deduction of tax at
source. In the present case, we are concerned with the second
mode of recovery, namely recovery of tax by deduction at
source.”
9.0. In the said decision, the Bombay High Court has considered
and relied upon the decision of the Om Prakas Gattani (supra). In the
said decision the Gauhati High Court after considering the relevant
provision under Chapter XVII has observed and held that so far as
assessee is concerned, he is not supposed to do anything in the whole
transaction except that he is to accept the payment of the reduced
amount which is deducted income tax at source. It is observed that on
the amount being deducted the assessee only gets a certificate to that
effect by the person responsible to deduct the tax. In the said decision
Gauhati High Court has quashed and set aside the notice issued under
Section 226(3) of the Act to the bankers of the assessee observing in
para 7 as under:
“7. So far the assessee is concerned, he is not supposed to do
anything in the whole transaction except that he is to accept
the payment of the reduced amount from which is deducted
incometax
at source. The responsibility to deposit the amount
deducted at source as tax is that of the person who is
responsible to deduct the tax at source. On the amount being
deducted the assessee only gets a certificate to that effect by the
person responsible to deduct the tax. In a case where the
amount has been deducted by the person responsible to deduct
the amount under the statutory provisions, the assessee has no
control over the matter. In case of default in making over the
amount to the account of the Central Government, it is
obviously the person responsible to deduct or the person who
has made the deduction who is held responsible for the same.
The responsibility of such person is to the extent that he has to
be deemed to be an assessee in default in respect of the tax. He
may be deemed to be an assessee in default not only in cases
where after deduction he does not make over the amount to the
Central Government but also in cases where there is failure on
his part to deduct the amount at source. This responsibility has
been fastened upon him under Section 201 of the Incometax
Act. It is, of course, without prejudice to any other
consequences which he or it may incur. Presently we are not
concerned with the case where the person responsible to make
the deductions has not deducted the amount at all. It may or
may not fall in a different category from one where the amount
has been deducted and not made over to the Central
Government. We are concerned with the latter category of
cases. As indicated earlier, on the facts it is nobody's case that
the amount was actually not deducted at source by Chandra
Agencies. What seems to be in dispute is the deposit of the said
amount in the account of the Central Government. The Incometax
Department seems to have made enquiries about the exact
date of payment to the Central Government which Chandra
Agencies could not furnish on the ground that the papers were
forwarded to the chairman of Vaibhavshali Bumper. In such a
category of cases we feel that the amount of tax can be
recovered by the Income tax Department treating the person
responsible to deduct tax at source as an assessee in default in
respect of the tax. It would not be possible to proceed to recover
the amount of tax from the assessee. The assessee cannot be
doubly saddled with the tax liability. Deduction of tax at source
is only one of the modes of recovery of tax.. Once this mode is
adopted and by virtue of the statutory provisions the person
responsible to deduct the tax at source deducts the amount,
only that mode should be pursued for the purpose of recovery
of tax liability and the assessee should not be subjected to other
modes of recovery of tax by recovering the amount once again
to satisfy the tax liability. It is, therefore, provided under
Section 201 of the Incometax
Act that the person responsible
to deduct the tax at source would be deemed to be an assessee
in default in case he deducts the amount and fails to deposit it
in the Government treasury. As observed earlier, the assessee
has no control over such person who is responsible to deduct
the incometax
at source, but fails to deposit the same in the
Government treasury. In this light of the matter, in our view,
the notices issued under Section 226(3) of the Incometax
Act
to the bankers of the petitionerrespondent
to satisfy the tax
liability from the bank account of the petitionerrespondent
are
illegal. It is not that the Incometax
Department was helpless in
the matter. The person responsible to deduct the tax at source
would move into the shoes of the assessee and he would be
deemed to be an assessee in default. Whatever process or
coercive measures are permissible under the law would only be
taken against such person and not the assessee.”
10. We are in complete agreement with the view taken by the
Bombay High Court and Gauhati High Court. Applying the aforesaid two
decisions of the Bombay High Court as well as Gauhati High Court, the
facts of the case on hand and even considering Section 205 of the Act
action of the respondent in not giving the credit of the tax deducted at
source for which form no.16 A have been produced by the assessee –
deductee and consequently impugned demand notice issued under
Section 221(1) of the Act cannot be sustained. Concerned respondent
therefore, is required to be directed to give credit of tax deducted at source to the assessee deductee of the amount for which form no.16 A have been produced.
11. In view of the above and for the reasons stated petition succeeds. It is held that the petitioner assessee deductee is entitled to credit of the tax deducted at source with respect to amount of TDS for which Form No.16A issued by the employer deductor – M/s. Amar Remedies Limited has been produced and consequently department is directed to give credit of tax deducted at source to the petitioner assessee – deductee to the extent form no.16 A issued by the deductor have been issued. Consequently, the impugned demand notice dated
6.1.2012 (Annexure D) is quashed and set aside. However, it is clarified
and observed that if the department is of the opinion deductor has not
deposited the said amount of tax deducted at source, it will always been
open for the department to recover the same from the deductor. Rule is
made absolutely to the aforesaid extent. In the facts and circumstances
of the case, there shall be no order as to costs.
sd/(
M.R.SHAH, J.)
sd/
K.J.THAKER
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