Mumbai HC Decision on TDS Certificates

The income tax amount from an assessee cannot be recovered once tax is deducted at source, irrespective of the fact whether the TDS amount was deposited with the treasury or not and whether TDS certificate was issued or not, the Bombay High Court has ruled. The court has also directed the Income Tax Department to refund the amount recovered from such a person within eight weeks, with six per cent interest. Assessee had raised this important and interesting issue in his petition which was decided by a division bench. Assessee was employed with a company as Managing Director from April 1 1996. But he was forced to quit the company because of certain disputes before end of the same year. During the period, the company paid salary to assessee after deducting total Rs 6,66,000 by way of TDS. Next year, when assessee filed his income tax returns for the next financial year, claiming credit of Rs 6,66,000, his returns were processed and refusing him credit, the assessing offficer from the IT department issued him an intimation for paying raised amount of Rs 12,73,940. Assessee them moved from pillar to post to get the intimation rectified and for initiating action against the company, but instead of taking action against the company, the income tax department proceeded against him and ultimately recovered Rs 17,89,581 by attaching his bank account. The court observed that, once it was established that tax had been deducted at source from salary of the employee, the bar under section 205 of the Income Tax Act comes into operation and it was immaterial as to whether the tax deducted at source had been paid to the Central Government or not, since elaborate provisions are made for recovery of tax deducted at source. The court further observed that, the fact that revenue was unable to recover the tax deducted at source from the person who had deducted it, would not entitle the revenue to recover the TDS amount once again from the employee-assessee