2011 (10) TMI 34 - HC - Income Tax

Revised Intimation u/s 143(1) - Claim of Refund on the basis of Form 16 - AO denied to give credit of TDS and raised demand - The Petitioner furnished Form 16, but it was self attested instead of being attested by the employer. - The Petitioner was a Judicial Officer in the State Judicial Service - Held that - In view of the law laid down by the Division Bench of this Court in Yashpal Sahni vs. Rekha Hajarnavis, Assistant Commissioner of Income Tax,1 (2007 -TMI - 1646 - HIGH COURT , BOMBAY) the position in law is that a complete machinery is provided under the Act for recovery of tax deducted at source from the person who has deducted such tax at source and the Revenue is barred from recovering the amount from the person from whose income the tax had been deducted at source. - revised intimation u/s 143(1) set aside - AO directed to verify as to whether as a matter of fact, the tax was deducted at source from the salary of the Petitioner and if that is so found to be correct, to take further steps in accordance with law and grant further credit for tax, as the case may be.

Summary

Issues:
1. Incorrect computation of income and tax demand by the Assessing Officer.
2. Non-consideration of tax deducted at source in the assessment.
3. Discrepancy in the tax payment information provided by the Petitioner and the Income Tax Officer.
4. Legal implications of tax deduction at source and the responsibility of the State Government.

Analysis:

Issue 1: Incorrect computation of income and tax demand
The Petitioner, a Judicial Officer, filed an income tax return for Assessment Year 2006-07, showing a total income of Rs.1,79,664 and a tax paid amount of Rs.17,500. However, the Assessing Officer, in an intimation under Section 143(1), reflected the total income at Rs.1,42,540 and made a tax demand of Rs.4,339. Despite the Petitioner's rectification application, the Assessing Officer issued further notices and revised the income, leading to a total demand of Rs.8,219. The Court noted these discrepancies and set aside the revised intimation, directing the Assessing Officer to verify the tax deductions and take necessary steps in accordance with the law.

Issue 2: Non-consideration of tax deducted at source
The Assessing Officer failed to credit the tax deducted at source in the assessment, leading to erroneous demands on the Petitioner. The Court emphasized the importance of verifying whether the tax was indeed deducted at the source from the Petitioner's salary. If confirmed, the Assessing Officer was instructed to grant further credit for the tax deducted, rectifying the oversight in the assessment process.

Issue 3: Discrepancy in tax payment information
The Petitioner submitted queries under the Right to Information Act, revealing conflicting information regarding the tax paid for the financial year 2005-06. While the Petitioner claimed Rs.17,500 was deducted, the Income Tax Officer issued notices for non-payment of Rs.12,558. The Court acknowledged these discrepancies but focused on the verification of tax deductions at the source to address the assessment errors.

Issue 4: Legal implications of tax deduction at source
Citing legal precedents, the Court highlighted that the Act provides a mechanism for recovering tax deducted at source from the appropriate party and prohibits the Revenue from recovering it from the individual whose income was the source of deduction. Considering the Petitioner's status as a Judicial Officer, the Court expressed doubt that the tax, if deducted at the source, was not deposited by the State Government. Consequently, the Court set aside the revised intimation and directed the Assessing Officer to verify the tax deductions and take necessary actions, emphasizing compliance with legal procedures.

The Court appreciated the assistance of the Learned Amicus Curiae in facilitating the case's resolution, ultimately disposing of the Petition based on the directions provided regarding the verification and rectification of tax deductions at the source.