1986 (12) TMI 392 - HC - Income Tax

Summary

Issues Involved:
The issue involves the jurisdiction of the Income-tax Officer (TDS) under section 201 of the Income-tax Act, 1961, to demand further tax from the employer in cases where regular assessment of an employee has been completed and the tax fully paid by the employee.

Jurisdiction of Income-tax Officer (TDS) under Section 201:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the jurisdiction of the Income-tax Officer (TDS) to demand additional tax from the employer in situations where the tax was not properly deducted by the employer in the cases of some employees. The Tribunal upheld that the Income-tax Officer (TDS) does not have the jurisdiction to demand further tax from the employer after the employee has completed regular assessment and fully paid the tax, as established in the case law CIT v. Divisional Manager, New India Assurance Co. Ltd. [1983] 140 ITR 818.

Factual Background and Legal Proceedings:
The Divisional Manager of the Life Insurance Corporation of India, Sagar, filed the annual return of salary income for the assessment year 1977-78, showing the tax deductible under section 192 of the Act. The Income-tax Officer (TDS) in Bhopal found discrepancies in tax deductions for certain employees and demanded additional tax under section 201 of the Act. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal, which was further upheld by the Tribunal. The Tribunal then referred the question of law to the High Court for its opinion.

Court's Decision and Conclusion:
After considering the arguments presented, the High Court concluded that the Income-tax Officer (TDS) does not have the jurisdiction to demand further tax from the employer once the employee has completed regular assessment and paid the tax in full. Citing the precedent set in CIT v. Divisional Manager, New India Assurance Co. Ltd. [1983] 140 ITR 818, the High Court answered the question in the affirmative, ruling against the Department. The parties were directed to bear their own costs in this reference.