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Issues involved: Interpretation of provisions u/s 192 and u/s 201 of the Income Tax Act, 1961 regarding tax deduction at source by the employer and the jurisdiction of the Income Tax Officer (TDS) to demand further tax from the employer after completion of regular assessment of an employee.
Summary: The High Court of Madhya Pradesh considered a reference made by the Income-tax Appellate Tribunal regarding the jurisdiction of the Income Tax Officer (TDS) under section 201 of the Income Tax Act, 1961. The case involved the employer, Shri Synthetics Limited, Ujjain, failing to properly deduct tax under section 192 for some employees, leading to a demand for additional tax and interest by the ITO. The CIT (A) held that the ITO exceeded his jurisdiction and directed a revision of the computation, which was upheld by the Tribunal. The Tribunal referred the question of law to the High Court, questioning the jurisdiction of the ITO (TDS) to demand further tax from the employer after the completion of regular assessment of an employee. The court considered previous decisions and held that the principal liability for income tax payment lies with the individual receiving the income. In this case, as the employees' assessments were completed and taxes fully paid, the ITO could not demand additional tax from the employer for the employees' income. Therefore, the High Court concluded that the Tribunal was correct in holding that the ITO (TDS) has no jurisdiction under section 201 of the Income Tax Act, 1961, to demand further tax from the employer after the completion of regular assessment and full tax payment by the employees. The question was answered in the affirmative, ruling against the Department. The court also awarded costs for the reference. This judgment clarifies the boundaries of the ITO's jurisdiction regarding tax deduction at source and upholds the principle that the individual receiving income is primarily liable for income tax payment.
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