2016 (6) TMI 500 - HC - Income Tax

Credit of tax deducted at source from salary - TDS not credited by Department - recovery of tax - Held that - We notice that undisputedly the tax was deducted from the petitioner s salary directly at source. Such tax so deducted was credited to the department by the District Court. However, out of total tax so deposited, the Revenue s system did not reflect the tax collection and deposit of a sum of ₹ 1,38,683/- in the form of section 26AS. It was on this account that the Assessing Officer did not grant benefit of such tax paid by the petitioner which resulted into a demand of tax which would presumably include interest. Whatever be the reason, the petitioner cannot be asked to pay tax twice, particularly when it appears that on account of some technical defect, the correct figures not being reflected in the system of the Revenue, the petitioner cannot be made to suffer. As decided in Sumit Devendra Rajani Versus Assistant Commissioner of Income Tax -OSD & 1 2014 (8) TMI 418 - GUJARAT HIGH COURT 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 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.16A issued by the deductor have been issued. Consequently, the impugned demand notice quashed - Decided in favour of assessee

Summary

Issues Involved:
1. Quashing of recovery notices and direction for credit of tax deducted at source for the accounting year 2011-2012.

Analysis:
The petitioner, an Additional District and Sessions Judge, Rajkot, sought the quashing of recovery notices dated 13.2.2013, 6.1.2015, and 6.7.2015 issued by the respondent authority. The petitioner also requested a direction to receive credit for tax deducted at source from his salary for the accounting year 2011-2012. The District Court deducted tax at source from the petitioner's salary and deposited it with the Revenue, issuing a certificate for the same. However, a technical issue in the Revenue's system led to a demand of &8377; 1,38,683 towards the petitioner's tax dues, as the tax deduction was not reflected correctly. The Assessing Officer did not grant the benefit of the tax paid by the petitioner due to this discrepancy, resulting in a tax demand, potentially including interest.

The High Court, after reviewing the documents and facts, acknowledged that the tax was indeed deducted at source by the District Court and credited to the Revenue. The discrepancy arose from the non-reflection of a sum of &8377; 1,38,683 in the Revenue's system. The Court emphasized that the petitioner should not be compelled to pay tax twice due to technical defects causing incorrect figures in the Revenue's system. Referring to a previous judgment, the Court highlighted that the petitioner is entitled to credit for the tax deducted at source, as evidenced by form no.16A produced by the employer. Consequently, the demand notice was quashed, and the department was directed to give credit for the tax deducted at source to the petitioner based on the relevant forms. The Court clarified that if the department believes the deductor did not deposit the tax amount, they can recover it from the deductor.

In conclusion, the High Court allowed the petition, quashing the recovery notices dated 13.6.2013, 6.1.2015, and 6.7.2015. The judgment emphasized the importance of ensuring that taxpayers are not burdened due to technical errors in the tax system, reiterating the principle that taxpayers should not be made to pay tax twice when the fault lies with the Revenue's system.