2004 (7) TMI 284 - AT - Income Tax

Summary

Issues Involved:
1. Credit for TDS on salary in the absence of Form No. 16 and Form No. 24.
2. The responsibility of the employer to issue TDS certificates and pay the deducted tax to the government.
3. The applicability of Section 205 of the Income Tax Act, 1961.
4. The legal implications of non-furnishing of TDS certificates by the employer.
5. The powers of the Income Tax authorities to enforce the payment of tax and issue of certificates by the employer.

Detailed Analysis:

1. Credit for TDS on Salary in the Absence of Form No. 16 and Form No. 24:
The primary issue revolves around whether the assessee can claim credit for TDS on salary without possessing Form No. 16 and Form No. 24. The CIT(A) held that giving credit for TDS without these forms is unjustified. However, the CIT(A) also acknowledged that the assessee should not be asked to pay the tax again if it has already been deducted at source, in line with Section 205 of the Income Tax Act, 1961.

2. Responsibility of the Employer:
The CIT(A) directed the Assessing Officer to ask the assessee to furnish Form No. 16 from the employer. The CIT(A) noted that it would not be very difficult for the assessee to obtain Form No. 16, given the employer's letter dated 19-3-1999, which confirmed the deduction of TDS from the salary and the company's intention to settle all liabilities, including TDS, upon revival. The CIT(A) also mentioned that if Form No. 24 is filed by the employer, credit can be given based on this certificate.

3. Applicability of Section 205:
Section 205 stipulates that the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income. The assessee argued that demanding tax again would result in double taxation, relying on the Supreme Court's decision in Laxmipat Singhania v. CIT and the ITAT decision in Rallies India Ltd. The Department admitted that Section 205 bars direct demand from the assessee.

4. Legal Implications of Non-Furnishing of TDS Certificates:
The Tribunal acknowledged that the employer had deducted TDS from the salary, as evidenced by monthly statements and a certificate from the employer. However, credit for TDS cannot be given without the certificate prescribed under Section 203, as per Section 199 of the Act. The Tribunal noted that the non-furnishing of the TDS certificate results in an interest levy on the assessee, which would not have occurred if the certificate had been provided.

5. Powers of Income Tax Authorities:
The Tribunal emphasized that the Income Tax authorities have the power to enforce the payment of tax by the deductor and the issuance of TDS certificates to the payee. The Tribunal directed the authorities not to recover any tax from the assessee until they collect the tax from the employer and obtain the TDS certificate. The Tribunal restrained the Department from recovering tax and interest from the assessee until such actions are taken against the employer.

Conclusion:
The appeal filed by the assessee was allowed, with the Tribunal directing the Income Tax authorities to refrain from recovering any tax or interest from the assessee until they enforce the payment of TDS and issuance of certificates by the employer. The Tribunal highlighted the employer's responsibility and the powers of the authorities to ensure compliance, thereby protecting the assessee from the consequences of the employer's default.