2013 (3) TMI 328 - HC - Income Tax

Deduction of TDS twoards Arrears of income tax and interest from assessee s salary on the basis of communication received by the ITO(TDS) - Held that - There appears to be no dispute that there is no order by the Income Tax Department directing the Management of the Institution or anybody else to deduct the tax from the salary of the petitioner towards arrears of salary received by him earlier.- This is clear from the counter affidavit of Smt. Shashi Mathur, Income Tax Officer, (TDS), who wrote communication dated 17th February, 2009 to the Commissioner of Income Tax, Allahabad. The inquiry was conducted against non deduction of tax by the DDO of Sadanand, Vidyayala Cheolaha, Fatehpur. - ITO TDS is not empowered to take any remedial measures against the individual tax payers. It was against the tax deducting authority and not against the petitioner. In this case, no demand was raised by the ITO (TDS), has been stated in para-19 of the counter affidavit. She has clarified that it was merely a correct calculation of relief under Section 89(1) to enlighten the DDO. Thus, it is crystal clear that it is not the case of the Income Tax Department that any tax is payable by the petitioner for the assessment year in question. Income Tax Department has not issued any order for deduction of tax from the salary of the petitioner. This being position, the college authorities and the D.I.O.S., Fatehpur were not justified in making any deduction from the salary of the petitioner on the pretext that the petitioner has not paid the tax on his arrears of salary. As decided in Jagran Prakashan Ltd. versus Deputy Commissioner of Income -Tax (TDS) (2012 (5) TMI 488 - ALLAHABAD HIGH COURT) considering Section 201(1) there is no occasion to treat the deductor as an assessee in default unless the assessee has not paid the tax directly. As the case of the department is that the petitioner in no manner, is an assessee in default. Thus, in view of the stand taken by the department that there is nothing against the petitioner in the said communication and it is against the DDO, the action of the College Management is wholly arbitrary and illegal. The Principal or the Manager had no authority or occasion to take any step to deduct the sum of Rs. 1,37,868/- for the alleged income tax dues for the assessment year 1998-99 from the current salary.

Summary

Issues:
Dispute over pay scale, deduction of income tax arrears from salary without proper order, legality of deduction by college management, authority of the Income Tax Department, liability determination, compliance with tax laws.

Analysis:
The petitioner, a Lecturer, challenged the deduction of Rs. 1,37,868 from his salary for income tax arrears by the College Principal, based on a letter from the Income Tax Officer (TDS). The Income Tax Department denied issuing any order for recovery from the petitioner, stating the inquiry was against the tax deducting authority, not the petitioner. The Court noted no order fixing the petitioner's tax liability existed. Referring to a previous case, it emphasized that a deductor is deemed in default only if the assessee fails to pay tax directly. Since the department confirmed no default by the petitioner, the deduction by the College was deemed arbitrary and illegal.

The Court held the Principal had no authority to deduct the amount without a valid order from the Income Tax Authorities. It directed the College to refund any deducted amount to the petitioner promptly. The District Inspector of Schools was tasked with ensuring compliance with the judgment. Consequently, the writ petition succeeded, and the impugned order was quashed, with no costs imposed.