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TMI Blog1997 (8) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... quired under sub-section (1) of section 192 of the Act. A notice was, therefore, issued to the bank requiring it to prove the source of investment in savings made by two employees, Shri R. R. Khanna and Smt. Kanta Gaur. One of the employees, namely, Shri R. R. Khanna, was the manager of the bank, and he had claimed rebate of tax under section 88 of the Act on a total amount of Rs. 45,997 out of which savings of Rs. 10,000 had been invested in the National Savings Certificates (N.S.C.) and another Rs. 10,000 were deposited by him in the Public Provident Fund Account (PPF Account). Smt. Kanta Gaur had claimed a similar rebate of tax under section 88 of the Act on a gross amount of Rs. 41,283 including Rs. 5,500 invested in the N. S. C. and Rs. 25,550 deposited in the P. P. F. Account. In response to the notice, the petitioner-bank explained the source of investment made in N. S. C. and P. P. F. account by the aforesaid two employees. It was considered by the Income-tax Officer to be not satisfactory. An order under section 192 read with section 201 of the Act was passed by the Income-tax Officer on December 15, 1993, against the petitioner-bank creating a demand of Rs. 11,650 inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employee. It means that an estimate of the income under the head "Salaries" for the financial year in which the payment was made, will have to be made. It is on the basis of that estimate that the amount of tax payable by the employee will have to be arrived at. At the time of payment of salary, income-tax will have to be deducted by the employer from the amount payable. The rates of tax and the estimate of income will have to be calculated on an annual basis. Whatever is to be included under the head "Salaries" will have to be taken into consideration for the purpose of making the estimate. Deduction of tax at source from salary income shall, therefore, depend upon the rebate of tax claimed by the employee under section 88 of the Act. An employer failing to pay the tax as required under the Act is liable to pay penalty as well as interest under section 201 of the Act, which reads as under : "201. Consequences of failure to deduct or pay.---(1) If any such person and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay the deducted amount of tax. From the facts emerging from the pleadings of the petitioner, it is apparent that the petitioner-bank had filed the return on April 30, 1993, in Form No. 24 under section 206 of the Act, showing the amount of salary paid to each employee and the amount of rebate claimed under section 88 by each employee during the financial year ending on March 31, 1993. The Income-tax Officer asked the petitioner to prove the source of investment in the savings by the two employees. Rebate of tax on the investment of Rs. 20,000 claimed by Shri Khanna was refused on the ground that Shri Khanna had not withdrawn any money from his bank account on the dates of investments. Withdrawal of money was made by Shri Khanna from his bank account a few days before making investments. It was explained before the Income-tax Officer that, after withdrawal of money, Shri Khanna had handed over the money to the agent for the purpose of making investments. In the case of Smt. Kanta Gaur, investments of Rs. 31,000 in N. S. C. and P. P. F. account were shown out of the money withdrawn from her overdraft account in the bank. The Income-tax Officer disallowed it also. It had been ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees in question. There was nothing to enable the Assessing Officer to hold that the petitioner-bank had, without good and sufficient reasons failed to deduct and pay tax. When the deposits stood verified, the employer cannot be held responsible for not looking into the source of funds invested by the employee in the savings. As has been seen, summary assessments in the cases of the two employees under section 143(1)(a) of the Act, was also made. A sum of Rs. 1,490 was refunded to Shri R. R. Khanna and a sum of Rs. 70 to Smt. Kanta Gaur. The respondents have, in their joint reply, defended the order passed by the Income-tax Officer as well as the orders of the Commissioner of Income-tax. It has been pleaded that an employer had to satisfy himself about the actual deposit of money in the investment made by an employee. Genuineness of the claim for rebate has to be seen. The petitioner-bank had not verified the genuineness of the investments made by the employees. Excess allowance of rebate was given under section 88 and thereby short deduction of tax at source took place. It is also explained in the reply that notices under section 147/148 of the Act have been issued by the conce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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