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TMI Blog2023 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction merely provides that no coercive measure will be taken against the assessee, in our view, falls short of what is put in place by the legislature via Section 205 of the Act. Therefore, in our view, the petitioner is right inasmuch as neither can the demand qua the tax withheld by the deductor/employer be recovered from him, nor can the same amount be adjusted against the future refund, if any, payable to him. Act does not seem to cast a burden on the deductee/payee with regard to the deposit of money, which is retained as tax, by the payer i.e., the deductor. Therefore, insofar as the deductee/payee is concerned, once the payer/deductor, who acts as an agent of the Central Government, has retained money towards tax, credit for the same cannot be denied, having regard to the consequences and the modes available for recovering the said amount from the payer/deductor. Deductors are individuals who, concededly, after retaining the tax deducted at source did not fully deposit the same, as noted above, with the Central Government. Upon the respondent/assessee becoming aware of this fact, a police complaint was lodged, which was brought to the notice of the appellant/revenue. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion fixed for this transaction was Rs. 19,89,96,655/-. 7.2 The respondent/assessee, after deduction of Tax at Source (TAS) at the rate of 10.3%, received Rs. 17,85,00,000/-. 7.3 The tax in absolute terms, which was deducted by the buyer of the shares held by the respondent/assessee was Rs. 2,04,96,655/-. 8. The record also discloses that to begin with, the respondent/assessee was treated as assessee-in-default. 8.1 In an appeal preferred by the respondent/assessee, the Commissioner of Income Tax (Appeals) [in short, CIT(A) ], in consonance with the provisions of Section 205 of the Income Tax Act, 1961 [in short, Act ] had granted relief to the respondent/assessee in this behalf. 8.2 However, insofar as credit for tax which was deducted is concerned, that part of the relief was not granted to the respondent/assessee. 9. It is in this context that the respondent/assessee preferred an appeal with the Income Tax Appellate Tribunal [in short, Tribunal ]. 9.1 The Tribunal, via the impugned order dated 03.03.2021, has ruled in favour of the respondent/assessee. 9.2 In other words, the Tribunal, in sum, ruled that the respondent/assessee is entitled to tax credit for the tax at source [TA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent to which tax has been deducted from that income. 8. The instruction dated 1-6-2015 is aligned with the aforesaid provision of Act inasmuch as it clearly provides in paragraph 2 that since the Act places a bar on a direct demand qua the deductee assessee, the same cannot be enforced coercively. For the sake of convenience, paragraph 2 of the said Instruction is extracted hereafter : 2. As per section 199 of the Act credit of Tax Deducted at Source is given to the person only if it is paid to the Central Government Account. However, as per section 205 of the Act the assessee shall not be called upon to pay the tax to the extent tax has been deducted from his income where the tax is deductible at source under the provisions of Chapter-XVII. Thus the Act puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch cannot be enforced coercively 9. The question, therefore, which comes to [the] fore, is as to whether the respondents/revenue can do indirectly what they cannot do directly. 9.1 The adjustment of demand against future refund amounts to an indirect recovery of tax, which is barred under section 205 of the Act. 9.2 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of Section 199. Therefore, Section 199, read in its entirety, does not limit credit only to those deductees whose deductors have deposited the amount with the Central government. 7.1 Moreover, the expression and paid to the Central Government found in Section 199(1) must be contextualized in the setting in which it is placed, i.e., Chapter XVII, whereby, the sanctions for failing to deposit tax with the Central government are laid on the payor/deductor. 7.2 Section 199, which is contained in Chapter XVII and, inter alia, includes provisions for collection and recovery of tax. Chapter XVII of the Act is divided into eight (8) parts. 7.3 Part A, which is general, includes Sections 190 and 191. Part B concerns Deduction [of tax] at source. Part BB relates to the Collection [of tax] at source. Part C pertains to Advance payment of tax. Part D concerns Collection and recovery of tax. 7.4 Part E concerns tax payable under provisional assessment and includes Sections 233 and 234 of the Act as omitted by the Taxation Laws (Amendment) Act, 1970 [w.e.f. 1-4-1971], and the Direct Tax Laws (Amendment) Act, 1987 [w.e.f. 1-4-1989], respectively. 7.5 Part F concerns Interest chargeable in cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same. Under Section 201, such a person is deemed to be an assessee-in-default and would, upon this eventuality occurring, be liable to pay interest [See sub-section (1A) of Section 201]. 8.7 Furthermore, the assessee-in-default is also liable for imposition of penalty under Section 221 of the Act. Besides this, outside Chapter XVII, penalty can also be levied under Section 271C. 8.8 In addition, thereto, a person who fails to deposit tax deducted at source, under the provisions of Chapter VII-B, is liable for punishment with rigorous imprisonment under Section 276B. 8.9 That said, both impositions of penalty and prosecution are subject to the defence of reasonable cause as provided in Sections 273B and 278AA of the Act respectively. 9. Importantly, Section 201(2), provides that where a person who, although required to, does not deduct tax or does not pay the tax deducted at source or after deducting fails to pay wholly or part of the tax as required under the Act, would have a statutory charge created on his assets concerning both the tax as well as the interest payable under sub-section (1A) of the said provision. 10. Thus, in our opinion, the Act does not seem to cast a burden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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