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September 2023

Deduction of tax at source — Recovery of demand — Bar against direct demand on assessee — Employer deducted tax at source from assessee’s salary but not paid into Government account — Assessee cannot be denied credit for tax deducted at source — Assessee is entitled to refund with interest of amount if any adjusted towards demand.

By K B Bhujle | Ritu Punjabi
Advocates
Reading Time 2 mins
38. Milan Arvindbhai Patel vs. ACIT
[2023] 455 ITR 82 (Guj.)
A.Ys. 2010–11 to 2012–13: Date of order: 13th February, 2023
Sections 156, 205, 226 and 237 of ITA 1961.

Deduction of tax at source — Recovery of demand — Bar against direct demand on assessee — Employer deducted tax at source from assessee’s salary but not paid into Government account — Assessee cannot be denied credit for tax deducted at source — Assessee is entitled to refund with interest of amount if any adjusted towards demand.

The assessee was a pilot working with Kingfisher Airlines. The assessee received notice from the AO seeking recovery of outstanding demand of Rs. 19,40,707 for A.Y. 2011–12 and Rs. 25,12,913 for A.Y. 2012–13. In fact, the assessee was eligible for a refund of Rs. 45,570 for A.Y. 2012–13. However, since the amount deducted as TDS had not been deposited by the Airlines to the Central Government, the assessee’s claim for credit of TDS was denied. As a result, demand was raised along with interest.

The assessee filed a writ petition seeking to cancel the outstanding demands under section 156 of the Income-tax Act, 1961, to quash the recovery notices under section 226, and to recover the unpaid tax deducted at source from the assessee’s employer and refund under section 237 of the amount which was adjusted against the outstanding demands for the A.Ys. 201
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