Section 194-IA and 205 – TDS – Bar against direct demand on assessee (Scope of) – Assessee sold property – Purchaser deducted TDS amount in terms of section 194-IA on sale consideration – Amount of TDS was not deposited with Revenue by purchaser – As provided u/s. 205, assessee could not be asked to pay same again – It was open to department to make coercive recovery of such unpaid tax from payer whose primary responsibility was to deposit same with government Revenue promptly because, if payer, after deducting tax, fails to deposit it in government Revenue, measures could always be initiated against such payers

13. Pushkar
Prabhat Chandra Jain vs. UOI; [2019] 103 taxmann.com 106 (Bom): Date
of order: 30^th January, 2019

Section
194-IA and 205 – TDS – Bar against direct demand on assessee (Scope of) –
Assessee sold property – Purchaser deducted TDS amount in terms of section
194-IA on sale consideration – Amount of TDS was not deposited with Revenue by
purchaser – As provided u/s. 205, assessee could not be asked to pay same again
– It was open to department to make coercive recovery of such unpaid tax from
payer whose primary responsibility was to deposit same with government Revenue
promptly because, if payer, after deducting tax, fails to deposit it in
government Revenue, measures could always be initiated against such payers

The petitioner sold an immovable property for Rs. 9 crore. The
purchasers made a net payment of Rs. 8.91 crore to the petitioner after
deducting tax at source at 1% of the payment in terms of section 194-IA of the
Income-tax Act, 1961. The petitioner filed the return of income and claimed
credit of TDS of Rs. 10.71 lakh. The Income-tax department noticed that only an
amount of Rs. 1.71 lakh was deposited with government Revenue and, thus, gave
the petitioner credit of TDS only to the extent of such sum. In an intimation
issued by the respondent u/s. 143(1), a demand of Rs. 10.36 lakh was raised
against the petitioner. This comprised of the principal tax of Rs. 9 lakh and
interest payable thereon. Subsequently, the return of the petitioner was taken
in limited scrutiny. During the pendency of such scrutiny assessment
proceedings, the Revenue issued a notice to the branch manager of the bank
attaching the bank account of the assessee. A total of Rs. 3.68 lakh came to be
withdrawn by the department from the petitioner’s bank account for recovery of
the unpaid demand.

The
assessee objected to attachment of the bank account on the ground that the
purchasers had deducted the tax at source in terms of section 194-IA. Further,
the petitioner had already offered the entire sale consideration of Rs. 9 crore
to tax in the return filed. The petitioner referred to section 205 and
contended that in a situation like the present case, recovery could be made
only against the deductor-payer. The petitioner could not be asked to pay the
said amount again. However, the respondent did not accept the representation of
the petitioner, upon which the instant petition has been filed.

The Bombay
High Court allowed the writ petition and held as under:

“i)   The purchasers paid the petitioner only Rs.
8.91 crore retaining Rs. 9 lakh towards TDS. The department does not argue that
this amount of Rs. 9 lakh so deducted is not in tune with the statutory
requirements. It appears undisputed that the deductor did not deposit such
amount in the government Revenue. Under the circumstances, the petitioner is
asked to pay the said sum again, since the department has not recognised this
TDS credit in favour of the petitioner.

ii)   Section 205 carries the caption ‘Bar against
direct demand on assessee’. The section provides that where tax is deducted at
the source under the provisions of Chapter XVII, the assessee shall not be
called upon to pay the tax himself to the extent to which tax has been deducted
from that income.

iii)   The situation arising in the present petition
is that the department does not contend that the petitioner did not suffer
deduction of tax at source at the hands of payer, but contends that the same
has not been deposited with the government/Revenue. As provided u/s. 205 and in
the circumstances of the instant case, the petitioner cannot be asked to pay
the same again. It is always open for the department, and in fact the Act
contains sufficient provisions, to make coercive recovery of such unpaid tax
from the payer whose primary responsibility is to deposit the same with the government
Revenue scrupulously and promptly. If the payer after deducting the tax fails
to deposit it in the government Revenue, measures can always be initiated
against such payers.

iv)  The Revenue is correct in pointing out that
for long after issuing notice u/s. 226(3), the petitioner has not brought this
fact to the notice of the Revenue which led the Revenue to make recoveries from
the bank account of the petitioner. In that view of the matter, at the best the
petitioner may not be entitled to claim interest on the amount to be refunded.

v)   Under the circumstances, the respondents
should lift the bank account attachment. Further, the respondent should refund
a sum of Rs. 3.68 lakhs to the assessee.”