Assessee Shall Not Be Called Upon to Pay Tax Deducted by Employer –Protects Employee Rights: Delhi High Court
In a significant ruling that bolsters the rights of employees, the Delhi High Court, comprising Hon’ble Mr. Justice Rajiv Shakdher and Hon’ble Mr. Justice Girish Kathpalia, delivered a landmark judgment on November 29, 2023, providing major relief to taxpayers across the nation. The Court decisively held that “the assessee shall not be called upon to pay tax to the extent tax has been deducted from that income,” emphasizing the protection of employees from undue tax demands.
The case, centered on a writ petition filed by Mr. Bhanu Mohan Kaila, challenged the arbitrary tax demand of Rs. 21,50,150 for the Assessment Year 2012-13. Despite tax deduction at source by his employer, Kingfisher Airlines Limited, the tax was not deposited with the revenue department. This led to the petitioner facing repeated notices of demand from the respondents.
The Court’s decision was anchored in the interpretation of Section 205 of the Income Tax Act, which stipulates that an employee cannot be held liable for tax deducted at source by their employer but not deposited with the Central Government. The bench underscored the principles laid out in Sanjay Sudan vs Assistant Commissioner of Income Tax and other similar cases, reiterating that coercive recovery of tax in such situations is barred.
In delivering the judgment, the bench observed, “We have heard counsel for the parties. According to us, Section 205 read with instruction dated 01.06.2015, clearly point in the direction that the deductee/assessee cannot be called upon to pay tax, which has been deducted at source from his income.” This observation laid the foundation for the judgment, thereby setting a precedent for similar cases.
The Court ultimately allowed the petition, setting aside the tax demand notices and restraining the respondents from carrying out any recovery proceedings against the petitioner for the specified assessment year. However, it was clarified that if the petitioner recovers any amount of tax deducted at source from his employer, it must be deposited with the revenue.
Date of Decision:29.11.2023
BHANU MOHAN KAILA VS UNION OF INDIA & ANR.
