AO cannot recover TDS from Assesse if the TDS is not deposited by the Deductor: HC

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INCOME TAX : Where 2nd respondent company had deducted tax at source from and out of payments made to assesses but had not paid it to credit of Central Government, assesses could not be saddled with tax liability as it was duty of Income Tax Department to recover such TDS from 2nd respondent company, hence demand notice against assesses to clear arrears of tax purportedly due from them was to be quashed and set aside

[2021] 128 taxmann.com 230 (Madras)

HIGH COURT OF MADRAS

Ashok Kumar B. chowatia

v.

Joint Commissioner of Income Tax (TDS), Chennai

C. SARAVANAN J

W.P. NOS. 31167,31170,31172,31174 OF 2018

W.M.P. NOS 36372, 36373, 36375, 36376 AND 36379 & 36380 OF 2018

APRIL 16,2021

Section 205 of the Income-tax Act, 1961 – Deduction of tax at source – Bar against direct demand on assesse (Illustrations) – Assessment years 2011-12, 2012-13 and 2013-14 – Impugned demand notices were issued upon assesses calling upon them to clear arrears of tax purportedly due from them – Assesses challenged demand notices on ground that 2nd respondent company had deducted tax at source from and out of payments made to assesses but had not paid it to credit of Central Government and therefore assesses could not be saddled with tax liability as it was duty of income tax department to recover such tax deducted at source from 2nd respondent company – whether to extent that tax was deducted by 2nd respondent company and not remitted by it to Income Tax Department, recovery could be only directed against 2nd respondent company as it was in default – Held, yes – whether assesses could not be made to pay tax twice – Held, yes – whether therefore, respective demand notices issued against assesses were to be set aside and fresh demand notices were to be issued to assesses after taking note of subsequent developments and payments made by 2nd respondent company – Held, yes [Paras 33 and 34] [In favour of assesse]

 
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