INCOME TAX ACT, 1961

Section 205

Bar against direct demand on assessee - Withholding tax payable on salary - Adjustment of withheld tax having not been deposited by deductor/employer in Central Government Account against refund due and payable to deductee/assessee - Permissibility

Petitioner's employer, i.e., KAL, had withheld, towards withholding tax payable on salary, an amount equivalent to Rs. 13,98,901. Record was showing that withholding tax was reflected in Form 16A issued by petitioner's employer, i.e., KAL. It had also come to fore that KAL did not deposit withholding tax and, hence, a demand amounting to Rs. 11,62,580 was raised by respondents/revenue, for assessment year 2012-13. According to petitioner, because of outstanding demand concerning assessment year 2012-13, refund payable to him for assessment year 2015-16 was not paid to him, and instead, set-off against said demand. Hence, this writ petition. Held: Section 205 read with Instruction, dated 1-6-2015, clearly point in direction that deductee/assessee could not be called upon to pay tax, which had been deducted at source from his income. Therefore, petitioner was right inasmuch as neither can demand qua tax withheld by deductor/employer be recovered from him, nor can same amount be adjusted against future refund, if any, payable to him. Thus, for foregoing reasons, notice was quashed holding that respondents/revenue were not entitled in law to adjust tax demand raised for assessment year 2012-13 against any other assessment year. It was ordered accordingly.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13

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