Orissa High Court

Afr Malay Kar vs Union Of India & Ors. ..... Opp. Parties on 3 May, 2024

Author: B.R.Sarangi

Bench: B.R.Sarangi

                    ORISSA HIGH COURT: CUTTACK
                         W.P(C) NO.12361 OF 2015

        In the matter of an application under Articles 226 and
        227 of the Constitution of India.
                               ---------------

AFR     Malay Kar                    .....              Petitioner

                                   -Versus-

        Union of India & Ors.        .....           Opp. Parties


            For petitioner    : Mr. R.P. Kar, Sr. Advocate along
                                with M/s. A.K. Dash and S.S.
                                Mohapatra, Advocates

            For opp. Parties : Mr. S.C. Mohanty,
                              Sr. Standing Counsel,
                               Income Tax Department
                               [O.Ps. No.1-5]


        P R E S E N T:

THE HONOURABLE DR. JUSTICE B.R.SARANGI AND THE HONOURABLE MR. JUSTICE G. SATAPATHY

DECIDED ON : 03.05.2024

DR. B.R. SARANGI,J. The petitioner, by means of this writ

petition, challenges inaction of opposite party no.4 in

granting credit of the tax deducted at source amounting

to Rs.2,68,733/- under Section 143(1)(c) of the Income

Tax Act, 1961 for the assessment year 2013-14.

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2. The factual matrix of the case, in brief, is that

the petitioner, being a salaried employee, is an assessee

under the Income Tax Act, 1961 (for short "I.T. Act"). He

had been filing his return of income with opposite party

no.4 regularly. For the assessment year 2013-14, vide

acknowledgement no. 682834840260713 dated

26.07.2013, he filed the return of income electronically.

During the period April, 2012 till October, 2012, the

petitioner was employed under opposite party no.6-M/s.

Corporate Ispat alloys Ltd. and received gross salary of

Rs.25,39,766/-, out of which a sum of Rs.5,90,112/-

was deducted as tax at source under Section 192 of the

I.T. Act. Upon repeated request, opposite party no.6 did

not issue Form 16 for the assessment year 2013-14.

2.1. Form 26AS drawn from the Income Tax

Department's website reflects a sum of Rs.3,21,379/-

was deducted and deposited by opposite party no.6.

There was a difference of Rs.2,68,733/- in between the

tax deducted by opposite party no.6 and the amount

reflected in Form 26AS. Upon processing of the return of

income, opposite party no.4 issued intimation under

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Section 143(1) of the I.T. Act on 26.07.2014 without

taking into account TDS of Rs.2,68,733/- deducted by

opposite party no.6 and while issuing such intimation,

he also charged interest under Section 234B and 234C

of the I.T. Act amounting to Rs.55,417/- for shortfall in

payment of prepaid taxes.

2.2. Upon receipt of the intimation from opposite

party no.4, the petitioner sent letter dated 05.08.2014

addressing to the Managing Director, M/s. Corporate

Ispat Alloys Ltd.-opposite party no.6 for mis-match of

tax deducted under Section 192 of the I.T. Act.

Thereafter, he also sent letter dated 12.08.2014 to the

Commissioner of Income Tax (TDS), Patna for initiation

of appropriate action against the deductor/employer,

i.e., opposite party no.6.

2.3. As per the provision contained in Section

143(1)(c) of the I.T. Act, opposite party no.4 is under

legal obligation to take into account the tax deducted at

source, tax collected at source, advance tax, etc. In spite

of communication being made to the Commissioner of

Income Tax (TDS), Patna on 12.08.2014, the petitioner

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did not receive any communication with regard to the

steps taken by the very same authority. Therefore, there

was inaction by opposite party no.4 in granting credit of

tax amounting to Rs.2,68,733/- deducted at source by

the deductor/employer during the assessment year

2013-14 along with interest of Rs.55,417/- levied under

Section 234B and 234C of the I.T. Act in total

determined the amount of Rs.3,24,150/- under Section

143(1)(c) of the I.T. Act. Hence, this writ petition.

3. Mr. R.P. Kar, learned Senior Counsel

appearing along with Mr. A.K. Dash, learned counsel for

the petitioner vehemently contended that since the tax

has been deducted at source by the deductor-opposite

party no.6 under Section 192 of the I.T. Act during the

assessment year 2013-14, so far as petitioner is

concerned in PAN-AHNPK0207H for the period from

April 2012 to October 2012, a total amount of Rs.

5,90,112/-, the petitioner is entitled to get credit of tax

deducted at source of the entire amount. He has also

made reference to the salary statement, wherein the

income tax deduction has been shown at source

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containing at page-12 to 18 of the brief. Therefore, the

tax having been deducted at source by the deductor,

obligation casts on the deductor to transmit the amount

to the Income Tax authority as against gross salary of

25,39,766/-. It is further contended that on the basis of

Form 26AS, drawn from the Income Tax Department

website, it is seen that Rs.3,21,379/- was deducted and

deposited by the deductor-opposite party no.6. Thereby,

there is difference of Rs.2,68,733/- in between the tax

deducted by opposite party no.6 and the amount

reflected in Form 26AS. It is contended that even if tax

has been deducted at source by the deductor and a part

of the amount has not been transmitted to the Income

Tax Department, the petitioner is not held responsible

for that. For inaction of the deductor in transmitting the

amount, the assessee has been put to difficulty by not

giving credit of tax deducted amounting to Rs.2,68,733/-

which also carries interest of Rs.55,417/- under Section

234B and 234C of the I.T. Act for shortfall of prepaid

taxes. It is further contended that Section 205 of the I.T.

Act specifically provides bar against direct demand on

assessee and the same has been clarified by the Central

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Board of Direct Taxes (CBDT), vide circular dated

01.06.2015, and in the office memorandum issued on

11.03.2015. Therefore, necessary compliance has to be

made thereof and without doing so, demand raised

under Annexure-4 amounting to Rs.3,24,149 for the

assessment year 2013-14 cannot be sustained in the eye

of law. To substantiate his contentions, he has relied

upon Rakesh Kumar Gupta v. Union of India, (2015)

276 CTR (All) 379 : (2014) 365 ITR 143 (All); Kartik

Vijaysinh Sonavane v. Deputy Commissioner of

Income Tax, Circle-8, (2021) 132 taxmann.com 293

(Gujarat) : (2022) 440 ITR 11 (Gujarat) and Milan

Arvindbhai Patel v. Assistant Commissioner of

Income Tax, (2023) 149 taxmann. Com 190 (Gujarat).

4. Mr. S.C. Mohanty, learned Senior Standing

Counsel appearing for the Income Tax Department

vehemently contended that the petitioner-assessee filed

his return for the assessment year 2013-14 in ITR-1,

vide acknowledgement number. 682834840260713

dated 26.07.2013 with total assessed income of

Rs.59,75,009/- and total tax and interest payable of Rs.

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16,57,158/-. The assessee has claimed TDS of Rs.

13,12,938/- and Self Assessment Tax of Rs.3,44,226/-

as taxes paid in his return of income. The return of the

assessee for the assessment year 2013-14 was processed

under Section 143(1) of the I.T. Act on 26.07.2014

raising a demand of Rs.3,24,150/- which includes

interest under Section 234B and 234C of the Act owing

to TDS mismatch of Rs. 2,68,733/- from the deductor-

M/s Corporate Ispat Alloys Limited (TAN-

RCHCO1143C). On verification of the documents, it is

found that the petitioner was employed under the

deductor-M/s Corporate Ispat Alloys Limited during the

Finance Year 2012-13. The assessee received gross

salary of Rs.25,39,766/- from the deductor during the

period under consideration, out of which a sum of

Rs.5,90,112/- was deducted at source as income tax

under Section 192 of the I.T. Act. However, only TDS of

Rs.3,21,379/- is getting reflected in the Form 26AS of

the assessee for assessment year 2013-14 out of total

TDS claim of Rs.5,90,112/- in respect of the TAN-

RCHC01143C of the deductor-M/s Corporate Ispat

Alloys Limited. This has resulted in TDS mismatch of

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Rs.2,68,733/- and the demand of Rs.3,24,150/-

thereon. It is further contended that as per provisions

contained in Section 200 of the I.T. Act, it is the duty of

the person deducting tax to pay within the prescribed

time period to the credit of the Central Government or as

the Board directs. As such, the liability of depositing the

tax deducted from the salary of the employee within

prescribed time period squarely lies with the deductor (in

the instant case, M/s Corporate Ispat Alloys Limited).

Therefore, it is clearly evident that there is failure on the

part of M/s Corporate Ispat Private Ltd. to deposit the

entire TDS of Rs.5,90,112/- deducted from the salary of

the petitioner for the Financial Year 2012-13. It is

further contended that the deductor upon failure to pay

to the credit of Central Government, the tax so deducted

is the jurisdictional Assessing Officer (TDS). In the

instant case, the deductor, who failed to pay to the

Central Government the tax deducted amounting to

Rs.2,68,733/- is M/s Corporate Ispat Alloys Limited. It

is further contended that on verification from the

database, the jurisdictional Assessing Officer (TDS) of

the defaulting deductor is DCIT/ACIT, TDS Circle,

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Ranchi. Therefore, the grievance made by the petitioner

under Annexure-6 has to be taken into consideration by

the very same authority at Ranchi and, more so, it is

contended that the issue has been intimated to the

DCIT/ACIT, TDS Circle, Ranchi with copy to the CIT

(TDS), Patna, vide office letter no.5856 dated

15.02.2023, to take appropriate action in the instant

case. It is further contended that though counter

affidavit has been filed, what steps have been taken by

the CIT (TDS), Patna, learned Senior Standing Counsel

appearing for the Income Tax Department has not

received any instructions, although in the meantime

more than one year has elapsed.

5. This Court heard Mr. R.P. Kar, learned Senior

Counsel along with Mr. A.K. Dash, learned counsel

appearing for the petitioner and Mr. S.C. Mohanty,

learned Senior Standing Counsel appearing for the

Income Tax Department in hybrid mode. Pleadings have

been exchanged between the parties and with the

consent of learned counsel appearing for the parties, the

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writ petition is being disposed of finally at the stage of

admission.

6. On the basis of the factual matrix, as

discussed above, the only consideration is left to be

decided with regard to difficulty faced by the assessee

(tax payer) relating to the credit of tax deducted at

source (TDS) which has been paid by the deductor. But,

a part of the same has been transmitted to the Central

Government, whereas a part of the same has not been

transmitted by the deductor. Therefore, the Court found

that a less percentage of the cases where the asessee is

entitled to be given to the credit of TDS which has been

deducted by the deductor, but has not been given credit

by income tax on account of the fact that TDS has not

been reflected in Form 26AS for various reasons.

Obviously, there are different grounds and one of such

grounds is that where the deductor failed to upload the

true particulars of TDS, which has been deducted, as a

result of which, the assessee was not given credit of tax

paid. It has also been brought to the notice of this Court

that there are cases where the details uploaded by the

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deductor and the details furnished by the assessee in

income tax returns were mismatched, on that count

credit was not given to the assessee. Due to such

mismatch, the assessee is required to approach the

Income Tax authority for rectification of their earlier

intimation and based on the character entries and pray

for refund of TDS, but the same is not attended to,

which has happened in the present case. It has been

brought to the notice of this Court by the Department

that these problems are apparent, real and enormous

and has escalated because of centralized

computerization and problem associate with

incorrect/wrong data which was uploaded by the tax

deductor. Therefore, the issue of not giving credit of the

TDS deducted by the deductor is one of the general

governance, failure of administration, fairness and

arbitrariness.

7. While entertaining this writ petition, this

Court directed the learned counsel for the Income Tax

Department to file affidavit as to what step has been

initiated against the employer for non-depositing of the

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tax collected and deducted at source from the salary of

the petitioner. In compliance thereof, the Department

has not filed affidavit. However, on 15.12.2022 this

Court protected the interest of the petitioner by passing

interim order to the following effect:

"Till the next date of hearing, no coercive steps shall be taken against the petitioner."

8. Section 205 of the Income Tax Act reads as

follows:-

"205. Where tax is deductible at the source under [the foregoing provisions of this Chapter], the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income."

In view of the aforementioned provision, it is made clear

that the assessee shall not be called upon to pay the tax

himself to the extent to which tax has been deducted

from that income.

9. There is no dispute before this Court that tax

has not been deducted by the deductor at source of the

assessee. To mitigate such situation, the CBDT, vide

clause-2 of its circular dated 01.06.2015, envisaged as

follows:

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"2. As per Section 199 of the Act credit of Tax Deducted at Source given to the person only if it is paid to the Central government Account.

However, as Section 205 of the Act the assessee shall not be called upon to pay the tax to the extent tax has been deducted from his income where the tax is deductible at source under the provision of Chapter -XVII. Thus the Act puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch cannot be enforced coercively."

10. Referring to such circular dated 01.06.2015,

the CBDT also issued office memorandum on

11.03.2016, paragraph-3 whereof reads as follows:

"3. In view of the above, the Board hereby reiterated the instructions contained in its letter dated 1-6-2015 and directs the assessing officers not to enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor. These instructions may be brought to the notice of all assessing officers in your Region for compliance."

Needless to say both the circular and the office

memorandum have been issued in consonance with the

provisions contained in Section 205 of the I.T. Act. In the

office memorandum dated 11.03.2016, it has been

mentioned that the Board had issued directions to the

field officers that in case of an assessee whose tax has

been deducted at source but not deposited to the

Government's account by the deductor, the deductee

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assessee shall not be called upon to pay the demand to

the extent tax has been deducted from his income. It

was further specified that Section 205 of the I.T. Act

puts a bar on direct demand against the assessee in

such cases and the demand on account of tax credit

mismatch in such situations cannot be enforced

coercively.

11. In Taylor v. Taylor, (1876) 1 Ch D 426, it

was laid down that where a power is given to do a

certain thing in a certain way the thing must be done in

that way or not at all. Other methods of performance are

necessarily forbidden. This doctrine has often been

applied to Courts.

Lord Roche in Nazir Ahmad v. King

Emperor, AIR 1936 PC 253 followed the aforesaid

principle. Subsequently, the said principle has been well

recognized by the apex Court and is holding the field till

today, as would be evident from State of Uttar Pradesh

v. Singhara Singh, AIR 1964 SC 358; Chandra

Kishore Jha v. Mahabir Prasad, AIR 1999 SC 3558,

Babu Verghese v. Bar Council of Kerala, (1999) 3 SCC

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422; Dhananjay Reddy v. State of Karnataka, AIR

2001 SC 1512; Gujurat Urja Vikas Nigam Ltd. v.

Essar Power Ltd., AIR 2008 SC 1921; Ram Deen

Maurya v. State of U.P., (2009) 6 SCC 735 and Zuari

Cement Limited v. Regional Director, Employes'

State Insurance Corporation, Hyderabad and others,

(2015) 7 SCC 690. The said principle has also been

referred by this Court in the case of Subash Chandra

Nayak v. Union of India, 2016 (I) OLR 922; Rudra

Prasad Sarangi v. State of Orissa, 2021 (I) OLR 844;

Bamadev Sahoo v. State of Orissa, 132 (2021) CLT

927: 2021 (Supp.) OLR 674; and Raj Kishor Deo v.

State of Odisha, 2022 (II) OLR 415.

12. Section 205 of the I.T. Act read with CBDT

circular, referred to above, being statutory one, the said

provision has to be adhered to in letter and spirit and to

give effect to such provision, CBDT circular was issued

on 01.06.2015 and the office memorandum was issued

on 11.03.2016. Therefore, for tax credit mismatch

cannot be enforced coercively against the petitioner-

assessee.

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13. In Rakesh Kumar Gupta (supra), the High

Court of Allahabad held in paragraphs-12, 14 and 15 as

follows:

"12. The petitioner has suffered a tax deduction at source but has not been given due credit in spite of the fact that he has been issued a TDS certificate by a Government department. There is a presumption that the deductor has deposited the TDS amount in the Government account especially when the deductor is a Government department. By denying the benefit of TDS to the petitioner because of the fault of the deductor causes not only harassment and inconvenience but also makes the assessee feel cheated. There is no fault on the part of the petitioner. The fault, if any, lay with the deductor. In the instant case, nothing had been indicated that the fault lay with the petitioner in furnishing false details.

Xxx xxx xxx

14. Further, section 243 relates to payment of interest on delayed refund. For facility, the said provision is extracted hereunder:

243(1) If the Assessing Officer does not grant the refund,--

(a) In any case where the total income of the assessee does not consist solely of income from interest on securities or dividends, within three months from the end of the month in which the total income is determined under this Act, and

(b) In any other case, within three months from the end of the month in which the claim for refund is made under this Chapter, the Central Government shall pay the assessee simple interest at fifteen percent per annum on the amount directed to be refunded from the date immediately following the expiry of

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the period of three month aforesaid to the date of the order granting the refund.

Explanation:-If the delay in granting the refund within the period of the three months aforesaid is attributed to the assessee, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which interest is payable.

2) Where any question arises as to the period to be excluded for the purposes of calculation of interest under the provisions of this section, such question shall be determined by the Chief Commissioner or Commissioner whose decision shall be final.

3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment years.

15. In the light of the aforesaid, we find from the perusal of the counter-affidavit, the respondents have denied refunding the TDS on the ground that the refund that would only be granted when the TDS matches with the details mentioned in Form 26AS. Since the mismatching is not attributable to the assessee and the fault solely lay with the deductor, we find that a case has been made out for grant of a mandamus for refund of the TDS amount. The petitioner has also made out a case for payment of interest since we find that the delay in refunding the amount was attributable solely with the Income-Tax Department and there is no fault on the part of the assessee."

Thereby, writ of mandamus was issued commanding the

opposite party to refund an amount of Rs.1,88,631/-

along with interest as per the law within a period of

three weeks from the date of the production of a certified

copy of the order.

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14. Similarly, in Kartik Vijaysinh Sonavane and

Milan Arvindbhai Patel (Supra), Gujarat High Court

came to a conclusion that the employer, which had

deducted tax at source from the salary of its employee-

assessee but had not deposited the amount to the

Central Government's account, the assessing officer