S.245 IT Act | TDS Deducted By Employer Can't Be Adjusted Against Assessee's Future Refund: Delhi High Court

The Delhi High Court recently granted relief to Satwant Singh Sanghera, a pilot formerly employed with the now collapsed Kingfisher Airlines, against tax demand of over Rs 11 lakh.

Singh contended that he had duly filed his income tax returns for the Assessment Years in question and the company had deducted TDS from his salary. The same was reflected in Form 16A issued by the company.

He contended that the amount was not deposited with the government due to the default of the company and he is not liable to pay tax which was already deducted from his remuneration.

Singh relied on Section 205 of the Income Tax Act, 1961 which bars direct demand on assessee to the extent to which tax has been deducted from his income.

The Assistant Commissioner of Income Tax on the other hand had issued an intimation to the Petitioner under Section 245 of the Income Tax Act.

The provision empowers the Income Tax Department to adjust any outstanding demand from a previous assessment year against the current year's refund. This adjustment occurs when the taxpayer has an unpaid tax liability from a prior year and a refund available in the current year.

The High Court bench of Justices Vibhu Bakru and Swarna Kanta Sharma observed that the issue before it is covered by an earlier decision of the Coordinate Bench in Sanjay Sudan v. The Assistant Commissioner of Income Tax & Another (2023).

It was held therein that neither can the demand qua the tax withheld by the deductor/employer be recovered from him, nor can the same amount be adjusted against the future refund, if any, payable to him.

The High Court also cited instruction dated 01.06.2015 issued by CBDT, clarifying that the deductee/assessee cannot be called upon to pay tax, which has been deducted at source from his income.

Accordingly, the High Court set aside the demand notices and directed Revenue to refund the amounts due to Singh.

Appearance: Advocate Archit Arora for Petitioner; Senior Standing Counsel Shlok Chandra with Junior Standing Counsel Naincy Jain and Madhavi Shukla, and Advocate Sushant Pandey for Revenue

Case title: Satwant Singh Sanghera v. Assistant Commissioner of Income Tax

Citation: 2024 LiveLaw (Del) 1162

Case no.: W.P.(C) 13765/2024

Click Here To Read/Download Order