Employee Can’t Be Penalised For Non-Deposit Of TDS By Employer: Delhi High Court

The Delhi High Court has held that the employer of the petitioner or assessee, having failed to perform his duty to deposit the deducted tax with the department, cannot be penalized. It would always be open for revenue to proceed against the employer of the petitioner for recovery of the deducted tax.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the petitioner, having accepted the salary after deduction of income tax at source, had no further control over it in the sense that it was the duty of his employer acting as tax collecting agent of the revenue under Chapter XVII of the Income Tax Act to pay the deducted tax amount to the Central Government in accordance with law.

From April 16, 2008, the petitioner was employed with Kingfisher Airlines Limited as an airline pilot at the rank of captain.

The respondents and department raised multiple demands for outstanding income tax and interest pertaining to Assessment Years 2009–10, 2011–12, and 2012–13. The petitioner was being paid salary after the deduction of income tax at source, but his employer, namely Kingfisher Airlines Limited, did not deposit it with the revenue. Despite repeated communications from the petitioner, the demands were not withdrawn by the respondents, so the petitioner filed the writ petition.

The issue raised was whether any recovery towards the outstanding tax demand could be affected against the petitioner when the tax payable on his salary was being regularly deducted at source by his employer, namely Kingfisher Airlines Ltd., who did not deposit the deducted tax with the department.

The assessee contended that it had accepted the salary after the deduction of income tax at source and had no further control over it in the sense that thereafter it was the duty of his employer, acting as a tax collecting agent of the revenue under Chapter XVII of the Act, to pay the deducted tax amount to the Central Government in accordance with law. The employer of the petitioner, having failed to perform his duty to deposit the deducted tax with the revenue, cannot be penalized. It would always be open for the department to proceed against the employer of the petitioner for the recovery of the deducted tax.

The court quashes intimations and communications issued by the respondent under Section 143, raising demands of tax and interest against the petitioner and consequently restraining the respondents from carrying out any recovery proceedings pertaining to the said intimations and communications.

The court directed the respondents or assessee to refund the petitioner within four weeks of receiving the order, which was wrongly adjusted by the respondents against the demands. However, it was clarified that in case the petitioner is able to obtain any amount of money towards tax deducted from his income at source from his employer, it shall be deposited by him with the department forthwith.

Counsel For Petitioner: Puneet Agarwal

Counsel For Respondent: Ruchir Bhatia

Case Title: Shri Chintan Bindra Versus DCIT

Citation: 2023 LiveLaw (Del) 1203

Case No.: W.P.(C) 2164/2022 & CM APPL. 6192/2022

Click Here To Read The Order