Aslam Checkar Vs ITO (Bombay High Court)
Section 205 Absolutely Bars Tax Recovery from Employees Where TDS Is Deducted but Not Deposited by Employer-Bombay High Court:
The Bombay High Court, in Aslam Checkar v. Income Tax Officer & Ors., allowed a batch of writ petitions filed by employees whose employer had deducted TDS from salaries but failed to deposit the same with the Government. The petitioners were subjected to income-tax demands solely on account of such non-deposit by the employer.
Interpreting Section 205 of the Income-tax Act, the Court held that the statutory bar against recovery from the assessee is absolute once deduction of tax at source is established. The Court emphasized that the liability to deposit TDS squarely rests on the employer, and any default by the employer cannot be shifted onto the employee, who has no control over remittance after deduction from salary.
The Court relied on the object and purpose of Section 205, observing that forcing employees to pay tax again would amount to impermissible double recovery in substance. It also placed reliance on CBDT Office Memorandum dated 11.03.2016, which expressly directs field officers not to enforce demands against deductee-assessees where tax has been deducted but not deposited by the deductor.
Accordingly, the impugned demand notices were quashed as being in direct breach of Section 205. However, the Court clarified that it was not adjudicating any other tax liability of the petitioners and left open the issue of grant of TDS credit to be pursued in appropriate proceedings. The ruling firmly aligns with the Delhi High Court’s pro-assessee jurisprudence, and stands in sharp contrast to the later Kerala High Court view, deepening the judicial divide on the scope of Section 205
Author’s Comments:
The Bombay High Court’s ruling in Aslam Checkar is fully aligned with the Delhi High Court’s pro-assessee jurisprudence, which treats Section 205 as an absolute statutory shield once deduction of tax from salary is established, regardless of the employer’s subsequent default. Both courts emphasise employee helplessness, loss of control over deducted income, and the legislative intent that the Revenue must pursue the defaulting deductor alone. In contrast, the Kerala High Court in Sharat V. S.Vs CIT-(WA NO. 2142/2025-decsion dt 5.1.2026) has consciously taken a divergent path, holding—after expressly considering the Delhi line of cases—that Section 205 operates only when TDS is actually deposited, by reading it inseparably with Section 199. This sharp divergence highlights a fundamental interpretative conflict between equity-driven employee protection (Delhi–Bombay view) and textual statutory coherence (Kerala view), making Section 205 one of the clearest examples of a live High Court split now awaiting authoritative resolution by the Supreme Court.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. These are batch of petitions wherein the petitioners have prayed for similar substantive reliefs namely praying that the impugned demand issued to the petitioners by respondent No.1, which is stated to be on account of non-deposit of the TDS amounts by respondent No.2 (petitioners’ employer) be quashed and set aside. For convenience, we note the prayers as made in the first petition [Writ Petition (L) No.2442 of 2024; Aslam Checkar Vs. Income Tax Officer & Ors.] which read thus:-
a) Issue a writ of certiorari thereby calling for the record of proceedings culminating into issuance of the Impugned Demand dated 12 January 2021 (Exhibit C to the Petition) after examining the legality, validity and propriety thereof, the Impugned Demands be quashed and set aside;
2. The case of the petitioners is that they were employees of respondent No.2 for the period which is set out in each of the petition. They were being paid monthly emoluments / salary, after deduction of TDS (taxes at source) by respondent No.2, as clearly seen from the pay slips issued to the petitioners by respondent No.2, for the respective period (A.Y.) as set out in each of these notices. It is the case of the petitioners that since the year 2019, respondent No.2 was involved in criminal proceedings initiated against it by the Enforcement Directorate (ED), in regard to the financial crimes. It is stated that also there was an investigation undertaken by SEBI on investors grievances in relation to violation of the securities law. It is stated that during the course of such investigation, the directors of respondent No.2 as also some senior officers of respondent No.2 were arrested. It is stated that as a consequence of these irregularities, there were defaults on the part of respondent No.2 in the payment of petitioners’ salary. Some of the employees did not at all receive their salaries while some others received delayed payments. It is stated that some of the petitioners have not received salary from the month of April 2020 till filing of the petitions in January, 2024. It is further stated that there are also other defaults of respondent No.2 in statutory payments like provident fund etc. In such circumstances, the petitioners concerned with their survival were constrained to leave respondent No.2’s employment. At such point of time, there were substantial dues payable to the petitioners including salary for the period prior to petitioners’ leaving the services of respondent No.2.
