If we look at the scheme for the provision of deduction of tax at source, it becomes obvious that such person is acting on behalf of the Revenue, i.e.,as an agent of the Revenue. In fact, the person is enabled statutorily to make deduction and remit the amount to the Central Government, though in the instant case, the person who has deducted the amount may be the tenant or lessee of the petitioner and there is such inter se relationship as between the two, insofar as the deduction of tax at source representing 20 per cent of the monthly rent payable as envisaged under Section 194-I of the Act is concerned, the deduction is under the statutory obligation and on behalf of the Revenue and because of the compulsion herein. It is not as if the petitioner could prevent such deduction. When the person like a tenant acts as a representative or agent of the Revenue for such deduction and if there is any violation on his/her part, the consequence should fall only on the Revenue and that cannot be foisted on the assessee. It is no doubt true that the assessee if pays the tax in terms of the tax liability, i.e., under the assessment order and to the extent of the amount is not paid to the Government remains a liability on the assessee also and could look upto the tenant to recover the amount for reimbursement. The question in the light of the provisions is that, should the assessee be driven to that plight? I thank that the provision is to provide a protection to the assessee and to prevent the Revenue from embarking on the recovery proceedings in respect of such amount. If such being the object of the provision, it is not possible to understand the word ‘deduct’ occurring in Section 205 as ‘deducted and remitted’.
Even on the general principles of law, the Law of Principal and Agent, as discussed above, for a default of the agent of the Revenue, the petitioner-assessee, who is a third party in relation to such relationship cannot be penalised. In the circumstances, I am of the view that the Revenue is to be definitely restrained in terms of Section 205 of the Act from enforcing any demand on the assessee-petitioner insofar as the demand with reference to the amount of tax which had been deducted by the tenant of the assessee in the present case, and assuming that the tenant had not remitted the amount to the Central Government. The only course open to the Revenue is to recover the amount from the very person who has deducted and not from the petitioner.
Karnataka High Court
Smt. Anusuya Alva
vs
Deputy Commissioner Of Income Tax
Date- on 9 June, 2005
Equivalent citations: (2005) 197 CTR Kar 37,
278 ITR 206 KAR 2005
278 ITR 206 Karn 2005
Author: D S Kumar
Bench: D S Kumar
ORDER
1. Petitioner is an assessee under the IT Act, 1961 (for short, the Act). This is a peculiar case where the petitioner-assessee is challenging the enforcement of demand made at Annex.-H dt. 5th Dec., 2002, wherein it is indicated that on verification of the records by the authorities under the Act, it was found that income-tax arrears was due from the petitioner for the period as indicated therein, and the petitioner-assessee was called upon to make payment of the amount within 10 days from the date of receipt of the notice, failing which coercive recovery proceedings would be initiated against the petitioner. The amounts mentioned in Annex.-H are as follows :
