Employer does not credit TDS to Govt – Can it be recovered again from employee by Income Tax?

Yashpal Sahni vs Rekha Hajarnavis, Assistant ) Commissioner of Income-tax (Bombay HIgh Court)

Equivalent citations: 2007 (109) Bom L R 1537, (2007) 211 CTR Bom 1, 2007 293 ITR 539 Bom, 2007 (4) MhLj 208

The interesting question raised in this petition is, where a company deducts tax at source (TDS) from the salary payable to an employee, but fails to deposit the said amount into the Government treasury, whether, the revenue can recover the TDS amount with interest from the employee concerned in spite of the express bar contained in section 205 of the Income Tax Act, 1961.

On 30th September, 1997 the petitioner filed return of income for A.Y. 1997-98 inter alia claiming credit of TDS amounting to Rs.6,66,000/ -.

The return of income was processed and on 29th March, 2000 the assessing officer issued an intimation under section 143(1) (a) of the of the Income Tax Act, 1961 (‘the Act’ for short) denying credit of the TDS amount of Rs.6,66,000/ – and after imposing interest under section 234A, 234B and 234C of the Act raised a demand of Rs.12,73,940/ -.

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