In the present matter it is seen that TDS has been deducted on “estimated income” of the employee, and the employer was not expected to step into the shoes of the AO and determine the actual income. Furthermore, under Section 191 of the Act the liability to pay the tax was that of the recipient, and that while forming this opinion the employer was undoubtedly expected to act honestly and fairly and, therefore, if it is found that the estimate made by the employer is incorrect, this fact alone, without anything more, would not inevitably lead to the inference that the employer has not acted honestly and fairly as held in the decision of Gwalior Rayon Silk Co. Ltd.(supra).
Unless that inference can be reasonably raised against an employer, no fault can be found against him and it cannot be held that he has not deducted tax on the estimated income of the employee. Further, it is noticed that the AO without application of mind proceeded with the determination of the value of the perquisite based on the survey operations in many other schools without reference to the “cost” of such education in a similar institution in or near the locality. Thus the very basis on which the assessment was finalised is erroneous. Factually, the CIT(A) held that on the basis of the accounts maintained by the Assessee, the cost of education was less than Rs. 1,000/- per month per child and, therefore, the Assessee was also entitled to the benefit of the proviso to Rule3(5) of the Rules, 1962.
