What the courts have decided on section 203, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Manohar Ramabtar Jhunjhunwala v PCIT
High CourtHelps taxpayerValidity unconfirmed
My employer deducted tax but never deposited it, so the credit was denied on processing, a demand now sits on the portal and my later years' refunds are being eaten by it. Do I get the credit and the refund, or only a promise that nobody will recover from me?
You get the credit and the refund, not merely a bar on recovery. A Division Bench of the Bombay High Court, hearing a batch of such petitions with the assistance of an amicus, held that where an assessee establishes that tax was in fact deducted at source, the Department must grant appropriate TDS credit and cannot recover the corresponding amount from the deductee directly or indirectly, that the consequential relief including refund must follow, and that pending disposal of a credit application the demand must be marked in the system as stayed or not recoverable so that no coercive recovery or refund adjustment takes place.
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Court On Its Own Motion v CIT
High CourtHelps taxpayer
CPC has refused my TDS credit and adjusted the refund against an old demand. What did the Delhi High Court actually direct?
Taking up the problem on its own motion, the Delhi High Court issued directions on both limbs. A TDS claim supported by the deductor's certificate is not to be rejected merely because the uploaded information does not tally, and unmatched challans are to be verified and corrected within a fixed time. And s.245 is a two-stage provision: prior intimation of the proposed adjustment, a reply from the assessee, consideration of that reply by the Assessing Officer, an order under s.245, and communication of the outcome. A computerised set-off without that sequence does not comply with the section.
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Yashpal Sahni v Rekha Hajarnavis, ACIT
High CourtHelps taxpayer
My employer deducted TDS from my salary, never paid it to the Government and never gave me a Form 16. The Department is now recovering that tax from me. Can it?
No. The Bombay High Court held that section 205 bars a direct demand on the assessee to the extent tax has been deducted at source, and the bar operates the moment deduction is established. Whether the deductor paid the money over, and whether a Form 16 was issued, are both irrelevant to the bar. The Act gives the Department complete machinery against the deductor - section 201 default, interest, a charge on its assets, penalty under section 221 and prosecution under section 276B - and that is the only route open. Rs 17,89,587 recovered by attaching the employee's bank account was ordered refunded with interest at six per cent.
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CBDT Instruction No. 5/2013 — TDS credit where 26AS does not match
CBDT Circulars & InstructionsHelps taxpayer
Form 26AS does not show my TDS but I hold the deductor's certificate. Must the officer still verify and give me credit?
Yes. Issued to give effect to the Delhi High Court's directions in Court On Its Own Motion v. CIT [2013] 352 ITR 273 (Delhi), the Instruction tells the assessing officer that where the assessee produces the TDS certificate as evidence against a mismatched amount, the officer must verify whether the deductor has paid the tax into the Government account and, if he has, give the credit. The Allahabad High Court has since decided a refund case on the strength of it.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.