Law:

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2007] 293 ITR 539 [2007] 165 TAXMAN 144 (BOM.) HIGH COURT OF BOMBAY Yashpal Sahni* v. Rekha Hajarnavis, Assistant Commissioner of Income-tax F.I. REBELLO AND J.P. DEVADHAR, JJ. WRIT PETITION NO. 950 OF 2006 JULY 18, 2007 Section 205 of the Income-tax Act, 1961 - Deduction of tax at source - Bar against direct demand on assessee - Assessment year 1996-97 - Whether once it is established that tax has been deducted at source, bar under section 205 comes into operation and revenue is barred from recovering TDS amount once again from employee from whose income TDS amount has been deducted - Held, yes - Whether bar under section 205 operates as soon as it is established that tax has been deducted at source and it is wholly irrelevant as to whether tax deducted at source is paid to credit of Central Government or not and whether TDS certificate in Form No. 16 has been issued or not - Held, yes - Whether fact that revenue is unable to recover tax deducted at source from person who has deducted such tax would not entitle revenue to recover said amount once again from employee-assessee - Held, yes FACTS Respondent No. 6 company appointed the assessee as managing director with effect from 1-4-1996. During the period April to December 1996, respondent No. 6 paid certain amount of salary to the assessee after deducting TDS. Thereafter, dispute arose between the parties and ultimately respondent No. 6 terminated the services of the assessee in March 1997. On 30-9-1997, the assessee filed return of income for the assessment year 1997-98, inter alia, claiming credit of TDS. The return was processed and the Assessing Officer issued intimation under section 143(1)(a) denying credit of the TDS amount. Thereafter, the Assessing Officer raised a demand of TDS along with interest under sections 234A, 234B and 234C. The assessee then wrote various letters to the revenue to recover the TDS amount collected by respondent No. 6 and to compel it to issue TDS certificate in favour of the assessee. Instead of recovering the amount from respondent No. 6, the authorities initiated penalty proceedings under section 221(1) against the assessee and attached the bank account of the assessee for…

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