The Honourable Mr. Justice R. Mahadevan v. The Joint Commissioner Of Income Tax (Tds), Tds Cell, Range-I

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM: THE HONOURABLE MR. JUSTICE R. MAHADEVAN W.P.Nos.28199 to 28211 of 2015andM.P.Nos.1 of 2015 W.P.No.28199 of 2015Aruna C.Chowatia ...Petitioner -Versus- 1. The Joint Commissioner of Income Tax (TDS), TDS Cell, Range-I, 121, M.G.Road, Nungambakkam, Chennai 600 034. 2. Influence Enterprises (India) Pvt. Ltd., No.3, Blackers Road, 4th Floor, Near Casino Theatre, Anna Salai, Chennai 600 002. 3. The Income Tax Officer, Non Corporate Circle, Ward 4(3), Kannammai Building, 611, Anna Salai, Chennai 600006. ...Respondents Prayer in W.P.No.28199 of 2015:- Writ Petition filed under Article 226 of theConstitution of India for the relief of issuance of Writ ofMandamus directing the 1st respondent to reflect the amountwhich has been deducted by the 2nd respondent while paying therent and treat the 2nd respondent as the defaulter andrecover the dues from them under the provisions of Income TaxAct, 1961 for the years 2011-12, 2012-13 and 2013-14. https://hcservices.ecourts.gov.in/hcservices/ W.P.No.28200 of 2015 Ashok Kumar B.Chowatia ...Petitioner -Versus- 1. The Joint Commissioner of Income Tax (TDS), TDS Cell, Range-I, 121, M.G.Road, Nungambakkam, Chennai 600 034. 2. Influence Enterprises (India) Pvt. Ltd., No.3, Blackers Road, 4th Floor, Near Casino Theatre, Anna Salai, Chennai 600 002. 3. The Income Tax Officer, Non Corporate Circle, Ward 4(1), Kannammai Building, 611, Anna Salai, Chennai 600006. ...Respondents Prayer in W.P.No.28200 of 2015:- Writ Petition filed underArticle 226 of the Constitution of India for the relief ofissuance of Writ of Mandamus directing the 1st respondent toreflect the amount which has been deducted by the 2ndrespondent while paying the rent and treat the 2nd respondentas the defaulter and recover the dues from them under theprovisions of Income Tax Act, 1961 for the years 2011-12,2012-13 and 2013-14. W.P.No.28201 of 2015Babulal L.Shah ...Petitioner -Versus- 1. The Joint Commissioner of Income Tax (TDS), TDS Cell, Range-I, 121, M.G.Road, Nungambakkam, Chennai 600 034. 2. Influence Enterprises (India) Pvt. Ltd., No.3, Blackers Road, 4th Floor, Near Casino Theatre, Anna Salai, Chennai 600 002. 3. The Income Tax Officer, Non Corporate Circle, Ward 5(1), Kannammai Building, 611, Anna Salai, Chennai 600006. ...Respondents Prayer in W.P.No.28201 of 2015:- Writ Petition filed underArticle 226 of the Constitution of India for the relief ofissuance of Writ of Mandamus directing the 1st respondent toreflect the amount which has been deducted by the 2ndrespondent while paying the rent and treat the 2nd respondentas the defaulter and recover the dues from them under theprovisions of Income Tax Act, 1961 for the years 2011-12,2012-13 and 2013-14. W.P.No.28202 of 2015 Chandenben ...Petitioner -Versus- 1. The Joint Commissioner of Income Tax (TDS), TDS Cell, Range-I, 121, M.G.Road, Nungambakkam, Chennai 600 034. 2. Influence Enterprises (India) Pvt. Ltd., No.3, Blackers Road, 4th Floor, Near Casino Theatre, Anna Salai, Chennai 600 002. 3. The Income Tax Officer, Non Corporate Circle, Ward 4(3), Kannammai Building, 611, Anna Salai, Chennai 600006. ...Respondents Prayer in W.P.No.28202 of 2015:- Writ Petition filed underArticle 226 of the Constitution of India for the relief ofissuance of Writ of Mandamus directing the 1st respondent toreflect the amount which has been deducted by the 2ndrespondent while paying the rent and treat the 2nd respondentas the defaulter and recover the dues from them under theprovisions of Income Tax Act, 1961 for the years 2011-12,2012-13 and 2013-14. W.P.No.28203 of 2015 Madanlal B.Chowatia ...Petitioner -Versus- 1. The Joint Commissioner of Income Tax (TDS), TDS Cell, Range-I, 121, M.G.Road, Nungambakkam, Chennai 600 034. 3. The Income Tax Officer, Non Corporate Circle, Ward 4(3), Kannammai Building, 611, Anna Salai, Chennai 600006. ...Respondents Prayer in W.P.No.28202 of 2015:- Writ Petition filed underArticle 226 of the Constitution of India for the relief ofissuance of Writ of Mandamus directing the 1st respondent toreflect the amount which has been deducted by the 2ndrespondent while paying the rent and treat the 2nd respondentas the defaulter and recover the dues from them under theprovisions of Income Tax Act, 1961 for the years 2011-12,2012-13 and 2013-14. W.P.No.28203 of 2015 Madanlal B.Chowatia ...Petitioner -Versus- 1. The Joint Commissioner of Income Tax (TDS), TDS Cell, Range-I, 121, M.G.Road, Nungambakkam, Chennai 600 034. 2. Influence Enterprises (India) Pvt. Ltd., No.3, Blackers Road, 4th Floor, Near Casino Theatre, Anna Salai, Chennai 600 002. 3. The Income Tax Officer, Non Corporate Circle, Ward 5(1), Kannammai Building, 611, Anna Salai, Chennai 600006. ...Respondents Prayer in W.P.No.28203 of 2015:- Writ Petition filed underArticle 226 of the Constitution of India for the relief ofissuance of Writ of Mandamus directing the 1st respondent toreflect the amount which has been deducted by the 2ndrespondent while paying the rent and treat the 2nd respondentas the defaulter and recover the dues from them under theprovisions of Income Tax Act, 1961 for the years 2011-12,2012-13 and 2013-14.W.P.No.28204 of 2015Naina A.Chowatia ...Petitioner ...Petitioner-Versus- 1. The Joint Commissioner of Income Tax (TDS), TDS Cell, Range-I, 121, M.G.Road, Nungambakkam, Chennai 600 034. 2. Influence Enterprises (India) Pvt. Ltd., No.3, Blackers Road, 4th Floor, Near Casino Theatre, Anna Salai, Chennai 600 002. 3. The Income Tax Officer, Non Corporate Circle, Ward 5(2), Kannammai Building, 611, Anna Salai, Chennai 600006. ...Respondents Prayer in W.P.No.28204 of 2015:- Writ Petition filed underArticle 226 of the Constitution of India for the relief ofissuance of Writ of Mandamus directing the 1st respondent toreflect the amount which has been deducted by the 2ndrespondent while paying the rent and treat the 2nd respondentas the defaulter and recover the dues from them under theprovisions of Income Tax Act, 1961 for the years 2011-12,2012-13 and 2013-14. W.P.No.28205 of 2015 Nirmala Bai ...Petitioner -Versus-1. The Joint Commissioner of Income Tax (TDS), TDS Cell, Range-I, 121, M.G.Road, Nungambakkam, Chennai 600 034.2. Influence Enterprises (India) Pvt. Ltd., No.3, Blackers Road, 4th Floor, Near Casino Theatre, Anna Salai, Chennai 600 002.3. The Income Tax Officer, Non Corporate Circle, Ward 5(2), Kannammai Building, 611, Anna Salai, Chennai 600006. ...Respondents Prayer in W.P.No.28205 of 2015:- Writ Petition filed underArticle 226 of the Constitution of India for the relief ofissuance of Writ of Mandamus directing the 1st respondent toreflect the amount which has been deducted by the 2ndrespondent while paying the rent and treat the 2nd respondentas the defaulter and recover the dues from them under theprovisions of Income Tax Act, 1961 for the years 2011-12,2012-13 and 2013-14. COMMON ORDER Seeking for mandamus directing the 1st respondent toreflect the TDS amount, which has been deducted by the 2ndrespondent herein while paying rent, and to treat the 2ndrespondent as the defaulter and also directing the 1strespondent to recover the dues from them under the provisionsof the Income Tax Act, 1961 for the years 2011-12, 2012-13 and2013-14, the respective petitioner have come forward withthese writ petitions. COMMON ORDER Seeking for mandamus directing the 1st respondent toreflect the TDS amount, which has been deducted by the 2ndrespondent herein while paying rent, and to treat the 2ndrespondent as the defaulter and also directing the 1strespondent to recover the dues from them under the provisionsof the Income Tax Act, 1961 for the years 2011-12, 2012-13 and2013-14, the respective petitioner have come forward withthese writ petitions. 3. The issue is related to deduction of TDS by the 2ndrespondent. According to the petitioners, the 2nd respondentdeducted TDS and though necessary details were furnished tothe authority concerned by the petitioners, recoveryproceedings are sought to initiated. Hence, the petitionersare now before this court for appropriate reliefs. 4. The learned counsel appearing for the petitionershas brought to the notice of this court an order passed bythis court in Executors of the Estate of S.Shanmuga Mudaliarv. The Assistant Commissioner of Income tax and another,reported in CDJ 2014 MHC 4040 wherein this court has held asfollows:- indirectly by deduction of tax atsource. In the present case, we areconcerned with the second mode ofrecovery, namely, recovery of tax bydeduction at source. 17. Sec.201 of the Act,inter alia, provides that where acompany bound to deduct tax atsource fails to deduct tax or afterhaving deducted fails to pay thesaid tax to the credit of theCentral Government within thestipulated time, then the Companyshall be deemed to be an assessee indefault in respect of the tax andthe said company shall be liable topay the simple interest at 12 percent per annum on the TDS amountfrom the date on which such tax wasdeductible upto the date on whichsuch tax is actually paid to theCentral Government. Section 201(2)of the Act further provides thattill the TDS amount with interest,as stated above, is paid to theCentral Government, there shall be acharge upon all the assets of thecompany. Moreover, section 221 ofthe Act, inter alia, provides forthe levy of penalty and section 276Bof the Act, inter alia, providesthat where a person fails to pay tothecreditoftheCentralGovernment, the tax deducted atsource, such person shall bepunishablewithrigorousimprisonment for a term which shallnot be less than three months butwhich may extend to seven years andprovides for levy of fine. Thus, theAct provides for complete machineryto recover the tax deducted atsource from the person who hasdeducted it. "18. At this stage, we mayalso note that every persondeducting tax at source is required "18. At this stage, we mayalso note that every persondeducting tax at source is required to issue a certificate undersection 203 of the Act specifyingthe amount of tax deducted, the rateat which the tax has been deductedand such other particulars as may beprescribed. Section 199 of the Actprovides that any tax deducted atsource under the provisions ofChapter XVII and paid to the CentralGovernment shall be treated as apayment of tax on behalf of theperson from whose income thededuction was made and the creditshall be given to him for the amountso deducted on the production of theTDS certificate issued under section203 of the Act. Section 205 of theAct provides that where tax isdeductible at the source underChapter XVII of the Act, theassessee shall not be called upon topay the tax himself to the extent towhich the tax has been deducted.Section 205 of the Act, asit stood at the relevant time, readthus: 205. Bar against directdemand on assessee._ Where tax isdeductible at the source undersections 192 to 194, section 194A,section 194B, section 194BB, section194C, section 194D, section 194E,section 195 and section 196A, theassessee shall not be called upon topay the tax himself to the extent towhich tax has been deducted fromthat income".20.Fromthelanguage of section 205, it is clearthat once the tax is deducted atsource, the same cannot be leviedonce again on the assessee who hassuffered the deduction. Once it isestablishedthat the tax has beendeducted from the salary of theemployee, the bar under section 205of the Act comes into operation andit is immaterial as to whether thetax deducted at source has been paid to the Central Government or not,because elaborate provisions aremade under the Act for recovery oftax deducted at source from theperson who has deducted such tax.18.Followingthisjudgement, a learned Single Judge ofKarnataka High Court in the case of(Smt.AnsuyaAlvavsDeputyCommissioner of Income Tax) reportedin (2005) 278 ITR 206 , interpretingsec.205, has held as follows:"9. I am of the view thatthisunderstandingandsuchinterpretation of Section 205 of theAct is also in consonance with thegeneralprinciplesoflaw,particularly the principles of theLaw of Principal and Agent. If welook at the scheme for the provisionof deduction of tax at source, itbecomes obvious that such person isacting on behalf of the Revenue,i.e.,as an agent of the Revenue. Infact, the person is enabledstatutorily to make deduction andremit the amount to the CentralGovernment, though in the instantcase, the person who has deductedthe amount may be the tenant orlessee of the petitioner and thereis such inter se relationship asbetween the two, insofar as thededuction of tax at sourcerepresenting 20 per cent of themonthly rent payable as envisagedunder Section 194-I of the Act isconcerned, the deduction is underthe statutory obligation and onbehalf of the Revenue and because ofthe compulsion herein. It is not asif the petitioner could prevent suchdeduction. When the person like atenant acts as a representative oragent of the Revenue for suchdeduction and if there is anyviolation on his/her part, theconsequence should fall only on the Revenue and that cannot be foistedon the assessee. It is no doubt truethat the assessee if pays the tax interms of the tax liability, i.e.,under the assessment order and tothe extent of the amount is not paidto the Government remains aliability on the assessee also andcould look upto the tenant torecovertheamountforreimbursement. The question in thelight of the provisions is that,should the assessee be driven tothat plight? I thank that theprovision is to provide a protectionto the assessee and to prevent theRevenue from embarking on therecovery proceedings in respect ofsuch amount. If such being theobject of the provision, it is notpossible to understand the word'deduct' occurring in Section 205 as'deducted and remitted'.10. Even on the generalprinciples of law, the Law ofPrincipal and Agent, as discussedabove, for a default of the agent oftheRevenue,thepetitioner-assessee, who is a third party inrelation to such relationship cannotbe penalised. In the circumstances,I am of the view that the Revenue isto be definitely restrained in termsof Section 205 of the Act fromenforcing any demand on theassessee-petitioner insofar as thedemand with reference to the amountof tax which had been deducted bythe tenant of the assessee in thepresent case,and assuming that thetenant had not remitted the amountto the Central Government. The onlycourse open to the Revenue is torecover the amount from the veryperson who has deducted and not fromthe petitioner." 19. The facts and circumstances ofthe above case is similar to the facts of thepresent case. Therefore, we have nohesitation to hold that the bar under Sec.205of the Income Tax Act prevents the departmentfrom demanding the tax deducted at sourcefrom the assesee who has suffered adeduction. Further more, now the liabilityrestswith theOfficialLiquidator.Therefore, the Department is at liberty toproceed against the company in liquidation inthe hands of the Official liquidator byfiling a claim for the amount in question." 5. There is no dispute that the 2nd respondent was atenant under the petitioners herein. Now, the petitionersclaim that the 2nd respondent vacated the premises long back.It is the specific case of the petitioners that though the 2ndrespondent company effected TDS, it had failed to remit thesame into the account of the Income Tax Department. This is adisputed fact which cannot be resolved in this writ petitionwithout any material and in the absence of the 2nd respondent.Having regard to the fact that the deduction of TDS from theamount payable to the petitioners towards rent as well asremittance of the same were to be made by the 2nd respondent,this court deems it appropriate to direct the respondents 1and 3 to consider the letter/representation of the petitionerin this regard after issuing necessary notice to the 2ndrespondent and to conduct an enquiry and to pass appropriateorders on merits and in accordance with law. The saidexercise shall be completed within a period of four weeks fromthe date of receipt of a copy of this order. 6. The writ petitions are disposed of with the abovedirections. No costs. Consequently, connected MPs are closed.Sd/-Assistant Registrar(CS-IV)//True Copy//Sub Assistant Registrar kmk To 1.The Joint Commissioner of Income Tax (TDS), TDS Cell, Range-I,121, M.G.Road, Nungambakkam, Chennai 600 034. 2.The Income Tax Officer, Non Corporate Circle, Ward 4(3),Kannammai Building, 611, Anna Salai, Chennai 600006. 3 CC to Mr.T.V.Lakshmanan, Advocate SR.No. 56497 1 CC to Mr.T.Pramodkumar Chopda, Advocate SR.No. 55931 Writ PetitionNos.28199 to 28205 of 2015 KM (CO)PSI (28.10.2015)