TMI Blog1986 (3) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... imitation ? 4. Whether, on the facts and in the circumstances of the case, and also considering the scope and purport of the judgment of the High Court in the earlier reference, Kannan Devan Hill Produce Co. Ltd. v. CIT [1986] 161 ITR 489 (Ker) (ITR No. 239 of 1979), the Tribunal (Bench) was right, justified and with jurisdiction in going into and deciding the questions of 'exemption' and 'limitation' contrary to the view of the earlier Tribunal (Bench)? " The assessee-company (which will be referred to in this judgment as "the company ") owning tea estates had employed A. J. McLean (hereinafter referred to as " the employee ") as manager of one of the estates. The employee was paid Rs. 8,112 during the accounting year 1970-71 relevant to the assessment year 1971-72, being passage money for the journey of his two children from the U.K. to India and back. The employee filed his return on July 7, 1971, disclosing his net salary income but without including the sum of Rs. 8,112. However, he mentioned the receipt of this amount in the statement appended to the return. The Income-tax Officer completed the assessment on the employee on December 22, 1971, accepting the return and trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f in ITR No. 239 of 1979 [Kannan Devan Hill Produce Co. Ltd. v. CIT [1986] 161 ITR 489 (Ker)]. The questions were whether the company should have deducted tax on the amount in dispute at source and whether the order passed by the Income-tax Officer was barred by limitation. Pointing out that the statutory authorities failed to decide the jurisdictional question, viz., whether in law, the Department was entitled to proceed against the employer under section 201 of the Act by going behind the order of assessment and treating the sum of Rs. 8,112 paid to the employee as not exempt from taxation despite the fact that in the assessment order made against the employee the said amount was treated as not includible in the taxable income of the assessee, this court remitted the case to the Tribunal for fresh disposal in accordance with law and in the light of the observations in the judgment. Thereupon, the Tribunal considered the matter once again and by the judgment dated March 28, 1981, held that the Income-tax Officer had no jurisdiction to invoke section 201 of the Act against the company since the assessment against the employee was completed and the same had become final and could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndividual, (a) from his employer, for himself, his spouse and children, in connection with his proceeding on home leave out of India. " Evidently, both the employee and the company proceeded on the basis that the passage money of Rs. 8,112 was paid to the employee towards passage of the employee's children from the U.K. to India and back as part of passage money received by the employee in connection with his proceeding on home leave out of India. Therefore, the employer, while deducting tax at source at the time of paying salary and perquisites to the employee, did not include this amount in the taxable income and did not deduct tax thereon. Chapter II of the Act deals with " basis of charge ". Section 4 explains charge of income-tax. Sub-section (2) of this section states that in respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or Paid in advance, where it is so deductible or payable under any provision of the Act. Chapter XIV of the Act deals with " procedure for assessment ". Section 139 requires, among other things, every person whose total income in respect of which he is assessable under the Act during the previous year, exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, that if any such person does not deduct or after deducting fails to pay the tax as required by or under the Act, he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax. The sub-section has a proviso which is not very material for the purpose of this case. Under sub-section (1A), the person who is deemed to be an assessee in default in respect of the tax, by virtue of sub-section (1), shall be liable to pay simple interest at fifteen per cent. per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Section 203 requires the person so deducting and paying to issue certificate containing necessary particulars to the person on whose account such credit is given. Section 206 requires the person paying salary to furnish the prescribed return. We may, in this connection, notice section 276B which states, inter alia, that if a person, without reasonable cause or excuse, fails to deduct or after deducting, fails to pay the tax as required by or under the provisions of Chapter XVII-B, he shall be punishable in the manner provided in cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sections is only mode of recovery of tax on the estimated income at the time of payment of salary to the employee. The obvious purpose of the scheme is to facilitate recovery of tax under the Act. Nevertheless, income-tax is a tax on the income derived by the employee. It is a charge on the income. The liability of the person who derives income subsists in spite of the liability cast on the employer to deduct tax at source and pay over the same to the Revenue. What is to be deducted at source and paid over to the Revenue is tax computed on the estimated income. Income estimated may or may not, ultimately, in the assessment to be made in regard to the employee, be found to be correct. It is for the employee to submit an annual return showing his total income for the purpose of taxation and the Department has a duty to complete the assessment, with statutory rights provided in the Act to the employee. The regular assessment may be preceded by a provisional assessment. In either event, the tax deducted at the source and paid over to the Revenue is to be given credit to in the tax liability fixed on the employee for the assessment year. If the tax deducted at source and paid over t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be liable to pay the deficit with simple interest at 15 per cent. per annum not from the date on which the tax was deductible but only from the day commencing after the end of the period mentioned in sub-section (1) of section 220, that is, the expiry of 35 days of the service of demand notice under section 156, which notice could be served only after completing the assessment. This would lead to absurd results. If the view is taken that the employer is deemed to be an assessee in default even though the assessment on the employee has become final, it would naturally follow that the employer would be under, a, duty to pay over the deficit to the Department, failing which the Department would be entitled to recover the same in the manner provided in the Act. Assuming that the deficit tax is so collected from the employer by the Revenue, the amount so collected would go to the credit of the employee. But the assessment made on the employee showing that no further tax was due from him having become final, the employee has no liability in regard to any further amount. Naturally, the alleged deficit amount collected from the employer must be refunded to the employee. We do not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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