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No coercive action against payee if payer failed to deposit TDS collection with Govt.: HC

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Pushkar Prabhat Chandra Jain v. Union of India - [2019] 103 taxmann.com 106 (Bombay)

The petitioner had sold an immovable property for Rs. 9 crores. The purchasers made a net payment of Rs. 8 crores 91 lakhs to the petitioner after deducting tax at source at 1 per cent of the payment in terms of section 194-IA.The petitioner filed the return of income and claimed credit of TDS of Rs. 10.71 lakhs. 

The Income-tax department noticed that only an amount of Rs. 1.71 lakh was deposited and thus demand of Rs. 10.36 lakhs was raised against the petitioner comprised of the principal tax and interest payable thereon.

The Bombay High Court held that section 205 carries the caption 'Bar against direct demand on assessee'. The section provides that where tax is deducted at the source under the provisions of Chapter XVII, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.

It is always open for the department and in fact the Act contains sufficient provisions, to make coercive recovery of such unpaid tax from the payer whose primary responsibility is to deposit the same with the Government.If the payer after deducting the tax fails to deposit it in the Government account, measures can always be initiated only against such payers.

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