1. This appeal by the assessee is directed against the order of the Appellate Assistant Commissioner of Income-tax T-Range, New Delhi, dated 6-11-1985 relating to assessment year 1984-85. The grievance of the assessee is that on the facts and in the circumstances of the case and in accordance with the provisions of law there was no justification in creating a liability of Rs. 4,944 against the assessee under Section 201(1) of the Income-tax Act, 1961. This grievance of the assessee arises out of the following factual background.
2. The assessee before us is Delhi Development Authority through the Pay and Accounts Officer, Engineering Wing. The Pay and Accounts Officer was required to deduct tax from the salaries paid to the employees of the DDA and pay the same into the Govt. treasury as required under law. The assessee had thereafter to file a return under Section 206 of the Income-tax Act, 1961 showing salaries paid to the employees and the tax deducted thereon. On examination of such a return filed by the assessee the Income-tax Officer concerned found that the assessee had not deducted full tax due from two of the employees as under :-SI. No. Name of the employee Tax Tax Balance due deducted The amount of tax deducted in each case bad been paid and as such there was no default insofar as the amount of tax deducted was concerned regarding its payment. However, the Income-tax Officer found that the short deduction in each case had rendered the assessee liable to the provisions of Section 201(1) of the Act and the assessee could be treated as in default in respect of the short deductions made. He accordingly issued an order to the assessee along with a challan on 11-4-1985 demanding total tax of Rs. 4,944 (Rs. 2023+Rs. 1921).
3. On receipt of the above order from the Income-tax Officer the assessee filed an appeal before the Appellate Asstt. Commissioner.
Before the Appellate Assistant Commissioner, it was submitted that the amount of Rs. 3,023, "in respect of Shri Khamani was not deducted at source owing to the fact that an undertaking was furnished by the officer (copy enclosed) to the effect that he would deposit this amount at the time of filing of his income-tax return." The learned Appellate Assistant Commissioner was also informed that this undertaking given by the officer concerned was fulfilled by payment of the disputed amount on 2-7-1984 into the State Bank of India, Indraprastha Estate. The learned Appellate Assistant Commissioner was also informed that Shri R.S. Jindal was given a rebate to the extent of Rs. 4,320 on account of House Rent Allowance as he declared that he was paying monthly rent of Rs. 600. The learned Appellate Assistant Commissioner considered these submissions, but held the view that the statutory obligation cost upon the assessee had not been fulfilled and the explanation given was not satisfactory. For the reasons assigned by him in his order, he dismissed the appeal of the assessee holding the assessee clearly in default. The order made by the Income-tax Officer was, therefore, sustained, hence the present appeal before us.
4. On the above facts the learned counsel for the assessee relying upon the following judgments submitted before us that the assessee cannot be treated as an assessee in default because the tax had been paid by Shri Khemani as per undertaking given by him and there was dispute with regard to the deduction of tax from the salary of Shri R.S. Jindal. The authorities below erred in treating the assessee as an assessee in default and demanding a sum of Rs. 4,944 as payment of arrears of tax.
(0 CIT v. Divisional Manager, New India Assurance Co. Ltd. [1983] 140 ITR 818 (MP), (ii) Gwalior Rayon Silk Co. Ltd. v. CIT [1983] 140 ITR 832 (MP), (in) CIT v. Life Insurance Corpn. [1987] 166 ITR 191 (MP) Indore Bench.
5. The learned Departmental Representative, on the other hand, submitted that the assessee is confusing the issues because payment by the employee is independent of the consideration whether the employer failed to deduct and pay the tax as required under law. He submitted that the failure to deduct and pay the tax is admitted even in the arguments raised before us and, therefore, there cannot be any question of not treating the assessee as assessee in default under Section 201(1) of the Act. The learned Departmental Representative also emphasised that the authorities relied upon on behalf of the assessee are distinguishable in so far as the facts were different and in each case the assessment of the employee had been completed and tax paid.
He, therefore, fully supported the orders of the authorities below.
6. We have given careful consideration to the rival submissions. The Income-tax Act, 1961 provides for collection and recovery of tax under Chapter XVII of the Act. Section 190 provides for deduction at source and advance payment of tax. Section 191 makes a provision of direct payment of tax by the assessee in the case of income in respect of which provision is not made under this Chapter for deducting income-tax at the time of payment. Thereafter the Legislature has provided a scheme for deduction of tax at source from salaries, interest on securities, dividends and other such items including winning from lotteries and horse races. But for the issue before us we are concerned with the deduction of tax at source from salaries. We find that Section 192 provides that any person responsible for paying any income chargeable under the head "Salaries" shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year. It is further provided that any person responsible for making the payment referred to in Sub-section (1) may, at the time of making any deduction. increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.
7. Section 200 cast a duty on the person deducting tax and incorporates a provision that any person deducting any sum in accordance with the provisions of Section 192, etc., shall pay within the prescribed time the sum so deducted to the credit of the Central Government or as the Board directs. It . is Section 201 which lays down the consequences of such a failure to deduct or pay the tax and it is this section that the Income-tax Officer invoked leading to the present proceedings.
8. Section 201(1) lays down that if any such person and in the cases referred to in Section 194 the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax. This is the provision that the Income-tax Officer has invoked to hold the assessee on the above facts and circumstances of the case as an assessee in default. The scheme of deduction of tax and its payment is so self-contained that the Legislature has provided for penal action to be taken in case of failure against the persons responsible for deduction and payment of tax. At the same time in order to protect the persons on whose behalf the tax is deducted it is provided that where tax is deductible at the source under Sections 192 to 194, etc., 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 only because of these elaborate provisions that finally the person paying salary is required to furnish a prescribed return under Section 206 so that the Income-tax Officer may find out whether the provisions relating to deduction of tax and payment thereof have been complied with. It was in this process that the Income-tax Officer was examining the return filed by the assessee under Section 206 that he came to know of the default committed by the assessee.
9. The explanation of the assessee is that it is not a default and in any case even if it is a default the assessee cannot be deemed to be an assessee in default for the same tax as the tax has already been paid by the employee concerned. The reliance for such a proposition is placed upon the judgment of the M.P. High Court which we have noted supra in the arguments of the counsel for the assessee. We, however, find that on the facts of the case the explanation of the assessee is not acceptable. We have noted in certain detail the provisions regarding deduction of tax and payment thereof into the treasury with a purpose in mind. The Legislature has provided this elaborate scheme and has gone to the extent of providing penalty upon the persons who are in default to ensure that taxes due on salaries, etc., are duly accounted for by the persons responsible for payment of salaries. We, however, find that the assessee knowingly flouted these provisions in so far as the failure of the assessee to deduct tax of Rs. 3,023 in the case of Shri R.A. Khemani is concerned because the explanation of the assessee is that the assessee did not deduct the tax because Shri Khemani gave an undertaking that the tax will be paid by him. In other words, the assessee deliberately joined hands with Shri Khemani to see that the legislative mandate of deduction of tax and its payment provided in the statute is flouted. There is no provision under the Act which can justify this because it is not an omission or failure inadvertently committed, but a decision taken after due consideration flouting the provisions of law. Even with regard to the non-deduction of the poper tax in case of Shri R.S. Jindal instead of discharging the statutory liability cast upon the assessee, the assessee merely accepted what was stated by one of the employees to whom the salary had been paid. Thus, the assessee did not discharge the statutory duty cast upon it by the Legislature. The explanation given by the assessee for not discharging its duty on facts is not satisfactory. The assessee, therefore, was rightly treated as assessee in default by the Income-tax Officer. The learned Appellate Assistant Commissioner was fully justified in supporting the action of the Income-tax Officer.
10. We have very carefully considered the judgments cited on behalf of the assessee. However, we find that each of the judgments turned on its own facts which were distinguishable from the facts of the case of the assessee. The assessee has not shown that in the case of the two employees in respect of the salary of whom the tax had not been deducted properly had got their assessments completed and paid the tax and no further tax was due from them as held in these judgments relied upon by the assessee. We are of the opinion, therefore, that there is no case made out for an interference in the order of the Appellate Assistant Commissioner by the assessee. The appeal is, therefore, dismissed.