Jcit Vs. Saraswati Real Estates and - Court Judgment

Excerpt:
1. this appeal of the revenue has arisen as a result of an order passed by cit(a) by which the cit(a) has held the assessee to be entitled to the credit of an amount of tax deducted at source which tax though has not been deposited by the payer with the revenue as contemplated by section 199 of the income tax act and the non-payment of the amount of tds with revenue persuaded the ao to disallow the credit claimed by the assessee.2. to adjudicate the controversy involved the material facts relevant for our purpose are that in the year under consideration the assessee received certain amount of interest. the payer while making the payment of interest, deducted tds as contemplated by section 194 of the income tax act. the certificate of the tax deducted at source was also furnished to the assessee. the assessee in the return furnished claimed credit for the tds on interest paid which was not granted apparently for the reason that the amount of tax deducted at source was not deposited with the government as contemplated under the act. this action of the ao in not giving credit for tds deducted gave a cause of action to the assessee to agitate the matter further by filing an appeal before the cit(a) which appeal of the assessee was allowed by the cit(a) directing the ao to allow credit for the tds deducted. the relevant portion of the order of the cit(a) reads as under:- "i have given careful consideration to the matter. there are two different perceptions emerging from a reading of two sections relating to the credit to be given for tax deducted at source by third party from the income of an assessee. the ao is right when he points that credit for tds has to be given in respect of any deduction made and paid to the central govt. (underlining mine). this would mean that for any tax deducted at source, which has not been paid to the govt., credit cannot be given tot the person from whose income the deduction was made. on the other hand, section 205 places a bar on the revenue from calling upon the assessee to pay tax to the extent to which such tax has been deducted from his income. in other words, if tax had been deducted from income of an assessee, it cannot be called upon to pay the tax on his income to the extent of deduction irrespective of the fact whether the same has been deposited with the central government or not. the scheme of the deduction of tax at source imposes a liability on the person making certain payments to deduct tax at the time of payment and if he does not do so he himself is liable to pay the tax as an assessee in default. thus, he becomes an agent of the government to collect the tax to the extent provided in that particular section. on the other hand, a person from whose income tax had been deducted has no control on the deducted in the matter of its payment to the government. that matter is between the government and the deductor does not pay the amount to the government he can be penalized as well as prosecuted. on the other hand, person from whose income tax has been deducted as per the statutory provisions cannot be made to suffer twice simply because another person has not fulfilled his statutory liabilities. the guwahati high court judgment in the case of om prakash upholds this view. in the circumstances, the appellant's plea must succeed. the ao is directed to allow credit of rs. 2,52,693/- as per the tds certificates produced." 3. the revenue has a grievance to the said order of the cit(a) and is in appeal before us.4. at the time of hearing of the appeal, the ld. dr submitted that once the payment of tax deducted at source is not made to the government, the credit for the same by no stretch of imagination can be given. to the arguments raised by the ld. dr, ld. ar contended that the issue is covered by the judgment of the guwahati high court in the case reported in 2003-taxindiaonline-24-hc-guw-it wherein the hon'ble high court has held that the assessee shall be entitled to the credit of the amount if the payee after deducting the amount of tds does not deposit the same.the other judgment on which the ld. counsel for the assessee placed reliance upon was the order of this tribunal reported in 2003-taxindiaonline-35-itat-kol for the proposition and contended that the assessee from whom the income tax has been deducted at source in accordance with the provisions contained in he act is entitled to the credit of the said tax irrespective of whether the person deducting the tax has credited the same to the central government or not. the id. ar contended that the person deducting the tax at source is in a sense an agent of the government and for his fault the assessee cannot be made to suffer.5. the judgment of the guwahati high court relied upon by id. ar, the dr contended that this judgment has been overruled by the division bench of the guwahati high court and the same stands reported in 2003-taxindiaonline-25-hc-guw-it. after having referred to the said judgment id. dr contended that as long as the obligation contemplated by section 199 are not complied with i.e., the tax is not only deducted, but paid in the central government, the credit of deduction of the same cannot be given or availed of.6. we have heard the parties and taken ourselves through the record and feel that the issue involved in the present appeal give rise to two questions, which are in the following terms :- i) whether an individual to whom while making the payment covered by chapter xvii, certain amount of tax has been deducted at source but the tax deducted at source has not been deposited in government treasury as per the scheme of the act is entitled to the credit of the amount deducted as tax at source or not as per the requirement of section 199 of the income tax act or not. ii) if the answer to the aforesaid question is in the negative, then can the revenue enforce the recovery against the assessee to whom no credit is given for non-compliance of the provisions of section 199 and recover from the assessee short deposit in tax or not.7. we must, before we proceed to answer the question referred to above observe that neither the assessee nor the revenue has placed the tds certificate, the basis of discussion of this order on record but from the orders of authorities below, it becomes clear that the certificate issued and placed by the assessee on record of the ao did reflect that tax at source having been deducted but did not indicate the date of its deposit which led the authorities to form an opinion that tax has not been deposited. on this fact of deduction of tax at source and non-deposit of the same with the government under section 199, there is no dispute, between the two parties i.e., revenue or the assessee before us.8. to answer the controversy involved in the present proceedings as well as the question as formed above, it would be pertinent to refer to the scheme of the income tax act on this subject relating to the manner in in which the tax at source is to be deducted, on what nature of payment it is to be deducted, how it is to be dealt with after deduction, what are the consequences of non-deduction of tax at source and what are the consequences of tax at source deducted but not deposited, and who shall be the person responsible to deduct tax or who shall be the person in default within the meaning of the act. when we examine the income tax act, in the aforesaid background, we find that chapter xvii is the chapter on the subject. the said chapter deals exclusively with collection and recovery of tax deducted at source.except section 191, which talks of direct payment, section 190 mandates deduction of tax at source irrespective of the fact that assessment is to be made at a later date. section 192-197 mandates on what payment the tax is to be deducted and on what payment it is not to be deducted while section 198 talks of the fact that payment of tax deducted is to be treated as the income received.9. after having examined the provisions of section 190-198 of the at act, we find from the provisions of section 199 that credit of tax deducted at source is to be given to the assessee only on the condition that the tax at source so deducted has been deposited with the central government it is only on deposit of the tax with the central government that the same shall be treated as payment of tax on behalf of the persons from whose income the deduction was made.10. the net effect of the provisions of section 199 of the income tax act is that it enables the person from whose payment tax is deducted at source to claim credit from its total tax liability. but this can only be availed of when the tax at source so deducted is deposited with the concerned authority in accordance with law and the payer issues a necessary certificate certifying not only the deduction of tax at source but also the factum of the same having been deposited with the concerned authority. unless and until these two conditions are fulfilled and the certificate in this regard is furnished along with the return of income filed by the assessee, no credit for the tax deducted at source an be claimed and if claimed, is liable to be rejected. the issuance of certificate certifying the deduction of tax at source and its deposit with the concerned authority is as per the provisions of section 203 of the it act.11. if one examine the mandate of section 199 which lays down that no credit to be given if tax is not deposited, then it would mean that the liability of tax of the person from whose payment tax deducted shall stand and this is what the case of revenue before us is.12. if we agree with the contention of the revenue as raised before us that no credit shall be given meaning thereby that the liability shall stand, then it would certainly mean that the assessee would be saddled with the liability twice because in that situation the revenue may try to enforce its demand against the individual from whose payment tax at source has been deducted.13. this seriousness of the issue, made us really think as to whether the legislature could ever intend to tax the man twice or could we be a party to such as action of the revenue who are not intending to give the benefit to an individual from whose payment though tax deducted at source but not deposited in accordance with law and the immediate impression at the threshold we get is that neither the legislature would have in such a situation intended to tax the individual twice nor could we make ourselves available to the revenue to justify their such as action.14. when we say so, we say on the strength that once the tax has been deducted from the payment made by payer to the payee, what the payee gets is the amount minus the tax. after that the payee has no control over the payment of tax deducted. the person deducting the tax is deducting the tax on behalf of government and, therefore, can very safely be said to be an agent of the central government and if the agents commits a breach of trust with the principal, as is that case here, then we shall have no hesitation in saying that the principal must bear the heart for breach of trust by the agent who has after deducting the tax at source has not deposited the same with the principal in the manner agreed/prescribed and since the default or breach of trust is committed by the agent, the recovery of the tax deducted at source but not deposited has to be made from the agent and not from the person from whose payment the tax was deducted.15. the view we take gets further clear when we look at the other provisions of chapter xvii of the income and more particularly to section 201 of the it act which defines an assessee in default and the assessee in default as per the provisions of section 201 is not the person from whose payment tax is deducted but not deposited but it is the person who has deducted the tax but not deposited with the concerned authority as per law.16. we therefore, feel that section 201 of the it act gives a protection to the present assessee who cannot be held to be an assessee in default and once the present assessee is not any assessee in default, then we fail to understand as to how can the recovery of tax deducted at source be effected on the assessee as he by no means can be held to be an assessee in default as per provisions of section 201. by the expression an assessee in default what the legislature must have intended was that such a person shall step into the shoes of assessee and would be held to be an assessee in default. that apart, as per section 201 (1)(a) it is mandated that if a person after deducting fails to pay the tax as required by or under the provisions of the act, he shall be liable to pay the simple interest from the date when such tax was deducted to the date such tax is paid. the protection here also has been given to the assessee who for the delay in payment of tax deducted at source cannot be called upon to make the payment of interest fro delayed deposit as the payment of interest for delay in deposit of the amount of tds, has been held to be the responsibility of the assessee in default, and not the assessee, who is before us. when we examined the provisions of chapter xvii further, we find that as per section 201 (2) sufficient security has been given to the assessee from whose payment tax has been deducted at source but after deduction the payment has not been deposited with the central government because of the reason that as the interest and tax are to be charge upon of the assets of the person i.e., assessee in default meaning thereby that no recovery of tax or interest or both can be effected on the assessee.this section also makes it further clear that the liability for non-deposit of tax or interest is of the person deduction the tax and that is why the assessee has been left out of the gamut of section 201 (2) because otherwise it would have amounted to double jeopardy, which by no means, the legislature could eve have intended. we must also take note of the provisions of section 203, which deals with issuance of a certificate for tax deducted by the person and also of section 204, which defines person responsible for making the payment of tax. the net effect of section 201, 203 and 204 of the it act is that once an individual from whose payments tax at source is deducted establishes this fact then such an individual can neither be called upon to pay either the interest on delayed payment nor can the recovery be enforced against him and this legal position gets further clarified when the provisions of section 205 are examined which mandates that where the tax has been deducted at source, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income meaning thereby that section 205 settles all uncertainties and doubts on the liability of the assessee with regard to tax deducted at source but not deposited at rest when it says that assessee cannot be called upon to pay the tax himself to the extent the tax has been deducted from the income. once the revenue, in view of provisions of section 205 cannot recover the tax, which has been deducted but not deposited in accordance with section 199, it would be of no consequence whether the credit for same is given or not to the assessee.17. in view of the discussion above, we answer question no. 1 framed above in the affirmative that as the tax deducted at source has not been deposited with central government under section 199, the assessee shall not be entitled to the credit of the same but this by itself would not give the revenue the right to enforce the recovery on account of short deposit of tax.18. to the similar effect is the order of this tribunal reported in 2003-taxindiaonline-35-itat-kol wherein it has been held that the assessee from whom the income tax has been deducted at source in accordance with the provisions contained in the act is entitled to the credit of the said tax irrespective of whether the person deducting the tax has credited the same with the central government or not. the sum and substance of the ratio of the judgment placed before us and the reasoning to which we have adverted to above makes us feel that where tax deducted is not deposited with the central government or other authority as per law, irrespective of the fact whether assessee is given any credit for the same or not but certainly assessee cannot be saddled with the liability on account of tax deducted at source and no recovery can be effected against the assessee.19. the view we take as aforesaid in fact is supported by the division bench of the guwahati high court reported in 2003-taxindiaonline-25-hc-guw-it wherein payee after deducting the tax at source did not deposit the amount in the government treasury. the revenue in this case wanted to enforce the payment by taking recourse to garnishee proceedings as contemplated by section 226(3) of the it act. the guwahati high court held that such proceedings are bad on account of the fact that the assessee would be subjected to double taxation, to be more precise will be doubly saddled with the tax liability and after holding the garneshi proceedings to be illegal the same were quashed by the high court.20. when the garnishee proceedings cannot be taken against an assessee from whose payment tax is deducted but not paid, it obviously means that the recovery of tax equivalent to the amount, which has been deducted at source, but not deposited with the central government could not be effected.21. in view of what has been discussed above, we feel that whether the revenue gives credit for the tax deducted at source or not, but we must say that the revenue by no means can enforce the payment of the said tax on the assessee, as in view of the scheme of the act the entire liability rests upon the person who has deducted and it is such a person who is responsible for deposit of the same with the central government and it is such a person who is to be held to be an assessee in default and not the assessee and that the assessee cannot be made to suffer on account of the default of such person who is performing the role of an agent of the government as far as deduction of tax at source is concerned.22. consequent to the above, the appeal filed by the revenue fails and is hereby dismissed.

Judgment:
1. This appeal of the Revenue has arisen as a result of an order passed by CIT(A) by which the CIT(A) has held the assessee to be entitled to the credit of an amount of tax deducted at source which tax though has not been deposited by the payer with the revenue as contemplated by Section 199 of the Income Tax Act and the non-payment of the amount of TDS with Revenue persuaded the AO to disallow the credit claimed by the assessee.

2. To adjudicate the controversy involved the material facts relevant for our purpose are that in the year under consideration the assessee received certain amount of interest. The payer while making the payment of interest, deducted TDS as contemplated by Section 194 of the Income Tax Act. The certificate of the tax deducted at source was also furnished to the assessee. The assessee in the return furnished claimed credit for the TDS on interest paid which was not granted apparently for the reason that the amount of tax deducted at source was not deposited with the Government as contemplated under the Act. This action of the AO in not giving credit for TDS deducted gave a cause of action to the assessee to agitate the matter further by filing an appeal before the CIT(A) which appeal of the assessee was allowed by the CIT(A) directing the AO to allow credit for the TDS deducted. The relevant portion of the order of the CIT(A) reads as under:- "I have given careful consideration to the matter. There are two different perceptions emerging from a reading of two sections relating to the credit to be given for tax deducted at source by third party from the income of an assessee. The AO is right when he points that credit for TDS has to be given in respect of any deduction made and paid to the Central Govt. (underlining mine).

This would mean that for any tax deducted at source, which has not been paid to the Govt., credit cannot be given tot the person from whose income the deduction was made. On the other hand, section 205 places a bar on the Revenue from calling upon the assessee to pay tax to the extent to which such tax has been deducted from his income. In other words, if tax had been deducted from income of an assessee, it cannot be called upon to pay the tax on his income to the extent of deduction irrespective of the fact whether the same has been deposited with the Central Government or not. The scheme of the deduction of tax at source imposes a liability on the person making certain payments to deduct tax at the time of payment and if he does not do so he himself is liable to pay the tax as an assessee in default. Thus, he becomes an agent of the Government to collect the tax to the extent provided in that particular section. On the other hand, a person from whose income tax had been deducted has no control on the deducted in the matter of its payment to the Government. That matter is between the Government and the deductor does not pay the amount to the Government he can be penalized as well as prosecuted. On the other hand, person from whose income tax has been deducted as per the statutory provisions cannot be made to suffer twice simply because another person has not fulfilled his statutory liabilities. The Guwahati High Court judgment in the case of Om Prakash upholds this view. In the circumstances, the appellant's plea must succeed. The AO is directed to allow credit of Rs. 2,52,693/- as per the TDS certificates produced." 3. The Revenue has a grievance to the said order of the CIT(A) and is in appeal before us.

4. At the time of hearing of the appeal, the ld. DR submitted that once the payment of tax deducted at source is not made to the Government, the credit for the same by no stretch of imagination can be given. To the arguments raised by the ld. DR, ld. AR contended that the issue is covered by the judgment of the Guwahati High Court in the case reported in 2003-Taxindiaonline-24-HC-Guw-IT wherein the Hon'ble High Court has held that the assessee shall be entitled to the credit of the amount if the payee after deducting the amount of TDS does not deposit the same.

The other judgment on which the ld. Counsel for the assessee placed reliance upon was the order of this Tribunal reported in 2003-Taxindiaonline-35-ITAT-KOL for the proposition and contended that the assessee from whom the income tax has been deducted at source in accordance with the provisions contained in he Act is entitled to the credit of the said tax irrespective of whether the person deducting the tax has credited the same to the Central Government or not. The Id. AR contended that the person deducting the tax at source is in a sense an agent of the Government and for his fault the assessee cannot be made to suffer.

5. The judgment of the Guwahati High Court relied upon by Id. AR, the DR contended that this judgment has been overruled by the Division bench of the Guwahati High court and the same stands reported in 2003-Taxindiaonline-25-HC-Guw-IT. After having referred to the said judgment Id. DR contended that as long as the obligation contemplated by Section 199 are not complied with i.e., the tax is not only deducted, but paid in the Central Government, the credit of deduction of the same cannot be given or availed of.

6. We have heard the parties and taken ourselves through the record and feel that the issue involved in the present appeal give rise to two questions, which are in the following terms :- i) Whether an individual to whom while making the payment covered by Chapter XVII, certain amount of tax has been deducted at source but the tax deducted at source has not been deposited in Government treasury as per the scheme of the Act is entitled to the credit of the amount deducted as tax at source or not as per the requirement of Section 199 of the Income Tax Act or not.

ii) If the answer to the aforesaid question is in the negative, then can the Revenue enforce the recovery against the assessee to whom no credit is given for non-compliance of the provisions of Section 199 and recover from the assessee short deposit in tax or not.

7. We must, before we proceed to answer the question referred to above observe that neither the assessee nor the Revenue has placed the TDS certificate, the basis of discussion of this order on record but from the orders of authorities below, it becomes clear that the certificate issued and placed by the assessee on record of the AO did reflect that tax at source having been deducted but did not indicate the date of its deposit which led the authorities to form an opinion that tax has not been deposited. On this fact of deduction of tax at source and non-deposit of the same with the Government under Section 199, there is no dispute, between the two parties i.e., revenue or the assessee before us.

8. To answer the controversy involved in the present proceedings as well as the question as formed above, it would be pertinent to refer to the scheme of the Income tax Act on this subject relating to the manner in in which the tax at source is to be deducted, on what nature of payment it is to be deducted, how it is to be dealt with after deduction, what are the consequences of non-deduction of tax at source and what are the consequences of tax at source deducted but not deposited, and who shall be the person responsible to deduct tax or who shall be the person in default within the meaning of the Act. When we examine the Income Tax Act, in the aforesaid background, we find that Chapter XVII is the Chapter on the subject. The said chapter deals exclusively with collection and recovery of tax deducted at source.

Except Section 191, which talks of direct payment, Section 190 mandates deduction of tax at source irrespective of the fact that assessment is to be made at a later date. Section 192-197 mandates on what payment the tax is to be deducted and on what payment it is not to be deducted while Section 198 talks of the fact that payment of tax deducted is to be treated as the income received.

9. After having examined the provisions of Section 190-198 of the AT Act, we find from the provisions of Section 199 that credit of tax deducted at source is to be given to the assessee only on the condition that the tax at source so deducted has been deposited with the Central Government it is only on deposit of the tax with the Central Government that the same shall be treated as payment of tax on behalf of the persons from whose income the deduction was made.

10. The net effect of the provisions of Section 199 of the Income Tax Act is that it enables the person from whose payment tax is deducted at source to claim credit from its total tax liability. But this can only be availed of when the tax at source so deducted is deposited with the concerned authority in accordance with law and the payer issues a necessary certificate certifying not only the deduction of tax at source but also the factum of the same having been deposited with the concerned authority. Unless and until these two conditions are fulfilled and the certificate in this regard is furnished along with the return of income filed by the assessee, no credit for the tax deducted at source an be claimed and if claimed, is liable to be rejected. The issuance of certificate certifying the deduction of tax at source and its deposit with the concerned authority is as per the provisions of Section 203 of the IT Act.

11. If one examine the mandate of Section 199 which lays down that no credit to be given if tax is not deposited, then it would mean that the liability of tax of the person from whose payment tax deducted shall stand and this is what the case of revenue before us is.

12. If we agree with the contention of the Revenue as raised before us that no credit shall be given meaning thereby that the liability shall stand, then it would certainly mean that the assessee would be saddled with the liability twice because in that situation the revenue may try to enforce its demand against the individual from whose payment tax at source has been deducted.

13. This seriousness of the issue, made us really think as to whether the legislature could ever intend to tax the man twice or could we be a party to such as action of the Revenue who are not intending to give the benefit to an individual from whose payment though tax deducted at source but not deposited in accordance with law and the immediate impression at the threshold we get is that neither the legislature would have in such a situation intended to tax the individual twice nor could we make ourselves available to the Revenue to justify their such as action.

14. When we say so, we say on the strength that once the tax has been deducted from the payment made by payer to the payee, what the payee gets is the amount minus the tax. After that the payee has no control over the payment of tax deducted. The person deducting the tax is deducting the tax on behalf of Government and, therefore, can very safely be said to be an agent of the Central Government and if the agents commits a breach of trust with the principal, as is that case here, then we shall have no hesitation in saying that the principal must bear the heart for breach of trust by the agent who has after deducting the tax at source has not deposited the same with the principal in the manner agreed/prescribed and since the default or breach of trust is committed by the agent, the recovery of the tax deducted at source but not deposited has to be made from the agent and not from the person from whose payment the tax was deducted.

15. The view we take gets further clear when we look at the other provisions of Chapter XVII of the Income and more particularly to Section 201 of the IT Act which defines an assessee in default and the assessee in default as per the provisions of Section 201 is not the person from whose payment tax is deducted but not deposited but it is the person who has deducted the tax but not deposited with the concerned authority as per law.

16. We therefore, feel that Section 201 of the IT Act gives a protection to the present assessee who cannot be held to be an assessee in default and once the present assessee is not any assessee in default, then we fail to understand as to how can the recovery of tax deducted at source be effected on the assessee as he by no means can be held to be an assessee in default as per provisions of Section 201. By the expression an assessee in default what the legislature must have intended was that such a person shall step into the shoes of assessee and would be held to be an assessee in default. That apart, as per Section 201 (1)(a) it is mandated that if a person after deducting fails to pay the tax as required by or under the provisions of the Act, he shall be liable to pay the simple interest from the date when such tax was deducted to the date such tax is paid. The protection here also has been given to the assessee who for the delay in payment of tax deducted at source cannot be called upon to make the payment of interest fro delayed deposit as the payment of interest for delay in deposit of the amount of TDS, has been held to be the responsibility of the assessee in default, and not the assessee, who is before us. when we examined the provisions of Chapter XVII further, we find that as per Section 201 (2) sufficient security has been given to the assessee from whose payment tax has been deducted at source but after deduction the payment has not been deposited with the Central Government because of the reason that as the interest and tax are to be charge upon of the assets of the person i.e., assessee in default meaning thereby that no recovery of tax or interest or both can be effected on the assessee.

This Section also makes it further clear that the liability for non-deposit of tax or interest is of the person deduction the tax and that is why the assessee has been left out of the gamut of Section 201 (2) because otherwise it would have amounted to double jeopardy, which by no means, the legislature could eve have intended. We must also take note of the provisions of Section 203, which deals with issuance of a certificate for tax deducted by the person and also of Section 204, which defines person responsible for making the payment of tax. The net effect of Section 201, 203 and 204 of the IT Act is that once an individual from whose payments tax at source is deducted establishes this fact then such an individual can neither be called upon to pay either the interest on delayed payment nor can the recovery be enforced against him and this legal position gets further clarified when the provisions of Section 205 are examined which mandates that where the tax has been deducted at source, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income meaning thereby that Section 205 settles all uncertainties and doubts on the liability of the assessee with regard to tax deducted at source but not deposited at rest when it says that assessee cannot be called upon to pay the tax himself to the extent the tax has been deducted from the income. Once the Revenue, in view of provisions of Section 205 cannot recover the tax, which has been deducted but not deposited in accordance with Section 199, it would be of no consequence whether the credit for same is given or not to the assessee.

17. In view of the discussion above, we answer question No. 1 framed above in the affirmative that as the tax deducted at source has not been deposited with Central Government under Section 199, the assessee shall not be entitled to the credit of the same but this by itself would not give the revenue the right to enforce the recovery on account of short deposit of tax.

18. To the similar effect is the order of this Tribunal reported in 2003-Taxindiaonline-35-ITAT-KOL wherein it has been held that the assessee from whom the income tax has been deducted at source in accordance with the provisions contained in the Act is entitled to the credit of the said tax irrespective of whether the person deducting the tax has credited the same with the Central Government or not. The sum and substance of the ratio of the judgment placed before us and the reasoning to which we have adverted to above makes us feel that where tax deducted is not deposited with the Central Government or other authority as per law, irrespective of the fact whether assessee is given any credit for the same or not but certainly assessee cannot be saddled with the liability on account of tax deducted at source and no recovery can be effected against the assessee.

19. The view we take as aforesaid in fact is supported by the Division Bench of the Guwahati High Court reported in 2003-Taxindiaonline-25-HC-Guw-IT wherein payee after deducting the tax at source did not deposit the amount in the Government Treasury. The Revenue in this case wanted to enforce the payment by taking recourse to garnishee proceedings as contemplated by Section 226(3) of the IT Act. The Guwahati High court held that such proceedings are bad on account of the fact that the assessee would be subjected to double taxation, to be more precise will be doubly saddled with the tax liability and after holding the garneshi proceedings to be illegal the same were quashed by the High Court.

20. When the garnishee proceedings cannot be taken against an assessee from whose payment tax is deducted but not paid, it obviously means that the recovery of tax equivalent to the amount, which has been deducted at source, but not deposited with the Central Government could not be effected.

21. In view of what has been discussed above, we feel that whether the Revenue gives credit for the tax deducted at source or not, but we must say that the Revenue by no means can enforce the payment of the said tax on the assessee, as in view of the scheme of the Act the entire liability rests upon the person who has deducted and it is such a person who is responsible for deposit of the same with the Central Government and it is such a person who is to be held to be an assessee in default and not the assessee and that the assessee cannot be made to suffer on account of the default of such person who is performing the role of an agent of the Government as far as deduction of tax at source is concerned.

22. Consequent to the above, the appeal filed by the Revenue fails and is hereby dismissed.