J SOMASHEKAR V. UNION OF INDIA

WP/6217/2019

AI Insights

The case involves J. Somashekar, the petitioner, who owned a property rented out to Innovative Leisure and Entertainment Private Limited and Innovative Studios Private Limited. These companies deducted TDS from the rent payments but the Income Tax Department did not give credit for these deductions in the assessments for the years 2009-10 and 2010-11. The petitioner filed a writ petition challenging the demand notices issued by the Department. The court found that the Department should have considered the TDS deductions made by the tenants and directed the Department to resolve the pending rectification applications.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 678482 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-01-2022
• Assessment Year: misc
• Other Referred Cases: Smt.Anusuya Alva v. Deputy Commissioner of Income-Tax and Others
• Laws Referred To: Constitution of India, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALGI; H KUMAR
• Assessee Lawyers: S S NAGANAND
• Keywords: Assessment Year; Demand notice; Rectification Application; TDS Deduction
• Section: 154; 205; 201(1); 201(1A); 226

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF JANUARY 2022 BEFORE THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV WRIT PETITION No.6217/2019 (T-IT) BETWEEN: J. SOMASHEKAR S/O SRI C. JAYARAJ AGED ABOUT 46 YEARS RESIDING AT NO.2223, 39TH 'F' CROSS 4TH 'T' BLOCK, JAYANAGAR BENGALURU - 560 041. … PETITIONER (BY SRI S.S. NAGANAND, SENIOR ADVOCATE FOR SMT SUMANA NAGANAND, ADVOCATE) AND: 1. UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE GOVERNMENT OF INDIA NORTH BLOCK NEW DELHI - 110 001 THROUGH THE SECRETARY. 2. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 4(1), INCOME TAX DEPARTMENT UNITY BUILDING ANNEXE MISSION ROAD BENGALURU - 560 027. 3. M/S. INNOVATIVE STUDIOS PRIVATE LIMITED NO.135, OUTER RING ROAD VARTHUR HOBLI, MARATHALLI BENGALURU - 560 037 2 REPRESENTED BY ITS DIRECTOR MR. SARAVANA PRASAD. ALSO AT: INNOVATIVE FILM CITY PLOT NO.24 AND 26 BIDADI INDUSTRIAL AREA, BIDADI, RAMANAGARAM DISTRICT - 562 109. 4. M/S. INNOVATIVE LEISURE AND ENTERTAINMENT PRIVATE LIMITED 'INNOVATIVE MULTIPLEX' NO.135, OUTER RING ROAD VARTHUR HOBLI, MARATHALLI, BENGALURU - 560 037 REPRESENTED BY ITS DIRECTOR MR. SARAVANA PRASAD. 5. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1), INCOME TAX DEPARTMENT BENGALURU - 560 027. 6. DIRECTOR GENERAL OF INCOME TAX (INVESTIGATION) QUEENS ROAD BENGALURU - 560 001. 7. COMMISSIONER OF INCOME TAX (TDS), NO.59, HMT BHAVAN, 4TH FLOOR, BELLARY ROAD BENGALURU - 560 032. ... RESPONDENTS (BY SRI JEEVAN J. NEERALGI, ADVOCATE FOR R1, R2 & R5 TO R7; SRI H. SUNIL KUMAR, ADVOCATE FOR R3 & R4) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF CONSTITUTION OF INDIA, PRAYING to QUASH THE DEMAND NOTICES DATED 19.12.2011 (ANNEXURES-M AND N) ISSUED BY R2 FOR THE ASSESSMENT YEAR 2009-10 AND 2010-11 AND ETC. 3 THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner is stated to be the owner of property that had been let out on rental to the 4th respondent company. It is submitted that the tenants while paying the rent had deducted TDS. It is further submitted that the petitioner had received Form 16A only for a sum of Rs.7,60,008/- with respect to the Financial Year 2008-09 (Assessment year 2009-10) from respondent no.3. 2. It is pointed out by the learned Senior Counsel appearing for the petitioner that the respondents have deducted TDS with respect to the period of April'2008 to July, 2009 and attention of the court is drawn to Annexure-'C', which is the statement as regards deduction of TDS amount for the period August, 2008 to August, 2009 as regards premises measuring 76,740 Sq.Ft., and letters of various periods indicating payment of rent after deduction of TDS are enclosed as Annexure-'C1' to 'C13'. Similarly, 4 statement at Annexure-'D' with respect to premises measuring 41407 Sq.Ft., for the period May,2008 to August, 2009 is enclosed at Annexure-'D' and individual letters of the tenants remitting rent after deducting TDS is enclosed at Annexure-'D1' to 'D16'. 3. It is pointed out by the learned Senior Counsel appearing on behalf of the petitioner that the Department however despite petitioner having pointed out deduction of TDS has passed the assessment orders without giving credit to the TDS deducted by the tenants. It is further submitted that demand notice for the assessment year 2009-10, 2010-11 were also raised. 4. The petitioner submits that the earlier writ petition filed by them in W.P.No.16883 & 17433/2012 seeking to quash the notice of demand dated 19.12.2011 were disposed off with liberty to the petitioner to file rectification application under Section 154 of the Income Tax Act, 1961 (\"the Act\", for short). 5 5. It is submitted that the petitioner had filed an application for rectification of assessment year relating to the assessment year 2009-10 and 2010-11 on 08.08.2012 and the applications are not disposed off till this date. The petitioner in the present writ petition has sought for quashing of the demand notice dated 19.12.2011 for the assessment year 2009-10, 2010-11, sought for directions to respondent nos.2, 5, 7 to allow the rectification application dated 08.08.2012 at Annexure-'R' and 'R1' filed by the petitioner and to declare that respondent nos.1, 2, 5, 6 and 7 are not entitled to recover the amounts demanded as per Annexure-'M','N' from the petitioner and further reliefs have been sought for. 6. It must be noted that the contention of the petitioner that under Section 205 of the Act, when the tax is 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 is explicit and accordingly, demand as against the petitioner is impermissible in law, 6 the said contention requires to be accepted. Insofar as the Department is concerned, right of the Department is to proceed against the Deductor and this is the position of law that also been laid down by this court in the case of Smt.Anusuya Alva v. Deputy Commissioner of Income-Tax and Others reported in 2005 SCC Online Kar 746, wherein this court has clarified that once deduction is made, revenue is expected to look to the person who had deducted the tax for realising the amount, if such person fails in remitting the amount to the Central Government. This position of law is not disputed by the learned counsel for the Department. In effect, the remedy available to the Department is to proceed against the Deductor in terms of Section 201 (1), 201 (1A) by treating the Deductor as Assessee in default. Further, the Department is also at liberty to levy interest and penalty as per law and would have liberty to take such other proceedings as are permissible as against the tenants who having deducted have failed to remit the tax to the Government. 7 7. In light of the settled position of law, Demand Notice as regards the petitioner at Annexure-'M' and 'N' are set aside. The respondent no.2 to decide the Rectification application at Annexure-'R' and 'R1' taking note of the discussion made above in light of settled position of law. Noticing that rectification applications are still pending before the respondent, this court relegates the matter to the respondent no.2 to dispose off the rectification application, taking note of the discussion as made above. The authority may take note of the material to be submitted by the petitioner to evidence deduction of tax at source by the respondent nos.3 and 4. 8. The learned Senior Counsel appearing for the petitioner has also produced along with the memo dated 11.01.2022, the letter dated 02.12.2009 whereby the tenant has acknowledged the remittance of TDS which the learned counsel for petitioner would indicate the factum of deduction of TDS by the tenants and if read along with Annexure-'C1' to 'C13' and 'D1' to 'D16' would indicate that 8 tenants have in fact deducted the amount and failed to remit as remittance is not found in the records of the revenue. Insofar as prayer at (iii) is concerned, it is open to the Department to take appropriate action against respondent nos.3 and 4 as per law to recover sums deducted by the respondents and not remitted to the Department and other penal action. 9. The rectification application to be disposed off within a period of not later than eight weeks from the date of release of the order. Sd/- JUDGE Np/- "