1. The Income-tax Appellate Tribunal, Indore, has made this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter called 'the Act').
2. The facts giving, rise to this reference as stated by the Tribunal are stated, in brief, as under : In compliance with the provisions of Section 206 of the I.T. Act, the employer, Shri Synthetics Limited, Ujjain, filed the annual return of salary income in respect of its employees showing the amount of tax deductible under Section 192 of the I.T. Act, 1961. The ITO (TDS), Bhopal, examined the said return and found that the tax deductible under Section 192 was not properly deducted by the abovementioned employer in respect of some of its employees. The basis on which such recomputation has been done is not evident in the impuged order nor was it conveyed to the assessee before the order was passed. He, therefore, recomputed the income in respect of a number of employees and demanded, under Section 201 of the Act,the additional tax that should have been deducted at source. He also leviedinterest on short deductions under Section 201(1A) of the Act. The assessee went up in appeal and challenged the order passed by the ITO under Section 201(1A) of the I.T. Act. The CIT (A) held that the ITO has transgressed his jurisdiction in the matter of dealing with the assessee-employer in respect of his obligations under Section 192 of the Act, inasmuch as the estimate referred to in this section could only be made by the employer and if he had bona fide done so, the ITO(TDS) was only concerned with the obvious and patent mistakes and could not go into controversial matters such as taxability or valuation of perquisites, etc. He, therefore, directed the ITO to revise the computation and, accordingly, allowed the appeal.
3. Against the decision of the CIT(A), the Department filed a second appeal before the Tribunal, which upheld the decision of the CIT(A).
4. Though the Department had proposed two questions for being referred to this court, the Tribunal has referred the following question of law for its opinion:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that where regular assessment of an employee has been completed and the amount of tax fully paid by him, the ITO (TDS) has no jurisdiction under Section 201 of the I.T. Act, 1961, to demand further tax from the employer in respect of the tax short deducted relating to such employees ?'
5. The learned counsel for the applicant, Shri R. C. Mukati, submitted that this question has already been considered and decided in favour of the assessee and against the Department in the decision in CIT v. Manager, M.P. Co-operative Development Bank Ltd. : 137ITR230(MP) which has been followed in CIT v. Divisional Manager, New India Assurance Co. Ltd. : 140ITR818(MP) , which are Divison Bench decisions of this court. In these decisions, relying on the provisions of Section 4 of the I.T. Act which is the charging section, it has been held that the principal liability for payment of income-tax is, therefore, that of the person who receives the income. These decisions have also considered the provisions of Sections 192 and 201(1) of the I.T. Act, under Chapter 17, which provides for deduction of tax at source.
6. In the present case also, it is not the case of the Department that the assessee did not deduct tax at source from the salary paid to its employees.
7. It is also apparent that regular assessment of the employees had been completed by the ITO and the amount of tax was fully paid by them. Therefore, the ITO, Salary Circle (TDS), could not demand further tax from the employer in respect of the income of the employees, which was the salary of the employees chargeable to tax when the same had been fully paid.
8. We, therefore, hold that the Tribunal was right in law in holding that where regular assessment of an employee has been completed and the amount of tax fully paid by him, the ITO (TDS) has no jurisdiction under Section 201 of the I.T. Act, 1961, to demand further tax from the employer in respect of the tax short deducted relating to such employees. Thus, the question referred to us is answered in the affirmative and against the Department.
9. Costs of this reference as incurred.