The Supreme Court recently dismissed a Public Interest Litigation against the Tax Deducted at Source (TDS) system on salaried individuals under Income Tax Act, while preserving the liberty to approach the jurisdictional high court.
The Income Tax Act requires private employers to deduct tax at source (TDS) from the salaries they pay. A bench consisting of Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar remarked that the petition filed by BJP leader Ashwini Upadhyay was “badly drafted” and advised him to approach the High Court instead.
This petition was reportedly very poorly drafted. Take this matter to the High Court, there are judgments where the provisions of the tax law have been upheld, the Chief Justice told the petitioner, who appeared in person. The Court also made it clear that it had not commented on the merits of the case.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The PIL argued that the TDS provisions impose a burdensome responsibility on private employers to collect tax on behalf of the Government. The petitioner claimed that TDS assesses (the private employers who deduct tax from salaries and remit it to the government) are “burdened with the difficult task of tax collection using their own resources, without compensation, and face heavy penalties for non-compliance or errors.”
“The costs associated with deducting tax at source, including salaries for staff, professional fees paid to chartered accountants, wages for employees involved in TDS compliance, and other office-related expenses, often range from 10% to 20% of the tax collected. It is important to note that government Assessment officers (AOs) do not face the same severe penalties as TDS assesses,” the petitioner stated.
The PIL also argued that TDS assesses are unfairly held liable for errors in the tax-collection process, while Assessment officers do not face similar liability for mistakes.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
TDS assesses are not compensated or remunerated for their work, not even nominally. They also do not receive training, unlike the well-trained AOs. If AOs make mistakes in tax assessments or allow disallowed expenses, they are not penalized. In contrast, TDS assesses face liability and disallowances.
AOs have the authority to correct their errors and recover under-assessed tax dues through rectification. However, TDS assesses do not have these privileges, despite the fact that those without the requisite expertise should logically be granted such opportunities. This situation undermines the spirit of Article 14, it was submitted.
The petition further argued that since Article 23 prohibits forced labor, the government’s imposition of TDS collection duties on private individuals and entities without compensating them violates this constitutional provision.
“We are not inclined to entertain the present writ petition under Article 32 of the Constitution of India. Accordingly, without commenting on the merits either way, the writ petition is dismissed as not entertained with liberty to the petitioner to approach the jurisdictional High Court”, said the bench of Chief Justice Sanjiv Khanna and Justice Sanjay Kumar.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
