JUDGMENT : Bhargav D. Karia, J. 1. This Court passed the following order on 29.04.2024: “1. Heard learned advocate Ms.Manini Bharti with learned advocate Ms.Jayani Shah for the petitioner. Learned advocate Ms.Shah has tendered draft amendment in both the petitions. The same is allowed in terms of the draft. To be carried out forthwith. 2. It was submitted by learned advocate for the petitioner that the respondent authorities have issued the intimation under Section 143(1) of the Income Tax Act, 1961 for the assessment year under consideration being A.Y. 2020-21 and 2021-22 and also intimated that the same may be considered as a notice of demand under Section 156(3) of the Act. 2.1 Learned advocate for the petitioner referred to and relied upon the Press Release dated 11th March, 2016 issued by the Central Board of Direct Taxes wherein it is mentioned that as per the Office Memorandum issued on 11th March, 2015 wherein it is re-emphasised that the Assessing Officer shall not enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor. Reliance was also placed on the following orders. (i) Shantanu Awasthi v. Income Tax Officer Ward 67(1), Delhi with other allied matters being W.P. (C) No.3518 of 2023 decided on 21st March, 2023 of Hon’ble High Court of Delhi; (ii) Abhijit Bhave v. Income Tax Officer, Circle 67(1), Delhi being W.P. (C) No.3989 of 2023 decided on 29th March, 2023 Hon’ble High Court of Delhi; (iii) Sachin S. Ghadge v. Income Tax Officer, Circle 22(1) & Ors. being Writ Petition No.1332 of 2023 with other allied matters decided on 17th July, 2023 of Hon’ble High Court of Bombay. 3. Considering the above submissions, issue Notice, returnable on 08th July, 2024. 4. In the meanwhile, the impugned demand notices shall remain stayed till the final disposal of the petition. Direct service, through email, is permitted.” 2. Thereafter, the following order was passed on 01.10.2024: “1. Heard learned advocate Ms.Manini Bharti for the petitioners through video conferencing and learned Senior Standing Counsel Mr.Karan Sanghani for the respondent. 2. 4. In the meanwhile, the impugned demand notices shall remain stayed till the final disposal of the petition. Direct service, through email, is permitted.” 2. Thereafter, the following order was passed on 01.10.2024: “1. Heard learned advocate Ms.Manini Bharti for the petitioners through video conferencing and learned Senior Standing Counsel Mr.Karan Sanghani for the respondent. 2. It was submitted by learned advocate Ms.Bharti for the petitioners that the petitioners are ex-employees of Karvy Stock Broking Limited and in spite of the fact that the tax was deducted from their salary but not deposited by the said Company and accordingly, the petitioners are subjected to assessment without giving the set off of the tax deducted from their salary. 3. This Court by order dated 29.04.2024 recording the facts of the case, issued the Notice and stayed the impugned notices till final disposal of the petition. 4. Today, learned advocate for the petitioners submitted that the petitioners are suffering continuous loss as they are not entitled to the refund because of the pendency of this proceeding. 5. Learned Senior Standing Counsel Mr.Sanghani submitted that in one of the matters, the reply is already filed by the respondent. 6. Considering the above submissions, list these matters for final disposal on 07.10.2024 on top of the Board.” 3. Learned advocate Ms. Manini Bharati for the petitioner submitted that the impugned intimation under section 143(1) of the Income Tax Act,1961 [for short ‘the Act’] was passed ignoring the Instruction No. 275/29/2014-IT-(B) dated 01.06.2015 issued by the Central Board of Direct Taxes [‘CBDT’ for short] as well as Office Memorandum F.No. 275/29/2014-IT(B) dated 11.03.2016. It was further submitted that the press release was also issued by the CBDT for non-enforcement of recovery of demand against the assessee where tax has been deducted but not deposited by the deductor based upon the aforesaid instruction and the Office Memorandum but, in spite of the same, the petitioners are subjected to inconvenience by raising the demand by the respondent. 4. It was submitted that the employer of the petitioners did not pay the Tax Deducted at Source from the salary of the petitioners for the Financial Year 2020- 2021 and when the petitioners filed the return of income disclosing the Tax Deducted at Source, there was a mismatch in the system and accordingly, the demand was raised in case of both the petitioners as under: Sr. No Name of the petitioner Special Civil Application No Amount of Tax deducted at source by the Employer (Rs.) Amount of demand raised in intimation issued under section 143(1) 1. Gayatri Snehal Rao 5835/2024 6,13,583/- [3,53,597/- for A.Y. 2020-21 +2,60,086/- for A.Y.2021-22] 5,13,200/- [2,63,300/- for A.Y. 2020-21 + 2,49,900/-for A.Y. 2021-22] 2. Shobhan Shantilal Doshi 5870/2024 32,48,022/- [18,24,686 for A.Y. 2020-21+14,23,336 for A.Y. 2021-22] 27,26,590/- [11,98,880/- for A.Y. 2020-21+15,27,710/- for A.Y. 2021-22] 5. It was submitted that the petitioners are now subjected to recovery of tax against the aforesaid demand raised in the intimation issued under section 143(1) of the Act. 6. Learned advocate for the petitioners referred to and relied upon the provisions of section 205 of the Act which specifically provides that the assessee shall not be called upon to pay tax himself to the extent to which tax had been deducted from that income where the tax is deductible at source under the provisions of Chapter-XVII. It was therefore, submitted that the provision of section 205 puts the bar on direct demand against the petitioners as the tax is already deducted by the employer but not deposited and the demand on account of tax credit mismatch could not have been raised by the respondent contrary to the said provision read with the Instruction and the Office Memorandum. 7. On the other hand, learned Senior Standing Counsel Mr. Nikunt Raval for the respondent-Assessing Officer could not controvert the submissions made by the learned advocate for the petitioners, however, he referred to and relied upon the following averments made in the affidavit-in-reply filed on behalf of the respondent No.1 in Special Civil Application No. 5835/2024 which read as under: “It is also worthwhile to mention that suo moto credit of TDS is not allowed while processing the return of income u/s. 143(1) of the I.T. Act unless the tax deducted by deductor is deposited to the government’s account. In the petitioner’s case as evident from the 26AS that the employer has deposited tax 9g the tune of Rs.1,26,153/- pertaining to FY 2019- 20 as against the claim of TDS of Rs.3,53,597/- by the petitioner. Therefore, credit of TDS is granted to the extent of Rs.1,26,153/-. For FY 2020-21 no such tax as claimed by the petitioner in her return of income has been deposited by the employer. Therefore, credit of TDS is granted to the extent of Rs.1,26,153/-. For FY 2020-21 no such tax as claimed by the petitioner in her return of income has been deposited by the employer. Therefore, credit of TDS in respect of salary income is as claimed by the petitioner was not allowed. By virtue of scheme of Amalgamation under Section 391 to 394 of the Companies Act, 1956 as approved by Honorable High Court of Gujarat vide order dated 14.10 2016, the SGSLold, PAN: AAJCSO174R got amalgamated with M/s Suzlon Structures Limited (PAN: AAICS1406R) (SSL) with appointed date as 31.03.2016. The resultant company M/s SSL (PAN: AAICS1406R) was renamed as M/s Suzion Global Services Limited (PAN: AAICS1406R} (hereinafter SGSL-new). Hence, SGSLnew was in operation for only 1 day i.e. 31.03.2016 during AY 2016-17. From perusal of notes to account for FY 2015-16 for SGSL-new, it was observed that there was an addition of goodwill of Rs 2550.69 crore in books of SGSL-new under the head intangible assets. Subsequently, the case of the assessee has been identified as a Potential Case flagged by the Directorate of Income-tax (Systems) after risk profiling ‘based on enquiry reports and findings of Directorate of Income-tax (Investigation) and Directorate of Intelligence & Criminal Investigation. Information has been received that the assessee has claimed benefit of both unabsorbed depreciation of Rs 724.46 Cr as well as depreciation on goodwill of Rs 179.85 crores. In a scheme of amalgamation assessee is not entitled to claim the benefit of both i.e. Unabsorded depreciation as well as depreciation on goodwill. However, assessee has claimed benefit of both Hence, depreciation of Rs 179.85 Cr claimed by assessee for AY 2016 17 as not found to be correct, leading to Income chargeable to tax escaping assessment in the hands of M/s SGSL (PAN: AAICS1400R) (erstwhile M/s SSL) for AY 2016-17. Accordingly, an Enquiry letter vide DIN No ITBA/AST/ F/17/2022-23/1050394470(1) us 148A(a) of the Income Tax Act was tssucd to the assessee on 03.03.2023. Assessee was requested to submit reply by 10.03.2023. In response, the assessee has made submission on 15 03 2023 The submission of the assessee was found not tenable and accordingly the assessee was issued a show cause notice u s 148A(b) of the Act dated 19.03.2023. 7 In response thereto, the assessee has made certain submissions vide reply dated 28 03.2023. In response, the assessee has made submission on 15 03 2023 The submission of the assessee was found not tenable and accordingly the assessee was issued a show cause notice u s 148A(b) of the Act dated 19.03.2023. 7 In response thereto, the assessee has made certain submissions vide reply dated 28 03.2023. Considering the reply of the assessee and information/material on record, order u/s 148A(d) dated 07 04 2023 was passed wherein the case of the assessee was found to be a fit case for re opening. Accordingly notice us 148 dated 07 04.2023 was issued and served to the assessee. Thus, the re-assessment proceedings u/s 147 has been started in the case of the assessee.” 8. Considering the above submissions, the undisputed fact remains that the employer of the petitioners deducted the Tax at Source from the salary income of the petitioners for two years but did not deposit the same with the Government. Thus, there is failure on the part of the employer to deposit tax deducted at source from the salary income of the petitioners. Therefore, the respondent could not have raised any demand against the petitioners in view of the provisions of section 205 of the Act read with Instruction No. 275 dated 01.06.2015 and Office Memorandum dated 11.03.2016 which read as under: “Section 205: Bar against direct demand on assessee. Where tax is deductible at the source under [the foregoing provisions of this Chapter] [Substituted by Act 23 of 2004, Section 48, for certain words (w.e.f. 1.10.2004).], the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.” Instruction No. 275/29/2014-IT-(B) SECTION 199 OF THE INCOME-TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - CREDIT FOR TAX DEDUCTED - NON-DEPOSIT OF TAX DEDUCTED AT SOURCE INSTRUCTION NO, 275/29/2014-T{B), DATED 1- 62015 Grievances have been received by the Board from many taxpayers that in their cases the deductor has deducted tax at source from payments made to them in accordance with the provisions of Chapter-XVIT of the Income-tax Act, 1961 (hereafter ‘the Act) but has failed to deposit the same into the Government account leading to denial of credit of such deduction of tax to these taxpayers and consequent raising of demand, 2. As per Section 199 of the Act credit of Tax Deducted at Source is given to the person only if it is paid to the Central Government Account. However, as per section 205 of the Act the assessee shall not be called upon to pay the tax to the extent tax has been deducted from his income where the tax is deductible at source under the provisions of Chapter XVII. Thus the Act puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch cannot be enforced coercively. 3. This may be brought to the notice of all the Assessing Officers in your region so that if the facts of the case justify, the assessees are not put at any inconvenience on account of default of deposit of tax into the Government account by the deductor. 4, This issues with the approval of Chairperson, CBDT. Office Memorandum F.No. 275/29/2014-IT(B) SECTION 199 OF THE INCOME-TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - CREDIT FOR TAX DEDUCTED - NON-DEPOSIT OF TAX DEDUCTED AT SOURCE BY THE DEDUCTOR - RECOVERY OF DEMAND AGAINST DEDUCTEE ASSESSEE OFFICE MEMORANDUM F.NO.275/29/2014-4T(B), DATED 11-3-2016 Vide letter of even number dated 1-6- 2015, the Board had issued directions to the field officers that in case of an assessce whose tax has been deducted at source but not deposited to the Government's account by the deductor, the deductee assessce shall not be called upon to pay the demand to the extent tax has been deducted from his income. It was further specified that section 205 of the Income-tax Act, 1961 puts a bar on direct demand against the assessce in such cases and the demand on account of tax credit mismatch in such situations cannot be enforced coercively. 2. However, instances have come to the notice of the Board that these directions are not being strictly followed by the field officers. 3. In view of the above, the Board hereby reiterates the instructions contained in its letter dated 1-6- 2015 and directs the assessing officers not to enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor. These instructions may be brought to the notice of all assessing officers in your Region for compliance. These instructions may be brought to the notice of all assessing officers in your Region for compliance. This issues with the approval of Member (Revenue &TPS).” 9. In view of the above provisions of law which is reiterated way back in 2015 by the Instruction No. 275 and again reiterated by Office Memorandum dated 11.03.2016, the respondent is unable to rectify the computer system to implement such Instruction and Office Memorandum which has resulted into inconvenience to the petitioners. 10. In view of the above facts, the impugned intimation issued under section 143(1) of the Act and consequential demand raised upon the petitioners are liable to be quashed and set aside. The respondents are hereby directed to see that strict compliance of the provision of section 205 of the Act as well as Instruction issued by the CBDT are followed and necessary corrections be made in the software so as to see that no demand is raised in case of the deductee on account of failure to deposit the amount of Tax Deducted at Source by the deductor. The Instruction issued by the CBDT under section 119 of the Act are binding upon all the officers of the department including the computer center which is now almost doing the job of the Assessing Officer. The technology used cannot be made to cause inconvenience to the tax payers contrary to the provisions of the Act and the Instruction issued by the CBDT resulting into helplessness on the human agency who has created the software resulting into the slavery of the technology. This is a classic case where the technology has failed to consider the provisions of the Act and the binding instructions of the CBDT. Therefore, we are of the opinion that necessary action be taken by the respondent-department so as to see that in future, no such inconvenience or harassment to the assessee is caused in breach of the provisions of the Act and the instructions issued by the CBDT. The respondents are directed to comply with the aforesaid directions forthwith and pass necessary orders to rectify the software which creates mismatch between the Tax Deducted at Source and the tax not deposited by the deductor in case of deductee. The respondents are directed to comply with the aforesaid directions forthwith and pass necessary orders to rectify the software which creates mismatch between the Tax Deducted at Source and the tax not deposited by the deductor in case of deductee. In no case there has to be a demand in case of a deductee for mismatch of the amount of Tax Deducted at Source not being found deposited by the deductor in view of the provision of section 205 which puts a bar on a direct demand in case of deductee. 11. Respondents are further directed to pass necessary order giving effect to this order and report the compliance thereof to this Court within a period of four weeks from the date of receipt of copy of this order. Petitions are accordingly allowed. Direct service through Email is permitted Rule is made absolute to the aforesaid extent.