Supreme Court permits income tax appeal, ruling recovery invalid after recipient pays tax under Section 201(1)

The Supreme Court allowed an appeal in an income tax matter because the recipient had already made the prior tax payment. The bench determined that tax recovery proceedings against a deductor are not permissible under Section 201(1) of the Income Tax Act, 1961, after the recipient has discharged the tax liability.

This ruling prevents double recovery of taxes by the revenue department, protecting deductors from coercive recovery action when the primary tax due has already entered the exchequer. The decision clarifies the statutory limits of Section 201(1) concerning deductor defaults and recipient compliance.

Tax professionals and corporate legal advisors should review pending litigation involving deductor default notices to check if recipients have paid the tax. Practitioners must cite this Supreme Court precedent in ongoing proceedings to contest unauthorized recovery actions.